Frequently Asked Questions
Luxembourg, as a renowned financial center, aspired for a credible deposit guarantee scheme with a solid financial base. For this reason, the FGDL was provided with immediate financial resources which are sufficient to ensure the repayment of depositors in the event of a failure of a mid-sized bank.
According to European legislation, every national deposit guarantee scheme must reach a capitalisation equivalent to 0.8% of the deposits it covers by 3 July 2024. However, Luxembourg legislation provides that this target level must be reached earlier, namely before 31 December 2018. Since 2016, significant financial resources have been raised in order to reach the target level in 2018. In order to maintain this level in view of the annual fluctuation of the covered deposits, the FGDL continues to be financed by regular contributions that it collects from the member institutions.
By adopting the requirement of a buffer of additional financial means, Luxembourg legislation has, moreover, introduced a higher coverage rate than the standard European requirements for deposit guarantee. Member institutions of the FGDL have to this end been requested to fund in the medium term, and before any failure of a credit institution, a total sum equivalent to 1.6% of the covered deposits.
Furthermore, in order to manage large-scale incidents, the FGDL has the possibility to call for additional extraordinary contributions from its members, and it may as well use additional funding from other sources e.g. debt financing.
In case of a joint account, the coverage applies individually and separately to each depositor as if s/he were the sole holder of the share of the joint account s/he is entitled to. In other words, the compensation paid to each co-account holder is the total of the amount of his/her portion of the joint account and the other deposits of that person, up to EUR 100,000. Unless otherwise specified in the account agreement, a joint account is deemed to be shared equally among the co-account holders.
Example: A husband and wife have a joint account with EUR 120,000. The wife has another account with EUR 50,000 with the same bank. In the event of bankruptcy, the wife will obtain a reimbursement of EUR 100,000 and the husband of EUR 60,000.
In order to receive the repayment, each co-holder must complete a form to provide the FGDL with the details of a new account. The new account does not have to be a joint account. The FGDL will send the form to each and every co-holder via mail.
Be careful not to confuse a joint account with a simple bank proxy. The latter is a mandate whereby the holder of a bank account authorises a person, the mandatary, to operate his/her account. Only one compensation to the account holder will be due in the latter case.
Deposits in an account where two or more persons have an interest in an account in their capacity as partner of a company, member of an association or any grouping of a similar nature, without legal personality, are treated as if it was made by a single depositor for the calculation of the amount to be paid under the deposit guarantee and subsequently only one compensation is payable. In order to obtain a repayment, a representative of the association must complete a single form in order to transmit a new account number to the FGDL.
Where the account holder is not the beneficial owner of the deposits, the deposit guarantee benefits the individual(s) entitled to the sums deposited, provided they have been identified or can be identified before the unavailabilty of the deposits. Where there are multiple beneficial owners, the FGDL takes into account the share due to each of them when reimbursing. Unless otherwise indicated, the deposit is deemed to be held equally by the beneficial owners.
This might be e.g. the case if a wealth manager deposits on his/her behalf money received from his/her customers on a so-called “omnibus account” with a member bank of the FGDL. Or, it might be the case of a trust or fiduciary arrangement where the money received in deposit, which is to be paid by the beneficial owner(s), is placed into an account with an FGDL member.
The beneficial owners are deemed identifiable if the depositor has informed the bank that s/he is acting on behalf of third persons and has communicated the number of beneficial owners with the right to claim, as well as their respective share of the deposited sum. The repayment for all beneficial owners for the deposit guarantee is subject to the communication of the identity of the latter, as well as the amount due to each, where applicable, following the determination of the unavailability of the deposits.
It is upon the depositor, holder of the account, to fill out the FGDL’s form in order to communicate the details relating to the new account where the aggregate amount of compensation of all the beneficial owners will be wired to.
The FGDL requires that said account is not constituted within the depositor’s property and has been declared as a third party account to the bank. Information of the beneficial owners as well as the distribution of the aggregate compensation to them is incumbent on the depositor.
The deadline for repayment by the FGDL in case of an account for which the depositor is different from the beneficial owner has been extended. Due to the additional check which have to be undertaken, the repayment may take up to three months instead of the standard seven days.
Deposits in foreign currencies are covered, however repayment will be made in euros at the exchange rate of the European Central Bank published in the Official Journal of the European Union at the date of the unavailability of deposits.
