In response to the current consultation, the NVB asks the Commission to take note of the following points:

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1 European Commission Directorate-General Internal Market, Unit H1 Rue de Spa 2 B-1049 Brussels markt-dgs-consultation@ec.europa.eu Date: 27 July 2009 Reference: BR-970 Subject: NVB response to the Commission consultation on the review of the Deposit Guarantee Schemes Directive T M E mail Holdtgrefe@nvb.nl Dear Mr Behnke, The Nederlandse Vereniging van Banken (NVB / Netherlands Bankers Association) 1 appreciates the opportunity to respond to the European Commission s consultation on the review of the Deposit Guarantee Schemes (DGS) Directive. The NVB agrees that, in general, the current European framework of DGS needs to be revised. The crisis has shown that more harmonisation is needed on certain issues and in particular harmonisation of the coverage level. During the crisis we have witnessed the detrimental effects of not maintaining a harmonised coverage level in Europe. Other areas where harmonisation is needed, include the scope of products and depositors covered by DGS. Both depositors and banks within the European Union (EU) should be in an equal position regardless of their country of establishment. In response to the current consultation, the NVB asks the Commission to take note of the following points: the DGS is not meant to serve as an instrument to prevent or manage a crisis. It can only be seen and used as a safety net for small failures after all other supervisory (and liquidity) tools have not been able to prevent such a failure. A DGS is there to protect small retail depositors; 1 The Nederlandse Vereniging van Banken (NVB) is the representative voice of the Dutch banking community with over 90 member firms, large and small, domestic and international, carrying out business in the Dutch market and overseas. The NVB strives towards a strong, healthy and internationally competitive banking industry in the Netherlands, whilst working towards wider single market aims in Europe. 1/16

2 before making major changes to any DGS a proper impact assessment should be performed. Some of the questions posed in this consultation can t be answered in advance, since the implications are not known; strong effective pro-active (prudential) supervision as part of the overall safety net is of utmost importance. Any DGS can only be seen as an integral part of this safety net and should also be well aligned with the crisis-management framework and the rules as to burden-sharing; the DGS has performed well in the past. Making major changes to the current framework, just as depositors have grown accustomed to the national DGS, could create instability and reduce depositor confidence. This should be prevented at any cost; and banks are faced with a full regulatory agenda, including multiple amendments to the Capital Requirements Directive (CRD). While acknowledging the need for review of the DGS Directive, we underline the need for prioritisation and proper alignment of all the proposals that are planned. Should you require any further information, please do not hesitate to contact me. Kind regards, Drs Koen Holdtgrefe Advisor Banking Supervision 2/16

3 Detailed remarks Question 1: Do you agree in general that the current framework of DGS in the EU needs to be revised? Are the areas identified for review the right ones, or are there other priorities? The NVB agrees that, in general, the current framework of DGS needs to be revised. The crisis has shown that more harmonisation is needed on certain issues. Most important of all is the harmonisation of the coverage level. Other areas where harmonisation is needed, include the scope of products and depositors covered by DGS. Both depositors and banks within the European Union should be in an equal position regardless of there country of establishment. The areas identified are the right ones. However the following issues can be added; Starting point for each DGS should be: what is its goal? The NVB supports the Basel principle of stating the public policy objectives, as it is essential that the underlying public policy objectives of a deposit insurance scheme, including its relation to the financial safety net, are made explicit. In the case of DGS we think financial stability and consumer protection could be defined as policy objectives. We note that prioritizing one over the other will have an effect on the amount of coverage deemed appropriate (being higher for the latter). As stated above a DGS can only be seen within the framework of the overall safety net. The interaction between the elements of the safety net (national or European) need to be examined on the effects. The issues of moral hazard for governments and DGS. In short, the higher the coverage level, the sooner a DGS (and the banking sector) will need to ask the government for financial backing. This issue can t be overlooked. In addition we note that moral hazard may also arise in a situation where the supervisor might be tempted to more easily stop seeking remedies for a difficult supervisory issue with a credit institution due to the existence of a readily available deposit insurance scheme or fund. To minimize this moral hazard, the NVB favors the extension of competencies for the supervisor rather than for the deposit insurance scheme. In order to protect DGS participants, a consistent assessment for new and existing banks should be ensured throughout the EU, so that all participants to a DGS are held to the same standard of soundness. It should not be possible to obtain a bank license that allows attracting deposits or savings without a strict assessment of the supervisor for those activities. In addition, we are of the opinion that the issue of co-insurance should be reexamined in about 3 to 5 years after the introduction of the new DGS. The propensity of depositors to seek out those banks offering higher interest rates without regard for the riskiness of the bank s borrowing practices or its stability is exacerbated by the discontinuation of co-insurance. Given that an increase in the level of coverage to 100,000 would further increase such hazards, it is important that the possibility of co-insurance be reconsidered in the context of the review. 3/16

