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1 ANNUAL REPORT 2015

2 Credits Publisher Deposit Guarantee and Investor Compensation Foundation PCC (EAS) Austrasse 46 FL-9490 Vaduz Phone: Website: Production BVD Druck + Verlag AG, Schaan

3 Table of contents 1. Foreword 2 2. Facts & Figures Organisation / Structure Legal form & purpose Structure Bodies Foundation Board Auditor Secretariat 6 4. Activity Report Transformation and expansion Introduction of single customer view (SCV) for banks Other projects & activities European & international developments 8 5. Cells Overview Banking cell Cells for other financial service providers Participant statistics Annual Financial Statement Information on the annual financial statement Foundation: Balance sheet and income statement Income and assets of the individual cells 16 EAS Annual Report

4 1. Foreword Dear Readers The year 2015 was clearly marked by change. Our deposit guarantee organisation was created already in 2001 and has since been borne by the Liechtenstein Bankers Association (LBA). Fortunately, it has so far not had to deal with any compensation case. Given that the regulatory requirements for all supervised financial service providers are steadily becoming more demanding, and given that separate investor compensation schemes for other financial service providers have turned out to be too burdensome in operational terms, the LBA took the groundbreaking decision to open up the existing institution also for other financial service providers who are required by law to join an investment compensation scheme. This opening up was made possible only thanks to the creation of protected cell companies under Liechtenstein company law. A single, combined protection institution is the most appropriate solution for the specific circumstances of the Liechtenstein financial centre. As an important pillar of stability, the newly created, combined solution can reflect the dynamic development of the financial centre and its financial service providers in a simple, flexible, and efficient manner. with national and international financial service providers, government authorities, and the public. In parallel, EAS was granted financial independence. As a non-profit organisation, the operating and project costs of EAS are covered entirely by the participants. After this enormous development for EAS, one might think that experiences could be gained with the new organisation first before tackling the next major project. But this is not the case. Together with the banks, EAS will take on the challenges relating to the new Deposit Guarantee Schemes Directive 2014/49/EU. The transposition of the directive provisions into a separate law is planned for the second half of 2017, with advance financing of the deposit guarantee fund beginning in Many preparatory measures have already been initiated. Inclusion in the international network, especially through our EFDI membership, helps us a great amount in this regard. With this first Annual Report for 2015, another essential step toward transparent reporting on EAS is being taken. We wish you an interesting read. To prepare the transformation of the foundation into a protected cell company and in order to expand the protection mechanism to cover other financial service providers, the articles of association had to be amended, new regulations and contracts established, the fee system and the guarantee contribution model prepared, the reporting system set up, and finally additional members of the Foundation Board appointed. Since April 2015, a total of 139 new contracts have been concluded, 124 of which with new participants joining the newly created cells for investor compensation. Along with the opening up and expansion of the scheme, a new and autonomous public image was developed. The protection institution is now called the Deposit Guarantee and Investor Compensation Foundation PCC (EAS). With the new logo and its own website ( the protection scheme has been given a clear and distinctive identity that simplifies communication Siegbert Näscher, President Rafik Yezza, Secretary 2 EAS Annual Report 2015

5 2. Facts & Figures participants 6 management companies/aifms 1 investment firm 117 asset managers 15 banks Covered deposits CHF 6.5 Mrd. No compensation cases Maximum compensation Depositors CHF Investors CHF EAS Annual Report

6 3. Organisation / Structure 3.1. Legal form & purpose The Deposit Guarantee and Investor Compensation Foundation PCC (EAS) is an autonomous foundation under articles 552 et seq. of the Liechtenstein Persons and Companies Act (PGR), entered in the Commercial Register since 6 September It is set up in the form of a protected cell company (PCC) in accordance with articles 243 et seq. PGR. The transformation into a protected cell company was completed on 1 April The founder is the Liechtenstein Bankers Association (LBA). Together with the cell participants, the foundation constitutes a protection organisation according to article 7 of the Banking Act (BankG). In accordance with its articles of association and the provisions of the Banking Law, its purpose is to guarantee covered deposits and to compensate covered investor claims at the banks and other financial service providers participating in the protection scheme. The current legal framework such as EU directives, the Liechtenstein Banking Act and Ordinance, and the EAS articles of association can be found on the EAS website at Since 2010, EAS has been a member of the European Forum of Deposit Insurers (EFDI), headquartered in Brussels, and of the International Association of Deposit Insurers (IADI), headquartered in Basel. IADI is affiliated with the Bank for International Settlements (BIS) and is the global standard-setter in the field of deposit insurance, while the EFDI as an expert for deposit insurance and investor compensation mainly focuses on the European Single Market. The foundation is established for an indefinite period of time and organised under private law. It does not operate a commercial business (article 552(1) PGR) and is non-profit. The fees collected are used to cover operational and administrative costs. Because of its non-profit purpose, EAS is exempt from corporate income tax under article 45(2) of the Tax Act. 4 EAS Annual Report 2015