The accounts will be settled on the date of the unavailability of the deposits. Interest accrued but not yet credited will be included in the repayable amount.
It is not up to the FGDL to settle indivisions. Thus, account holders in indivision will receive a single repayment limited to EUR 100,000, or EUR 2,500,000 in case the deposits constitute temporary high balances.
As a general rule, the FGDL mobilises the funds required for repayment within seven working days of the date on which the deposits are determined unavailable. The repayment by bank transfer is made as soon as the FGDL has received the necessary information to carry out said transfer from the depositor.
The repayment period is of three months in cases where additional verifications have to be conducted prior payout. This applies, in particular, to cases where the depositor is not the beneficial owner of the sums deposited in the account, or where the deposits result from real estate transactions involving private property, a life event or from the payment of insurance benefits or compensation for victims of criminal offences or wrongful convictions (please refer also to the temporary high balances section). Repayment may be deferred where it is uncertain whether or not a person is entitled to receive repayment or where the deposit is subject to legal dispute. This comprises also the cases where the deposit is subject to restrictive measures imposed by national governments or international bodies. The repayment may also be deferred if there has been no transaction relating to the deposit within the last 24 months (i.e. the account being dormant). In addition, where the account is dormant and where the repayment would cause administrative costs that are higher than the value of the deposit, no repayment will be made at all.
Deposits which stem from offences in relation to money laundering and the financing of terrorism are excluded from repayment. Pending a judicial ruling, the repayment may be deferred.
The guarantee limit applies per depositor and per bank, irrespective of the number of accounts opened with the same credit institution.
This means that the distribution of deposits over different credit institutions entails an increase in the deposit guarantee.
But beware, when a credit institution operates under different brands and trademarks, the level of guarantee applies to the total of the deposits held by the depositor in the given establishment. In order to gain better visibility, banks are expected to inform their customers of the different brands under which they operate
The deposit guarantee does not apply to financial institutions or investment firms acting on their own account, insurance undertakings, undertakings for collective investment, pension or retirement funds or public authorities which have made deposits with the failing bank.
Deposits arising out of transactions in connection with which there has been a criminal conviction related to money laundering or terrorist financing are excluded from repayment, as are deposits the holder of which has never been identified.
Debt securities issued by a credit institution and liabilities arising out of own acceptances and promissory notes are also not covered by the deposit guarantee.
Deposits made by undertakings for collective investment are excluded from any repayment by the FGDL. Moreover, the securities constituting the collective assets of the SICAV do not benefit from the guarantee of the FGDL or the Système d’indemnisation des investisseurs Luxembourg (SIIL, Investor Compensation Scheme Luxembourg).
SOPARFIs, sociétés de gestion de patrimoine familial (SPF, family asset management companies), securitisation undertakings, offshore investment vehicles/companies and foundations (other than non-profit foundations governed by the Law of 21 April 1928 on non-profit associations and foundations, as amended), established in the context of estate planning or asset management, are assimilated to financial institutions and are therefore excluded from the deposit guarantee. The FGDL does not reimburse the relevant deposits to their beneficial owners.
A distinction must be made between the following two situations:
- The money of the customer of the investment firm is deposited in an account of a Luxembourg bank in the name of the customer and the investment firm has a management or advisory mandate. In this case, the customer benefits from the deposit guarantee of the FGDL, as if the contract with the investment firm was inexistent.
- The money of the customer is held by the investment firm which must deposit it with a bank or alternatively with an eligible money market fund. The money is then placed on an account, called “omnibus account”, on behalf of the investment firm. This is the case described in Question 4 (cf. “What are the specific features of repayment of accounts for which the depositor and the beneficial owner are not one the same”). If said omnibus account is opened with a member institution of the FGDL, each customer shall benefit from a guarantee of EUR 100,000 in the event of a failure by the bank, provided that the investment firm has informed the credit institution that it acts on behalf of third customers and has communicated the number of the beneficial owners with a right to claim and the share due to each of them. In the event of failure by the bank, the FGDL will reimburse the investment firm which is responsible for distributing the money accordingly among its clients. In the event of a failure by the investment firm, the omnibus account does not fall into the liquidation assets in case of liquidation i.e. customers do generally not lose their money. In the event of fraud, or if the account is blocked for a long period of time during a suspension of payment or liquidation, the Système d’indemnisation des investisseurs Luxembourg (SIIL, Investor Compensation Scheme Luxembourg) reimburses customers up to EUR 20,000. Securities held by the investment firm on behalf of its clients are also covered by the SIIL. For more information, please refer to Articles 174 and 196(5) of the Law of 18 December 2015 on the failure of credit institutions and certain investment firms, as amended, as well as to Circular CSSF-CPDI 16/02.