4 Appropriateness of the coverage levels The following options could be considered: (a) Revert to a coverage of (b) Coverage of (current approach from end 2010 onwards) (c) Coverage of a higher amount (d) Coverage depending on the actual size of deposits or economic indicators such as the Gross Domestic Product per capita (thus different in each Member State) (e) Unlimited coverage Question 2: Which of the above options would you prefer? Would you prefer another option? Please explain your choice. See also Question 3 on differences in coverage level and Question 30(e) on a possible de-minimis rule (i.e. deposits below a certain size, e.g. 10 would not have to be paid out). The NVB has a strong preference option a. This level would be more in line with the average amount of deposits in the European Union. The NVB believes however that harmonisation of the amount of coverage is crucial. We are in favor of a lower coverage level than the currently agreed upon EUR 100,000 only insofar as any lower amount would be applicable in all circumstances to all banks and depositors. Furthermore the NVB believes that the higher the coverage level is set, the more likely the chance will be that a DGS can t cover all the deposits (either ex ante or ex post) and that the remainder of the claim can t be born by the banks. Then the government needs to step in, which creates a problem of moral hazard for the government. This will eventually result in less depositor confidence in the system. For this reason we are in favor of setting the harmonised coverage level at EUR The financial stability will only be enhanced by fixing the level at one amount. Keeping the option to set the level at national discretion will, especially in times of crisis, lead to a race to the top as we have seen during the last crisis. This in turn leads to the shifting of deposits across national boundaries, thereby creating more instability. Another important element in the discussion on coverage level is the question what amount can and should be born by the banks. It should be made clear and acknowledged that a DGS can t be used to prevent or manage a crisis. Therefore, there are limits to what a DGS can payout. Question 3: Should the coverage level you prefer (Question 2) be a minimum or a fixed level? Or do you think a different solution would be more suitable, e.g. a range with a minimum and maximum level? If so, please describe. Please give reasons for your choice. The NVB believes that a fixed level can be the only possible outcome, since this would prevent any topping-up issues, see for further explanation Q&A 2 Question 4: Do you have background information or evidence whether depositors have split up their deposits when the financial crisis aggravated in autumn 2008? Should depositors be actively encouraged to split up their deposits between different banks or is this inappropriate? Please give reasons. The NVB believes that it is wrong to actively encourage depositors to split up their deposits for two reasons: 4/16

5 1) It remains the responsibility of the depositor to place their deposits within a certain bank. If a depositor has saved an amount above the coverage level, then it can be almost certain that this depositors knows about the pro s and con s of the bank and the coverage level of a DGS. 2) Actively telling depositors that they could split up their deposits would only create confusion about the stability/quality of the bank. This would lead to more shifting of deposits, less confidence in the banks/system and therefore more instability It is our experience that most depositors with large(r) funds have become aware of the coverage level and have split up their deposits themselves. We believe banks have a duty to inform, at their request, depositors of the amount of coverage and the effects on their deposits. Question 5: Do you think this problem could be solved with a mere information obligation towards depositors (see Questions 22-25)? Or do you think banks should have the option to ask for coverage per brand name to avoid aggregation of accounts in case of failure? If so, and how, should this be taken into account when the contributions of such banks to DGS are calculated? The NVB is of the opinion that the DGS should be linked to the licensed entity and not the brand. Companies using a multi-brand model should not be in a more advantageous position than banks using a single brand. Providing the depositor with information could solve this problem. This information should not only be given by the banks, but also by (the authority responsible for) the DGS. The DGS should publish a list of banks and their respective brand names which perform under the DGS. Question 6: If the coverage level is fixed, should there be exemptions that allow a higher coverage of certain products for social considerations? If so, for which products should there be exemptions and up to which amount? Should this be harmonised or should Member States have the discretion to decide on this? In the latter case, which elements should be within the discretion of Member States (e.g. amount and duration of coverage)? We do not think that there should be any exemptions (other than temporary) which allow for a higher coverage of certain products for social considerations. In the Netherlands we don t have such products which fall under the DGS. The coverage level should be fixed and there need be no exemptions for social considerations. Appropriate alternatives are available in such cases. Question 7: Should temporary high account balances be covered? If so, up to which amount and for how much time? In which situations should these balances be covered? Should this be harmonised or should Member States have the discretion to decide on this? In the latter case, which elements should be within the discretion of Member States (e.g. situation, amount and duration of coverage). Should, in order to facilitate payout, such balances be transferred to special accounts that are tagged? Do you see other solutions to protect temporary high balances? The NVB thinks that temporary high account balances should not be covered. This should be done in a harmonised way. In any case clear characteristics of what a temporary high account balance entails must firstly be defined. 5/16