7 3.2. Structure The foundation is a protection institution for covered deposits and investor claims of clients against banks and other financial service providers domiciled in Liechtenstein. It has assumed the obligation to compensate the clients of a bank or other financial service provider up to a certain maximum amount (coverage amount) in the event of default or bankruptcy, if that bank or other financial service provider has a pre-existing contractual relationship with the foundation. With this purpose, EAS as the sole protection institution in Liechtenstein contributes substantially to the protection of creditors and makes a crucial contribution to the reputation and stability of the Liechtenstein financial centre. For this purpose, it operates a combined protection scheme for deposits and investor claims in accordance with the legal and European requirements. The foundation is composed of a core and the following four cells: 1. Banks 2. Investment firms 3. Asset managers 4. UCITS management companies and AIFMs The core of the foundation is responsible for ongoing operations, namely management of the foundation and administrative processing of compensation cases on behalf of the cells. The core of the foundation has the core assets at its disposal. Within an individual, separated, and independent cell, assets are accumulated through the contributions of the participating financial service providers. These assets serve to finance compensation cases. They are explicitly and exclusively allocated to each cell. The individual cells do not have their own legal personality, however. The core and each cell are liable only for themselves, i.e., liability does not extend between cells or between the core and individual cells. The core assets assume liability for the core. For an individual cell, only the specifically allocated cell assets are liable. These assets are accumulated in the form and amount of the contributions already paid in by the participants in the cell. LBA (Founder) Founda on Board Deposit Guarantee and In on Founda on PCC Core of the Founda on Auditor Cells Banks Investment Firms Asset Managers Manag.Comp./ AIFMs Secretariat EAS Annual Report

8 3.3. Bodies Foundation Board The Foundation Board is the governing body of the foundation, comprised of three to seven natural persons as members, who are appointed by the founder for an indefinite term and may be dismissed by the founder. It is the Foundation Board s responsibility to manage the foundation and to represent it externally. Upon transformation of the foundation into a protected cell company, the Foundation Board was expanded from five to a maximum of seven members; according to article 9(b) of the articles of association, representatives of the two partner associations the Association of Independent Asset Managers in Liechtenstein (VuVL) and the Liechtenstein Investment Fund Association (LAFV) are entitled to at most two seats on the Foundation Board. The remaining members of the Foundation Board are representatives of the LBA member banks. Willy Bürzle (NEUE BANK AG), who served as president for many years, resigned effective the end of July With the merger of Centrum Bank AG and VP Bank AG, Leo Heeb also left the Foundation Board. Siegbert Näscher President, VP Bank AG, member since March 2012 Christoph Reich Vice President, Liechtensteinische Landesbank AG (LLB), member since March 2012 Ivo Enderli LGT Bank AG, member since March 2012 Roland Frick Bank Frick & Co. AG, member since October 2015 Fredy Wolfinger Association of Independent Asset Managers in Liechtenstein (VuVL), member since October 2015 Lars Inderwildi Liechtenstein Investment Fund Association (LAFV), member since October Auditor The foundation requires an auditor licensed under Liechtenstein banking law (article 7(4) BankG), which performs an annual legality and regularity audit of the protection scheme and prepares a detailed audit report. PricewaterhouseCoopers AG (St. Gallen) since 2001 fiscal year 3.4. Secretariat According to the articles of association, the Foundation Board may establish a Secretariat reporting to it in order to fulfil its responsibilities. By way of a written agreement, the LBA has been entrusted with the responsibilities of ongoing management and especially with the processing of compensation cases. On the basis of this agreement, the management of the EAS Secretariat has been assigned to the LBA Secretariat, which in particular is responsible for all daily business and administrative concerns of EAS. Rafik Yezza Secretary Simon Tribelhorn Secretary Silvia Heron Administration Katharina Zogg Accounting/Annual Financial Statement 6 EAS Annual Report 2015

