5.1 Modalities for repaying depositors at branches

Cooperation agreements between DGSs, or where appropriate, designated authorities, should specify the following modalities for repaying depositors at branches of member credit institutions authorised in other Member States by the host DGS on behalf of the home DGS, pursuant to Article 14(2) of Directive 2014/49/EU:

• a. Notification of unavailability of deposits

Cooperation agreements should specify the content and the process of sending the notification of unavailability of deposits. The agreements should include relevant contact details, including email addresses and phone numbers.

The home DGS should notify the host DGS, and the designated authority of the host Member State in which the DGS is not the designated authority, that a situation of unavailability of deposits, as defined in Article 2(1)(8) of Directive 2014/49/EU, has occurred. The notification should also include general information about the institution where the unavailability of deposits has occurred, including an estimate of the magnitude of the expected payout, the amount of covered deposits and number of eligible depositors in the branch, the currency of repayment and any other general information that the home DGS considers useful for the host DGS in preparation for the payout.

The notification should be transmitted by the home DGS to the host DGS immediately upon determination of unavailability of deposits. The host DGS should receive the notification, ahead of receiving all the necessary information and funds, in order to start preparing for a payout as soon as the notification is received.

• b. Exchange of information, including instructions for payment

While Article 4(9) of Directive 2014/49/EU requires DGSs to ensure the confidentiality and the protection of the data pertaining to depositors’ accounts and the processing of such data in accordance with Directive 95/46/EC⁷ , it should not preclude cooperation agreements from setting more stringent standards, provided this is agreed to in the cooperation agreement.

⁷ Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (OJ L 281, 23.11.1995, p. 31).

Cooperation agreements should provide a deadline by which the home DGS should send all the necessary information for the preparation of a repayment of depositors to the host DGS. The deadline should be no later than two working days of the Member State of the home DGS prior to the deadline for making the repayable amount available to domestic depositors, including where the home DGS’s repayment deadline is longer than seven working days, following the determination of unavailability of deposits in the institution. The home DGS should make every reasonable effort to comply with the deadline. However, the home DGS may defer the transfer of information in instances in which, in spite of all reasonable efforts, the home DGS is not able to comply with the deadline, due to the need to obtain additional information on deposits and depositors, or because its internal processes make it impossible to obtain the information within the deadline or to process the host depositors’ information within the deadline without significantly delaying the process for domestic payout. In such instances, the home DGS should inform the host DGS of the delay as soon as possible and agree on a new estimated deadline which should not be later than the deadline for transferring the funds pursuant to paragraph 33.

The home DGS should obtain the SCV in line with domestic deadlines for receiving this information from the credit institution. It should then process the SCV in order to provide the host DGS with only the relevant instructions for payment in a format agreed between the DGSs and specifying the amounts to be paid out in the currency agreed in the cooperation agreements. The information to be transmitted from the home DGS to the host DGS should include:

• • the amount to be paid out to each depositor;
• • all the information needed depending on the payout method (for example, addresses of depositors or bank account numbers for electronic transfers).

In the event that the home DGS does not have all the information needed, depending on the method of payout of the host DGS, the home DGS should ask the host DGS to collect the necessary additional information. In order for the host DGS to be able to collect additional information necessary for the payout, the home DGS should assist the host DGS by transmitting any necessary information (for example, depositors’ contact details or national identification numbers).

The DGSs should inform one another promptly of any updates to the data.

The host DGS should strive to ensure that the repayable amount is available to depositors as soon as possible, within three working days of the Member State of the host DGS after receiving all the necessary information, instructions and funds from the home DGS, without a request to the home or the host DGS being necessary.

Following the initial payout, the host DGS should inform the home DGS in a documented manner of the results of the payout, including the distribution and making of payments to depositors, a report on any issues encountered with payouts and an assessment of areas of the process and of the cooperation agreement to improve in the future. The host DGS should inform the home DGS regularly about progress in relation to further repayments made after the expiration of the deadline set out in paragraph 28.

• c. Modalities for advancing the funds

Cooperation agreements should provide that, after receiving notification of unavailability of deposits from the home DGS, the host DGS will promptly provide the home DGS with all the necessary information about the accounts to be used for the transfer of funds from the home DGS to the host DGS.