6 Question 8: Should mutual guarantee schemes and voluntary schemes be integrated into the Directive so that the same rules would apply for them as for 'classical' DGS? If so, how? Should there be restrictions on advertising for these schemes? Please provide reasons. Yes, to reach a full level playing field it is most essential that mutual and voluntary schemes are integrated into the Directive. This is the only way in which true harmonisation can be reached. Restrictions on advertisement should therefore also apply to these schemes.. There is no reason why those rules should be any different. Scope of deposits covered by DGS The scope of eligible deposits could be in the discretion of Member States or harmonised. If it is harmonised, it could be considered to fully cover certain deposits, to cover them only up to a certain percentage of the normal coverage level, or not to cover them at all. A. Structured deposits: Question 9: Which solution(s) would you prefer as regards structured deposits? Please provide reasons. Would you B. Debt certificates issued by a credit institution: Question 10: Which solution(s) would you prefer as regards debt certificates? Please provide reasons. Would you C. Accounts in non-eu currencies: Question 11: Which solution would you prefer as regards accounts in non-eu currencies? Please provide reasons. Would you prefer another option? Please describe. Q9-11 Harmonisation in this respect is of utmost importance. Starting point for harmonisation is that the definition of what can be considered to be a deposit must be reviewed. This should leave little room for maneuver, should be fully harmonised and only covered up to the coverage level. When then thinking about the scope, one simply should ask; does the deposit/product fall under the definition of a deposit. The NVB believes that the above mentioned deposits (question 9 and 10) should not fall under the coverage of the DGS, since these are not typical deposits of small retail depositors. Question 12: Should the eligibility criteria as regards depositors (provided for in Annex 1 no of the Directive) be fully harmonised or should Member States retain some discretion to decide about eligibility of depositors? (If you prefer that Member States retain discretion, please skip questions 13-16) As stated in the previous answer, harmonisation is also in this respect key. Again, one has to look at the definition of a depositor. For the NVB this means looking at the definition from the perspective of a small retail depositor. Eligibility of depositors If the eligibility criteria in Annex 1 no are harmonised, it could be considered to fully cover all depositors, to cover them only up to a certain percentage of the normal coverage level, or not to cover them at all. For the answer to Q see Q 17. 6/16

7 A. Enterprises in the financial sector (Annex 1 no. 1, 2, 5, 6): Question 13: Do you have background information or evidence whether a covered amount of is relevant for these enterprises? Which solution would you prefer? Please provide reasons. Would you prefer another option? Please describe. B. Authorities on central and local level (Annex 1 no. 3, 4) Question 14: Do you have background information or evidence whether a covered amount of is relevant for authorities? Which solution would you prefer? Please provide reasons. Would you prefer another option? Please describe. C. Depositors having a relationship with the failed bank (Annex 1 no. 7, 8, 9, 11) Do you have background information or evidence on how many depositors are actually concerned by this? Question 15: Which solution would you prefer? Please provide reasons. Would you D. Depositors who opened their account anonymously (Annex 1 no. 10) Do you have background information or evidence on how many depositors are actually concerned by this? Question 16: Which solution would you prefer? Please provide reasons. Would you Coverage of companies/enterprises The following categories could be used: Companies that cannot draw up abridged balance sheets; micro-, small, medium-sized enterprises or all enterprises) The following options could be considered: (a) No coverage for any company or enterprise (i.e. no coverage of accounts used for professional purposes) (b) Include certain categories of companies or enterprises but exclude others in a harmonised way (c) Include certain categories and leave exclusion of other categories to the discretion of Member States (similar to current approach) (d) Coverage for all enterprises and companies regardless of their size (e) Limited coverage according to the category Question 17: Do you have background information or evidence whether a covered amount of is relevant for companies or enterprises above a certain size? Would you prefer to keep the current approach (companies that cannot draw up abridged balance sheets may be excluded by Member States)? If not, which solution would you prefer? Please specify, which category/-ies should be used to distinguish and if so, to which amount you would limit the coverage. Please provide reasons. Would you prefer another option? Please describe. 7/16

