Account Guarantee Programs
At the height of the Global Financial Crisis (GFC) in fall 2008, the Belgian government increased the coverage limits of its deposit guarantee to restore faith in its banking system, protect savers and depositors, and safeguard financial stability. Belgium joined the European Union’s (EU) efforts to strengthen deposit guarantee systems. The measures complemented the Belgian government’s other efforts to secure domestic banks. The government implemented the emergency measures in October and November 2008 through royal decrees, which Parliament later incorporated into law. In a five-week span, Belgian authorities increased the deposit guarantee from EUR 20,000 to EUR 100,000 (USD 26,820 to USD 134,100). They also expanded coverage to include deposit-like life insurance products. Two public institutions administered the guarantees for credit institutions and investment firms: the existing Protection Fund for Deposits and Financial Instruments (FDP) guaranteed deposit balances up to EUR 50,000, and the newly created Special Protection Fund for Deposits and Life Insurance (SPF) guaranteed balances between EUR 50,000 and EUR 100,000. Separately, the SPF guaranteed “class 21” life insurance products up to EUR 100,000. The FDP and SPF collected contributions from members. The FDP could also use assets collected by legacy insurance funds prior to the FDP’s establishment in 1998. FDP and SPF protection was compulsory for both credit institutions and investment firms. SPF protection was originally voluntary for life insurers and later became compulsory; life insurers were not members of the FDP. Annually, FDP and SPF members contributed a proportion of their income and assets eligible for protection to the funds. Fees were initially uniform and later became risk based. Protected assets included a range of deposit accounts, financial instruments, and “class 21” life insurance products that offered a fixed return. In 2010, authorities lowered payment timelines from three months to 20 working days, in line with EU guidance. The government initially set a timeline of one year for the higher deposit guarantee limits but later made them permanent. The FDP held collective assets of more than EUR 800 million by year-end 2008. Both the FDP and SPF went unused from 2008 through 2011. External evaluations about the intervention are positive, with scholars arguing that it helped to restore stability to the Belgian banking system during the GFC.
"Belgium: Protection Fund/Special Protection Fund,"
Journal of Financial Crises: Vol. 4
Iss. 2, 257-279.
Available at: https://elischolar.library.yale.edu/journal-of-financial-crises/vol4/iss2/7
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