The accounts and transfer method chosen should ensure utmost security of the funds and timeliness of the transfer.

• d. Timeline for advancing the funds

Cooperation agreements should specify the deadline for providing the necessary funding.

The home DGS should provide the host DGS with the necessary funds no later than the day on which the repayable amount should be made available to domestic depositors after the determination of unavailability of deposits in the institution, including where the home DGS’s deadline for making the repayable amount available is longer than seven working days, as allowed under Article 8(2) of Directive 2014/49/EU.

Any funds advanced in excess to the host DGS should be refunded to the home DGS by no later than three working days of the Member State of the host DGS after the finalisation of the payout. Figure 1. Timeline for payout in branches

Partial payouts in the transitional period until 31 December 2023

Where the home DGS’s deadline for making the payout amount repayable is longer than seven working days, the host DGS should inform the depositors, either directly or by advertising in the media, about the possibility of a payout of costs of living upon request.

The host DGS should, within one working day, notify the home DGS of a depositor request for a cost of living payout. This notification should include all relevant information, including:

• a. the clear and complete identification of the depositor, including the relevant account details;
• b. the date of receiving the request by the host DGS;
• c. the amount claimed (if applicable).

When a depositor requests a payout of a cost of living amount, either directly to the home DGS or to the host DGS, the home DGS should strive to provide the host DGS with all the necessary information and funds within five working days of the Member State of the home DGS after receiving the request or being notified by the host DGS, for the host DGS to be able to ensure that depositors have access to an appropriate amount of their covered deposits to cover their costs of living while waiting for full payout.

Where the full payout is imminent, or where a partial payout would significantly delay the full payout process, the DGSs may agree to forgo partial payout in the interest of ensuring prompt full payout.

• e. Treatment of temporary high balances

Cooperation agreements should outline the process for repaying temporary high balances by the host DGS, which should happen in the following sequence:

• a. Depositors submit claims, either to host or home DGS.
• b. Where the claims are addressed to the host DGS, that DGS should forward the claim to the home DGS.
• c. Where the claims are addressed to the home DGS, or the home DGS receives them from the host DGS, the home DGS should verify the claims. The host DGS should lend assistance where necessary, for example in dealing with the language or legal issues stemming from the law applicable in the host DGS’s jurisdiction.
• d. Upon verifying the claims, the home DGS should send the necessary information on deposits, depositors and funds to the host DGS, either as a package with other claims if done in a reasonable timeframe, or individually.
• e. The host DGS should repay the depositors.

Supplementary bilateral or multilateral cooperation agreements should also specify the following aspects:

• a. the home DGS’s deadline, if applicable, for accepting repayment claims from depositors, which the host DGS should communicate to the relevant depositors;
• b. information on the home DGS’s temporary high balances repayment deadline and coverage level.
• f. Currencies used

Cooperation agreements should specify that the currency of the repayment shall be the currency determined under the law of the home DGS and should be communicated by the home DGS to the host DGS.

Where the law of the home DGS allows for a choice between several currencies and where that choice includes the option to use the currency of the host DGS’s Member State, that option should be used primarily. Where practical, and legally allowed, upon agreement between DGSs, the repayable amount may be available in multiple currencies.

Example 1. If the Polish DGS guarantees repayments in Polish zloty (PLN), irrespective of the currency of the account, following a failure of a branch of a Polish bank in the UK, the depositor in the UK will get the money back in PLN. If the Polish DGS guarantees repayments in PLN, British pounds (GBP) or Swiss francs (CHF), following a failure of a branch of a Polish bank in the UK, the majority of UK depositors will get the money back in GBP. However, where the host DGS has the capability to make payouts in several currencies, and where contracts with depositors or the information provided to them in accordance with Directive 2014/49/EU allowed payouts in CHF, depositors who had accounts in Swiss francs could be repaid in francs.

Where there is a need for a currency exchange, the rate to be applied should be the spot rate published by the central bank of the home DGS’s Member State on the day of the determination of unavailability of deposits in a given institution.