8 The NVB believes that the DGS is only meant to protect small retail depositors and small businesses. These depositors will be really affected by a banking failure. One again has to go back to the goal of a DGS and look at the public policy objectives. These don t state that a DGS is meant to protect all. The NVB has however seen that in practice it is very difficult to come up with data on small businesses according to the definition of the abridged balance sheet. The NVB advises the European Commission to look at the definition of small business again and come up with a more practical one. Alternatively we can also imagine the option to limit the coverage to retail depositors only. As regards to the Annex, the NVB believes that these exceptions should be fully harmonised. A possible solution would be the establishment of a pan-european DGS. Question 18: Would you be generally in favor of a pan-eu DGS? (If you disagree, please skip questions ) If so, should there be a transition period until a pan-eu DGS should be operational? If so, how long? Please provide reasons. We believe that any change in DGS should not create confusion, instability or loss of confidence. When, after an impact assessment, it becomes clear that making changes brings benefits to all stakeholders, including depositors and banks there should be sufficient period to implement. At this moment, a pan-eu DGS would only create more confusion among the depositors, who have just become accustomed to their national DGS. Changing the structure again will only enlarge confusion and lead more instability and less confidence. A pan-eu DGS is something that could be a future solution on the long run which requires a strong alignment with the other elements of the European institutional safety net (burden sharing, supervision, crisis-management). Structure of a potential pan-eu DGS There seem to be at least the following options concerning the possible structure of a potential pan-eu DGS: (a) Single entity replacing the existing DGS (b) A DGS that is complementary to existing DGS that would support the existing DGS if needed ("28th regime") (c) "European system of DGS" (i.e. a network of schemes in the Member States that provide each other mutual assistance if needed, e.g. by borrowing from each other) Question 19: Which solution would you prefer? Please provide reasons. Would you If you support option (c), please indicate how in your view, such mutual assistance should be provided. Should mutual guarantee schemes and voluntary schemes (see question 8) be integrated into a pan-eu DGS? If so, how? See answer to question 18. In addition it is impossible to come up with any answer to this question, since these options are to open and the effects are not known. In any case we would like to suggest to make any moves carefully. Therefore an alliance between DGS s or network seems to be a first step in the right direction. Scope of a potential pan-eu DGS With regard to the scope of a potential pan-eu DGS, there are at least the following options: (a) All banks should contribute to a potential pan-eu DGS 8/16

9 (b) Only large cross-border banking groups (i.e. banks with a certain systemic relevance that have subsidiaries in other Member States) (c) All cross-border banks (i.e. those who operate directly or by means of branches in other Member States than in the one where they are licensed) Question 20: Which solution would you prefer? Please provide reasons. Would you See answer to question 18. In addition it is impossible to come up with any answer to this question, since these options are too open and the effects are not known. Mandate of DGS The following options could be considered: (a) Retain current approach (other DGS functions than paying out depositors within discretion of Member States) (b) DGS provide liquidity assistance to banks in need (c) DGS participate in the reorganization of banks (d) DGS play an active role in the winding up of banks Question 21: Which solution would you prefer? Should this solution be recommended or mandatory? Please provide reasons. Would you prefer another option? Please describe. Would a broader mandate fro DGS require a different funding mechanism or a higher level of funding? If you prefer a pan-eu DGS (Question 18), please precise which options you would prefer in that case. The NVB believes that the only function a DGS can have is that of a paybox. It is of utmost importance that the role of a DGS (paybox) is not mixed up with other elements of the overall safety net, especially supervision. Providing a DGS with functions other than the paybox will only lead to uncertainty over responsibilities. The division of supervisory powers must remain strict and clear. Option b, c and d can in the option of the NVB only can be performed by the relevant supervisory authority (not being a DGS). Harmonisation of the information for depositors In order to ensure that all depositors throughout the EU get the same information, it could be considered to recommend or prescribe a template for standardized information. This template could be annexed to the Directive or be developed by stakeholders. Question 22: Which solution would you prefer? Please provide reasons. Would you The NVB agrees that banks and DGS have a responsibility to provide information to the depositors. The NVB however is not in favor of a prescribed template for standardized information. This should remain at the discretion of the individual banks and DGS. Banks and DGS at national level should cooperate to provide the same information to their depositors. Advice to split up deposits between banks (See also Question 4) Currently, depositors do not have to be informed that it is safer to split up deposits if the coverage limit is exceeded. 9/16