Savings accrued under a housing savings plan are covered by the guarantee of the deposit guarantee scheme to which the housing savings institution is affiliated. For example, contracts concluded through Luxembourg branches of BHW Bausparkasse AG, Bausparkasse Schäbisch Hall AG or Wüstenrot Bausparkasse AG are covered by various German deposit guarantee schemes.
Once a year, Luxembourg banks must provide their customers with a fact sheet describing the officially recognised Luxembourg deposit guarantee scheme (Article 185(6) of the Law of 18 December 2015 on the failure of credit institutions and certain investment firms, as amended). Said letter informs you that this is the FGDL, an établissement public (public body) whose mission is the repayment of deposits under the legal conditions following the failure of a Luxembourg bank. The FGDL is a distinct and separate entity from your bank, which only has access to your customer files in the event of a bankruptcy of your bank. The FGDL does not exchange data about you with your bank and does not transmit information to your banker in normal circumstances.
The content and format of the depositor information sheet are set by Luxembourg legislation in the ambit of the European harmonisation of deposit guarantee schemes. The letter specifies the amount of the deposit guarantee, the application to different accounts held by the same holder, the deadline for compensation, as well as the contact details of the FGDL. The dispatch of this letter is not related to any change in the level of protection of your deposits or to a change to the situation of your bank. The letter is a simple legal information, on which you do not need to take action. It is therefore not necessary to reply to your bank or to contact the FGDL after having received this standard informational dispatch.
For any questions relating to your banking relationship (e.g. change of address, closure of your account, etc.) please directly contact your banker.
In the event of a failure of the custodian institution (credit institution or investment firm), financial instruments such as securities held on behalf of customers do not fall into the liquidation assets, i.e. they are bound to be returned to the customer.
However, in case of a failure of the custodian institution, it may turn out that financial instruments are found to have vanished due to e.g. fraud or administrative negligence. The FGDL does not provide compensation for investors who hold financial instruments. They are instead covered by the Système d’indemnisation des investisseurs Luxembourg (SIIL, Investor Compensation Scheme Luxembourg). The SIIL’s guarantee is limited to 20,000 euros per person and per institution. Claims resulting directly from investment transactions not yet liquidated also fall under the SIIL. Investors shall present their requests within ten years as from the date on which the CSSF determined that the custodian institution does not seem to be able to fulfil its obligations resulting from claims of investors or where the Tribunal d’Arrondissement (District Court) in Luxembourg sitting in commercial matters ordered the suspension of payments or the winding-up of the credit institution or investment firm. It should be noted that no claim can be covered by both the FGDL guarantee and the SIIL guarantee at the same time.
Deposits made by all types of companies, irrespective of their size or their registered address, are covered by the FGDL, apart from deposits made for their own account by banks, financial institutions, investment firms, insurance or reinsurance undertakings. Deposits made by investment funds (UCITS, SIF, …) as well as deposits made by insurance undertakings in relation to life insurance products are excluded as well.
Financial institutions include all companies whose principal activity is a financial activity, including the acquisition of holdings and the granting of loans.
In general, deposits arising out of transactions in connection with which there has been a criminal conviction for money laundering or for terrorist financing are excluded from the FGDL’s protection.
Merely your debts that have fallen due before or on the day at which the deposits become officially unavailable are taken into account for calculating the guaranteed amount to the extent that the set-off of your debts with your deposits is possible under the statutory and contractual provisions governing the contract between you and the bank.
In general, you do not have to repay the principal of a mortgage loan if the deposits at your bank become unavailable. However, you may owe the bank monthly interests or an installment at the moment when the deposits become unavailable. If in addition, the bank has the right to deduct the due amount from your deposits, then the FGDL takes into account the deduction before applying the limit of 100,000 EUR, in accordance with Article 175 of the law of 18 December 2015 on the failure of credit institutions and certain investment firms.