The necessary funding referred to in paragraphs 32–34 should be provided in the currency of repayment determined under the law of the home DGS pursuant to paragraphs 41 and 42. The home DGS should handle the necessary currency exchange and bear the necessary currency exchange costs.

• g. Handling of correspondence and language used

Cooperation agreements should specify that the host DGS will handle communication with depositors on behalf of the home DGS, including informing depositors about the determination of unavailability of deposits and the payout by the host DGS on behalf of the home DGS.

In addition, where the home DGS has the capability to effectively handle communication with depositors in the Member State in which the branch is located, including the capability to communicate in the official language or languages of the host DGS’s Member State, the agreement may provide that depositors will be offered an explicit, additional option to communicate directly with the home DGS. In practice, this means, for example, that the letter informing depositors about the member credit institution’s failure may include two phone numbers – one for the host DGS and another for the home DGS.

Cooperation agreements should specify that the language to be used by DGSs in communicating with the depositors in the context of a repayment is the official language or languages of the host DGS’s Member State. However, both home and host DGSs should not be precluded from answering correspondence addressed to them by depositors in the official language or languages of the home DGS’s Member State or another language where they have the capability to do so, or communicating in those languages with depositors who have accepted to receive information in a given language.

The home and the host DGSs or, where relevant, the designated authorities, should use English to communicate with one another, unless they agree bilaterally to use another language in their communication.

Communication channels established to communicate with the depositors, and between the home and the host DGSs, should guarantee sufficient levels of confidentiality and security.

• h. Reimbursement of costs of repayment

Cooperation agreements should specify the types of costs that the home DGS will reimburse the host DGS for, including, but not limited to, costs incurred in performing the following tasks attributable to the payout:

• a. communication with depositors, including setting up the necessary infrastructure, hiring staff and media publications;
• b. communication with the home DGS, including providing feedback information about claims paid;
• c. collection of additional information needed for the payout, including setting up the necessary infrastructure and hiring staff;
• d. translation of documents;
• e. acquisition of information;
• f. transaction costs of payouts;
• g. relevant legal costs.

Eligible costs incurred by the host DGS should meet the following criteria:

• a. be necessary for carrying out the payout;
• b. be actual, reasonable, justified and comply with the principle of sound financial management;
• c. be identifiable, in particular, being recorded in the accounting records of the host DGS and backed by effective supporting evidence.

Cooperation agreements may provide that:

• a. the home DGS shall provide a lump sum amount, based on estimates, ahead of the host DGS incurring costs followed by reconciliation of accounts; or
• b. the host DGS shall be reimbursed for costs agreed upon in the cooperation agreement following the payout.

Where the host DGS is reimbursed following the payout, reimbursement details, such as time to reimburse the costs or the applicable interest rate, should be agreed upon no later than seven days after the initial payout of covered deposits.

• i. Right to audit

To further reinforce trust in DGSs’ ability to perform their function in the case of a payout in a branch, prospective parties to the agreement may agree on a mutual right of audit of their partner DGS’s activities related to the payout before entering into the cooperation agreement, and at any point after the agreement is reached.

Such an audit, subject to the DGSs’ or, where relevant, the designated authorities’ agreement, may take the form of, for example, oversight, post-payout review, audit of costs and seconding staff during payout, and may be performed either on-site or remotely. Parties to the agreement may agree to allow the home DGS to conduct an audit of the host DGS’s activities related to the payout paid for by the home DGS.

• j. Treatment of delays

Any costs arising from delays in the home DGS providing the host DGS with the instructions for payment, the necessary information and the funds, should be borne by the home DGS, including where the delays impose operational costs on the host DGS.

Where the delay is attributable to the host DGS’s actions, the host DGS should bear the costs arising from this delay.

• k. Liability

In accordance with Article 14(2) of the Directive 2014/49/EU, the host DGS shall not bear any liability for any acts undertaken in accordance with the instructions given by the home DGS.

• l. Review of the arrangements to operationalise payouts

The home and the host DGS may bilaterally agree that, on a case-by-case basis and no earlier than three months from the notification of unavailability of deposits, they will review the functioning and scope of the practical arrangements and infrastructure needed for proportionate, continued operationalisation of payouts by the host DGS in accordance with this section 5.1, making the necessary adjustments to it.