9 4. Activity Report The following activity report provides information on the main work and projects of EAS which alongside ongoing administration of the foundation were the focus of the Secretariat s activities in the past year, as well as international developments relating to deposit insurance and investor compensation. The specific and statistical information on the individual cells can be found in chapter 5 below Transformation and expansion The focus in 2015 was on expanding the protection scheme and the related legal transformation, as well as spinning off the foundation s operations in terms of communication and finances. The extraordinary general meeting of the LBA on 21 January 2015 approved the transformation of the Deposit Guarantee and Investor Protection Foundation of the Liechtenstein Bankers Association into a protected cell company in accordance with articles 243 et seq. PGR. At the same time, the foundation was renamed the «Deposit Guarantee and Investor Compensation Foundation PCC» (PCC standing for «protected cell company»). Upon entry in the Commercial Register, a new and autonomous public image was established with a new logo and own website ( This gives the protection scheme a clear and distinctive identity that simplifies communication with financial service providers, government authorities, and the public in both the national and international context. Protected cell companies (PCCs) are not a new legal form, but rather an organisational form that permits legal persons to be divided into different cells. PCCs permit entities that are separate in terms of liability to be unified legally as part of the same legal person, thus offering a higher degree of flexibility but also legal certainty when structuring organisations under company law. In parallel with the transformation, the existing LBA institution was expanded in coordination with the partner associations VuVL (Association of Independent Asset Managers in Liechtenstein) and LAFV (Liechtenstein Investment Fund Association) so that alongside banks, other financial service providers can also join the protection scheme or the appropriate cell thereof for the purpose of investor compensation. By centralising and separating homogeneous liability groups under a single umbrella and combining their strengths, assets can be separated more easily, liability can be limited in a purposeful way, and the entire institution can be managed efficiently by making use of synergies. As an important pillar of stability, the newly created, combined solution can reflect the dynamic development of the financial centre and its financial service providers in a simple, flexible, and efficient manner. The new legal design in conjunction with the inclusion of new categories of financial service providers resulted in a comprehensive revision of the framework governing EAS. The existing articles of association were completely revised and vastly simplified. The specific substantive provisions on deposit insurance and investor compensation were transferred into the cell regulations. Moreover, the existing participation contracts for banks were completely revised, and new contracts were prepared for other financial service providers. Finally, the existing Secretariat agreement between EAS and the LBA was updated, and a new fee system was defined to cover operating costs. To prepare the newly joining market participants and representatives of the public authorities, EAS held an information session in Vaduz in March In addition to the new structure and the new obligations, the presentation focused on the legal and regulatory requirements and the new acceptance process. The new developments met with keen interest, and the event had a high attendance of more than 100 participants. The representatives of the banks that were already members gathered in a smaller group in mid-2015 to obtain information on the newest developments. So that the other financial service providers could be integrated into the newly established investor compensation schemes, more than 120 new participation contracts were concluded during the reporting year. To determine the target amounts of the cells, the covered investor EAS Annual Report

