Andorran Deposit Guarantee Fund (Fagadi)

The Law regulates the Andorran Deposit Guarantee Fund (Fagadi) as a guarantee system for deposits in the terms established in the Directive 2014/49/EU and with an additional cushion of financial resources so that the Fagadi immediately has more resources than those required by the Directive itself.

The Law, like the Directive, establishes a transitional period during which those banks that are members of the Fagadi must contribute annually the amount determined by their Management Committee in order to have financial resources of an equivalent amount of 0.8% of their guaranteed deposits before the deadline of June 30^th 2024.

The Law also foresees that Andorran banks continue to make annual contributions to the Fagadi against their income statement for a period of 8 years from 2024, in order to have an additional volume of ex-ante financial resources equivalent to 0.8% of guaranteed deposits to protect depositors.

During the aforementioned foreseen period given to provide the Fund with the ex-ante financial resources, a dual system will be in place to ensure the immediate availability of financial resources.

Thus, banks have to keep part of the deposit guarantee reserves for those already established pursuant to Law 1/2011 [Llei 1/2011] and assets assigned to these reserves can only be immediately used at the request of the Fagadi Management Committee. The remaining part of the deposit guarantee reserve held by banks under the Andorran application of Law 1/2011 on the date of enforcement of said Law, will be reclassified to unavailable reserves that can be used to cover possible risks or losses; the AFA may authorize its reclassification as available reserves.

As banks make ordinary contributions to the ex-ante Fund, these deposit guarantee reserves may be reclassified as unavailable reserves.

The main regulatory features of the deposit guarantee system are as follows:

• The coverage amount is 100,000 euros per depositor and bank, and additional coverages are foreseen in exceptional cases that guarantee, with a limit of 300,000 euros, deposits from real estate transactions of a residential and private nature, payments received by the depositor on a one off basis and linked to marriage, divorce, retirement, dismissal, disability or death, and those that are based on the payment of insurance benefits or compensation for damages and which are the result of a crime or a legal error, provided that these balances have been paid to the covered accounts during the three previous months.
• The Fagadi's ex-ante resources must reach 0.8% of guaranteed deposits by June 30^th 2024, through the bank’s annual contributions.  Additionally, as of said date, the banks will continue to make annual contributions to the ex-ante Fund so that it reaches a level of 1.6% of financial resources over a period of 8 years starting from 2024. This percentage exceeds the overall 0.8% required by Directive 2014/49/EU as well as the 0.5% that is foreseen as a possible threshold for highly concentrated banking systems, such as the Andorran one. In return, Law establishes a total limit of Fagadi resources.
• The Fagadi will receive the available financial resources corresponding to the ex-ante portion, through contributions that its members realize at least once a year. This will not prevent the obtaining of additional funds from other sources, including financing credits or loans from financial institutions or from third parties that in no case may imply that the maximum coverage limit established in the Law is exceeded.
• When the Fagadi´s available financial resources are not sufficient to reimburse depositors in cases of coverage, the Fagadi Management Committee may request extraordinary contributions from member entities; These contributions may not exceed 0.5% of their guaranteed deposits per calendar year.
• Finally, the Fagadi Management Committee, with prior consent from the AFA, may request higher contributions in exceptional circumstances that in no case imply exceeding the maximum limit of coverage established by the Law.