10 Question 23: Should such information be required or recommended? Please provide reasons. Would you Banks inform their customers on the rules with respect to the DGS and in practice the consumers appear to be well aware of the consequences and possibility of splitting up deposits. At the depositors request the banks inform the depositors individually of the consequences of splitting up deposits. A more pro-active and obligatory information requirement is not necessary given the existing information requirements. When and how should depositors be informed? The following options could be considered: (a) Retain current approach (details left to the discretion of Member States) (b) Mandatory reference to information on DGS in advertisements (c) Mandatory reference to information on DGS on account statements (d) Require depositors to countersign information on DGS before entering into a contractual relationship and to receive a copy. Question 24: Which solution(s) would you prefer? Please provide reasons. Would you The NVB believes that the current approach, in which details are left to the member states, would suffice. However, the NVB has also seen that current levels of information can be upgraded. This again should be done on a national level. Banks and DGS can jointly decide which and how information is provided to the public. Every existing channel can and must be used. It is important to note here that the Directive prohibits DGS to be used in advertisement. The line between advertisement and information is not always clear in practice. This should first of all be cleared-up. Information in case of a bank failure With regard to the question, from which DGS depositors should receive information when their bank fails, the following options could be considered: (a) Retain current approach (Home country scheme must inform) (b) Host country DGS must inform depositors at branches in another Member State (c) Individual agreement between DGS about who informs depositors Question 25: Which solution would you prefer? Please provide reasons. Would you Which approach would you prefer in case of a pan-eu scheme not being a single entity (see question 19)? Please EG-plan. We prefer to retain the current approach. This should be supplemented by strict cooperation requirements between DGS. In the Netherlands the Dutch DGS has taken on the responsibility to take care of the claims of Dutch depositors on the Icelandic DGS. This helped restoring confidence and made the whole process more clear. Set-off arrangements The following options could be considered (please note that the options below are not mutually exclusive): (a) Retain current approach (unlimited set-off; within discretion of Member States) 10/16

11 (b) Discontinue or limit set-off for the payout of depositors (c) Discontinue or limit set-off in the insolvency procedure (when the DGS has subrogated into the depositors' claims against the bank) (d) Limit set-off to claims that have fallen due or are delinquent (e) Limit set-off to a certain amount or percentage of covered deposits but leave it optional (f) Encourage depositors to split deposits and liabilities between different banks (rendering set-off obsolete if this encouragement is effective) Question 26: Which solution would you prefer? Please provide reasons. Would you A harmonised approach to setting-off is the preferred solution. Discontinuing setting-off for Member States where this is current practice is only an option for the NVB if it would not have major negative effects on banks and the DGS ánd that all fiscal, legal hurdles are taken care of. Payout delays In order to reduce payout delays as such, the following options could be considered (Please note that the options below are not mutually exclusive): (a) Retain current approach (4-6 weeks from end 2010 onwards) (b) Reduce payout delay to one week after a certain transition period (c) Differentiate payout delay, i.e. a longer payout delay only for depositors where setoff has to be calculated or whose eligibility has to be thoroughly examined Question 27: Which solution would you prefer? Please provide reasons. Would you The NVB opposes any reduction in payout shorter than the current approach. Implementation of the current approach will require significant effort (both financial and organizational). The effects of the current approach will need to be analyzed before suggesting new changes. Our experience is that when depositors are aware that they will receive their deposits within a defined period, that they will not run to the banks to retrieve their money. Alternative solutions As an alternative (or supplementary) to a mere reduction of the payout delay, it could be considered to transfer deposits to another bank or to have an emergency payout procedure in place (e.g within 3 days). Question 28: Would you prefer such solutions? If so, on a voluntary or mandatory basis? Please provide reasons. Would you prefer any other option? Please describe. We do not prefer such a solution, because we believe this will make the whole procedure more difficult, increase costs and will ultimately lead to more confusion for depositors. Afterwards it has to be sorted out whether a depositor had the right to receive a certain amount. All emergency payouts will then have to be checked and setoff with remaining deposits. 11/16