10 claims as of 30 June 2015 also had to be reported. A uniform reporting form was developed for this purpose. As of the end of 2015, the target amounts were defined for the cells with a system of advanced financing and communicated to the FMA and the cell participants Introduction of single customer view (SCV) for banks The goal of introducing single customer view (SCV) is to pay out covered deposits within the time limit established by the legislative power when a compensation case arises. At the same time, SCV helps increase quality and efficiency when determining the covered deposits (guarantee amount) and harmonisation among all participating banks. Under the new rules, the banks are called upon to be able to make the required data available to EAS within a few days in the predefined scope and form. SCV will be mandatory upon entry into force of the new provisions of the Deposit Guarantee Schemes Directive 2014/49/EU in Liechtenstein. SCV helps ensure the planned gradual reduction of the repayment period in a compensation case from 90 to eventually 7 days. Introduction of SCV necessitated amendments to the existing cell regulations for banks. The key provisions were discussed with the banks in advance on several occasions, both verbally and in writing. The technical implementing provisions are summarised in an SCV manual providing clear, result-oriented requirements and information (technical specifications of the SCV file and the reporting process) to support ongoing introduction and optimisation of SCV. The changes to the cell regulation and the SCV manual were approved by the Foundation Board in November 2015 and entered into force on 1 January Other projects & activities In addition to the priority topics of the past year, EAS undertook the following activities: In coordination with the FMA, preparatory measures were taken for the transposition of the new Deposit Guarantee Schemes Directive 2014/49/EU, which replaces Directive 94/14/EC. The legal conceptual questions relating to the national implementation law were discussed, the protection scheme was introduced, and a statement on the exercise of rights of choice was submitted to the FMA. The legislative and internal implementing measures will take up a great deal of EAS s attention especially in 2016/17. Preparatory measures were taken to expand the EAS website by a protected participant area with separate access authorisation. During the reporting year, two ordinary meetings of the Foundation Board were held, and a total of seven proposals were adopted by way of circulars. The supervisory report in accordance with article 18f(5) of the Banking Ordinance (BankV) and the audited annual financial statement (including report by the auditor) were transmitted to the FMA European & international developments EU & Single Market (EEA): As an EEA member state, Liechtenstein has to implement the relevant EU rules for the Single Market. For EAS, this means especially that Liechtenstein must undertake the actual regulatory work relating to deposit insurance and investor compensation and to closely follow the other rules relating to banks and investment firms, such as CRD IV and MiFID. 8 EAS Annual Report 2015

11 At the beginning of the reporting year, the new European Commission withdrew the proposal to amend the existing Investor Compensation Schemes Directive 97/9/EC, even though preliminary consultations in the competent committees of the EU Parliament and Council had already taken place. This means the efforts to further harmonise investor compensation schemes within the Single Market are suspended for now. In mid-2014, the new Deposit Guarantee Schemes Directive 2014/49/EU was published. This new directive, which replaces the old one from 1994, is conceived as the fundamental core regulation for deposit guarantee schemes, with the goal of harmonising provisions governing their functioning. The directive requires all protection schemes to provide advance financing for compensation cases. Within 10 years, these funds are to reach at least 0.8% of the covered deposits. Additionally, the repayment period is to be gradually reduced to seven days, and several information obligations are set out. The EU member states had time until 3 July 2015 to transpose the provisions into national law. The directive is still being incorporated into the EEA Agreement and is thus not yet legally binding on Liechtenstein. In conjunction with the new directive, the European Banking Authority (EBA) has meanwhile published four supplementary guidelines on risk-based contribution systems, irrevocable payment commitments, cooperation agreements, and stress tests. Additionally, the European Securities and Markets Authority (ESMA) published an opinion on the accounting for guarantee contributions according to the International Financial Reporting Standards (IFRS). Liechtenstein is planning to implement the new, harmonised provisions into national law in the second half of The intention is to transpose the existing provisions on deposit insurance and investor compensation from Liechtenstein banking law (BankG/BankV) into a separate, autonomous law (Deposit Guarantee and Investor Compensation Act, EAG). European Forum of Deposit Insurers (EFDI): Thanks to membership in EFDI, the Secretariat was able to exchange important experiences in the reporting year concerning the concrete implementation measures of deposit guarantee schemes in the individual EU member states. With regard to member integration, EFDI aims to include European third countries in their activities to the extent possible, even if its focus is clearly on the EU and the EEA. For that purpose, measures are planned to amend the association s statutes. As the representative of an EEA member state, it is a concern of EAS that the members from EEA countries receive the same membership and participation rights as members from the EU. The Secretariat actively represented its position in the debate and follow-up work at the general meeting. Additionally, the Secretariat took part in the annual specialist conference as well as in a meeting of the working group and a seminar on investor compensation. Membership in EFDI has also given rise to the need for even more intensive exchanges among German-language deposit guarantee schemes for the purpose of indepth treatment of the new rules. The utility of this exchange among specialists during a five-country meeting of the representatives from Germany, Austria, Luxembourg, Switzerland, and Liechtenstein was seen especially in regard to two aspects: 1) All schemes are organised under private law (which is rather unusual internationally), and 2) only Germany and Austria have institution-based protection schemes. At both meetings during the reporting year, questions relating to the exercise of rights of choice and irrevocable payment commitments, the development of risk-based contribution models, information obligations, and international cooperation in cases of cross-border compensation were discussed. Given that no compensation case has arisen so far in Liechtenstein, it is especially important for EAS to exchange technical and organisational expertise. EAS Annual Report

12 International Association of Deposit Insurers (IADI): As the international standard-setter, IADI issues the Core Principles for Effective Deposit Insurance Schemes, which were revised at the end of These Core Principles serve as the basis for the International Monetary Fund (IMF) and the World Bank to evaluate the quality of deposit guarantee schemes in their country assessments. Building on these Core Principles, IADI also published a Handbook for the Assessment of Compliance with the Core Principles in 2015 for self-assessment by deposit guarantee schemes concerning their implementation of technical and organisational measures. The Secretariat took part in the annual IADI survey and reported to the European Regional Committee on the new legal structure as a combined protection scheme for banks and other financial service providers. 10 EAS Annual Report 2015

13 5. Cells In addition to statistical information, this chapter presents and comments on important developments relating to the individual cells, where applicable Overview Each cell constitutes its own protection scheme for covered deposits (only banks) and investor claims (all participants), with the purpose of financing and processing compensation cases. Operational activities are delegated to the core of the foundation. During the reporting year, EAS administered four cells for the following categories of financial service providers: Banks (authorised under the BankG) Investment firms (authorised under the BankG) Asset managers (authorised under the Asset Management Act) Management companies and AIFMs (authorised under the UCITS Act and the AIFM Act), with a supplementary licence for individual portfolio management As in the previous years, no new compensation cases arose during the reporting year Banking cell During the entire reporting year, all banks authorised in Liechtenstein with a full licence participated in the banking cell of the deposit guarantee and investor compensation scheme. The only exception is SIGMA KREDITBANK AG, which merely has a restricted licence for lending in accordance with article 3(3)(b) BankG and thus is under no obligation to join a deposit guarantee scheme. Moreover, one cell participant Alpe Adria Privatbank AG is in voluntary liquidation and is no longer engaged in operational activities. At the end of April 2015, Centrum Bank AG left the protection scheme upon its merger with VP Bank AG. Furthermore, in the course of the transformation into a protected cell company, new participation contracts had to be concluded with the banks, because the contracting party is now the banking cell. Based on the articles of association as well as the cell regulation and the participation contracts, the cell is financed only if a compensation case occurs (ex post financing). The basis for determining the individual guarantee contributions is the reporting of covered deposits and investor claims, which are consolidated into a weighted guarantee amount and distributed proportionately among the participants using a matrix. The total of the weighted guarantee amount determined as of 30 September 2015 valid from 1 January 2016 is CHF 6,497,116,992. According to the cell regulation, the foundation grants maximum coverage for deposits and investor claims of up to CHF 400 million. This upper limit on the scheme corresponds to 6.2 % of the current guarantee amount, meaning that the contributions to be made by the banks (without interest) will at no time exceed the indicated limit in total. The following chart shows the development of covered deposits since the foundation was established in 2001: billion EAS Annual Report

14 5.3. Cells for other financial service providers In the course of the expansion, more than 120 other financial service providers joined their respective cells in the reporting year through the conclusion of participation contracts. By the end of the reporting year, all investment firms, asset management companies, and UCITS management companies or AIFMs with a supplementary license for individual portfolio management authorised in Liechtenstein had become active participants of the investment compensation scheme in their respective cells. Based on the articles of association as well as the applicable cell regulations and participation contracts, the cell assets necessary for an average compensation case are financed in advance by collecting guarantee contributions (ex ante financing). Every unit participant must make a basic contribution of at least CHF 250 each year, regardless of whether the participant has covered investor claims or not. On the basis of the reports of covered investor claims submitted by the participants (as of 30 June 2015) and in consultation with the FMA, the appropriate target amount was for the first time determined individually for each cell. The target amount for each cell corresponds to 0.3% of the sum of the covered investor claims of all participants of a cell. This target amount for the cell assets is being built up over the next 10 years by collecting annual guarantee contributions from all cell participants. The adequacy of the initial determination of the target amount is reviewed each year on the basis of the reports. If the sum of the covered investor claims of all cell participants changes significantly (+20 %/-30 %), the adequacy of the target amount is re-evaluated and, where necessary, a new target amount is defined. Guarantee contributions are levied until the cell assets reach or exceed the target amount. After that, no contributions are levied until the actual cell assets fall below the target amount by 10%. The following chart shows the relative achievement of the target amount during the accumulation phase for the 2015 fiscal year in the individual cells for other financial service providers: 12% 10% Assets as of (in % of target amount) 8% 6% 4% 2% 0% Investment firms Asset managers Management companies /AIFMs 12 EAS Annual Report 2015