12 Depositors are best protected by effective prudential supervision in first instance and thereafter by continuity of banking services and access to deposits for systemic institutions in preference to a reliance on payout through the DGS. Payout modalities In order to achieve clear and fair payout modalities, the following options could be considered (please note that the options below are not mutually exclusive): (a) As regards the calculation of payout delay, it could be considered to calculate the payout delay and the delay to determine a payout situation in calendar days (b) As regards the currency of payment, it could be considered to leave this within discretion of Member States (current approach) or in the same currency as the deposits were paid in. (c) As regards interest payment, it could be considered to leave this within the discretion of Member States (current regime) or to pay interest that has not been credited at the time of failure. Question 29: Which solution(s) would you prefer? Please provide reasons. Would you prefer any other option? Please describe. Again the NVB believes that harmonisation is key with regard to option b and c.we prefer to chose for the same currency and to include interest up to the date of failure. With regard to option a the NVB doesn t have a preference as long as the period of 20 working days is upheld. Verification of claims In order to facilitate the verification of claims, the following options could be considered (please note that the options below are not mutually exclusive): (d) 'Tag' eligible depositors when account is opened and then regularly keep up to date this information on account statements. (e) Payout under reserve of later reclamation verification only after payout (f) Simplify eligibility criteria (see Questions 13-16) (g) Harmonise eligibility criteria (see Question 12) (h) Introduce a de-minimis rule (i.e. deposits below a certain size, e.g. 10 would not have to be paid out) (i) Limit or abandon set-off (see above) Question 30: Which solution would you prefer? Please provide reasons. Would you The NVB is only in favor of options f, g and h. These should be harmonised as much as possible. The other options are to complex in practice to be advocated without an impact assessment. Application for reimbursement In order to facilitate the application for claims, the following options could be considered: (a) Retain current approach (depositors may have to take initiative, to fill in application forms and send them electronic processing and own initiative payment within discretion of Member States) 12/16

13 (b) Payments by DGS on their own initiative without need for applications only electronic request to depositors asking them to indicate new account or payment to the same account whenever feasible Question 31: Would you prefer one of these solutions? If so, on a voluntary or mandatory basis? Please provide reasons. Would you prefer another option? Please describe. The NVB prefers to retain the current approach. In our experience this has worked well in the past. Changing this procedure would implicitly impose a new administration system, which doesn t merit the costs. Involving DGS at an early stage In order to involve DGS at an early stage, it could be considered to require competent authorities to inform DGS either if appropriate (current approach) or by default when triggering of DGS becomes likely. Question 32: Which solution would you prefer? Please provide reasons. Would you This question can only be seen in relation to the organization of the DGS within each country. In the Netherlands our supervisor also acts as DGS-administrator, so there is continuous involvement. In other Member States DGS are not part of the supervisor. When this is the case, the DGS could be involved at an early stage. Information exchange between banks and schemes In order to improve information exchange between banks and schemes it could be considered to recommend or require that DGS have access to relevant banks' records when DGS are informed by competent authorities and that DGS and their member banks have a common interface to quickly exchange information Question 33: Which solution would you prefer? Please provide reasons. Would you The NVB supports information exchange between banks and schemes, but cautions against excessively detailed deposit information requirements. The DGS should only require the information that is necessary to fulfill its role, at the time when the failure is declared but never at an earlier stage. Excessively detailed information requirement is not necessary and more likely to provide depositors with additional unnecessary costs, for little or no value. Proven capability of DGS to handle payout situations effectively In order to ensure that DGS are capable to deal with payout situations, the following options could be considered: (a) Retain current approach (stress testing required in general) (b) Require DGS to regularly disclose the amount of ex-ante funds, their workforce and the result of regular stress testing exercises (c) Make such disclosure (as referred to under point b) a precondition for cross-border services or establishment of branches (d) Regular peer review among DGS 13/16