15 5.4. Participant statistics As the only compensation scheme in Liechtenstein, EAS and its cells concluded a total of 139 new participation contracts during the reporting year, 124 of which with other financial service providers. Due to its merger with VP Bank AG, Centrum Bank AG withdrew from the banking cell. The following table shows the development of cell participants in the reporting year: 2015 reporting year Banks Number of participants per cell Investment firms Asset managers UCITS MCs / AIFMs TOTAL ) New members Returns of licences Exits Change of cell Increase/decrease ) Number before transformation into protected cell company The list of current cell participants is published on the EAS website at EAS Annual Report

16 Annual Financial Statement According to the requirements of company law, the annual financial statement of the foundation contains the financial information for both the core (operation of the institution) and the cells, which serve solely to finance any compensation cases. Separate accounts are maintained for all subareas. This separation permits unique identification of the individual assets at any time in accordance with article 243e(4) PGR Information on the annual financial statement In its meeting on 26 November 2015, the Foundation Board decided to use the one-time effect arising from the entry of new members in 2015 to create provisions for future projects and fee reductions. The goal of EAS is to cover the regular budget with stable annual fees. Future entry fees will also be allocated to the provisions in consultation with the Foundation Board. It was also decided to return CHF 250,000 to the founder as a onetime lump-sum payment for partial reimbursement of the founder s accumulated formation and project costs. The short-term receivables of the core and of the cells result from late invoicing of fees and guarantee contributions. At the time of publication, all receivables had been settled. The 2015 fiscal year concludes with a revenue surplus of CHF 3, The net profit (taking account of the profit brought forward of CHF 43, from the previous year, minus the creation of the reserve for the banking cell in the amount of CHF 30,000) thus amounts to CHF 16, The balance sheet total for 31 December 2015 amounts to CHF 507, With a reporting date of 15 March 2016, the auditor presented its report for the year 2015 and recommended that the Foundation Board approve the annual financial statement. At its meeting on 19 April 2016, the Foundation Board considered and approved the annual financial statement. The foundation capital (core) was reduced to the legal minimum amount of CHF 30,000 in the reporting year, and legal reserves in the same amount were created for each cell in accordance with article 243e(2) PGR. 14 EAS Annual Report 2015

17 6.2. Foundation: Balance sheet and income statement Balance sheet as of 31 December 2015 (in CHF) Assets Cash and cash equivalents Accounts receivable Total assets Liabilities and equity Accounts payable Accrued expenses Provisions Total liabilities Foundation capital Reserves Retained earnings Surplus of the period Total equity Total of liabilities and equity Income statement (in CHF) Expenses Fees Maintenance Administration and IT Communication New provisions and reserves Financial expenses Extraordinary items Profit of the year Total expenses Revenues Participant fees and contributions Financial income Total revenues EAS Annual Report

18 6.3. Income and assets of the individual cells Balance sheet as of 31 December 2015 (in CHF) Cells Banks Investment firms Asset Managers MCs/AIFMs Assets Cash and cash equivalents 30' ' ' ' Accounts receivable ' Total Assets 30' ' ' ' Liabilities and Equity Provisions for claims ' ' Cell reserves 30' ' ' ' Surplus of the period Total liabilities and equity 30' ' ' ' Income statement 2015 (in CHF) Cells Banks Investment firms Asset Managers MCs/AIFMs Participant contributions ' ' Provisions for claims ' ' Result before financial income Net Financial income Profit of the year EAS Annual Report 2015

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