14 Question 34: Which solution would you prefer? Please provide reasons. Would you The NVB can only support option a, since other option could endanger the stability of the banks. Disclosing information in relation to the DGS could trigger depositors to place their money elsewhere, thereby enlarging the instability of the bank. Topping-up arrangements The following options could be considered: (c) Retain current approach (topping up within discretion of Member States; host country topping up regulated in some detail by the Directive (Annex 2) but home country topping up permitted) (d) Make topping up mandatory in whatever form (e) Recommend home country topping up (f) Making home country topping up mandatory (g) Making host country topping up mandatory (h) Discontinue topping up Question 35: Do you consider topping up a problem? If so, which solution would you prefer? Please provide reasons. Would you Topping up is one of the most prominent problems. We believe that full harmonisation of the coverage levels and the scope of deposits and depositors will make topping up arrangements redundant. It is therefore important to ensure that the agreed upon harmonisation of coverage level is retained. Independent of which choice is being made, it stays important that clear agreements are being made between the different DGS and banks on information exchange, conditions to banking activities and certainty that the home DGS will pay out. Cross-border cooperation between DGS It could be considered that a DGS in a host country acts as a single point of contact for depositors at a branch in the host country. This could encompass features such as post box services, advice in the host country s language or being a paying agent for the home country DGS. Question 36: Which solution would you prefer? Please provide reasons. Would you From the experience we have had with Icesave, we can say that it is preferable that the host DGS acts as single point of contact. This leads to more stability and less frantic situations. Depositors have more confidence in their own DGS than in some foreign DGS. As a result DGS will have cooperate more closely. Level of funding of DGS On top of improving the financing mechanism (Question 39) and a possible introduction of a pan-eu DGS (Questions 17-19), it could be considered to recommend or require a target level (certain percentage of deposits) for ex-ante funds, ex-post contributions and alternative means of financing (e.g. borrowing). A maximum level for the contribution of banks could also be considered. 14/16

15 Question 37: Which solution would you prefer? Please provide reasons. Would you The NVB is in favor of installing such a maximum. The NVB notes that banks can not influence the internal workings of individual (other) banks and have no influence over supervisory practices. Furthermore the public policy objectives of a deposit insurance scheme may include a coverage amount which is higher than necessary. Therefore, banks should not by definition be solely responsible for the costs, but only partially as in some instances the government may need to pay a share as well. Risk-adjustment of contributions to DGS It could be considered to introduce risk-based contributions on a voluntary or mandatory basis. Particular models could be recommended or required. Question 38: Would you prefer introducing risk-based contributions? Which models would you envisage? Please provide reasons. Please describe. The NVB supports the introductions of risk-based contributions to the DGS. How this should be done in practice remains to be seen. One factor however is important, and that is that these risk-based contributions should be made country specific. No EU format can be implemented. Furthermore the differences caused by the risk profiles should be such that they have an impact on the behavior of individual banks. They should be triggered to achieve a better risk profile. Funding mechanisms It could be considered to make ex-ante funding mandatory and to require alternative short-term (interim) financing or long term borrowing in case of need. Question 39: Which solution would you prefer? Please provide reasons. Would you If you prefer interim financing, please describe how and by whom such financing should be provided. The NVB is not in favor of making any system of funding mandatory. First and foremost an impact assessment has to be performed before making any choice for any funding system. It remains to be proven that at this moment in time a move towards an European funding system is viable. The country specific circumstances should form the starting point. Question 40: Are there any other issues that have not been mentioned above but should be dealt with in the context of the review of the DGS Directive? If so, please describe the problem and its different impacts as precisely as possible. As stated in our cover note and question 1, we think that a dgs can only be seen in relation to its role in the safety net. It remains important to note that a dgs can t be seen or used as an instrument to prevent or manage a crisis. More emphasis should be given in the review of the Commission to this larger framework. Furthermore, the question of definitions should be tackled. If it would be possible to impose a strict definition of depositors and deposits, then this would lead to more harmonisation and clarity. Another definition that gave rise to practical problems, was the definition of companies with abridged balance sheet. The corresponding criteria are 15/16

16 not used in banks corporate systems. This definition should be brought more in line with what banks use in practice. The effects of increasing the level of coverage to 100,000 on both depositors behaviour and the borrowing practices of banks should be carefully examined and assessed. Should the level of coverage indeed be increased to 100,000, we would advocate the introduction of a review clause into the Directive which provides for a fresh examination of the matter of the level of coverage after a period of, e.g. three years. This would enable the level of coverage to be readjusted when normal times have returned. In order to protect DGS participants, a consistent assessment for new and existing banks should be ensured throughout the EU, so that all participants to a DGS are held to the same standard of soundness. More generally, DGS administrators should be tasked with protecting the interests of the contributing banks in order to enhance trust in the banking system. Finally, we would propose to investigate the legal framework for a DGS. With a view to future cooperation and possible merger of DGS s it would be an advantage that the legal status is equal. * 16/16