We would like you to be have the comfort of knowing that Swedbank is a member of investor-protection scheme under the Investor Protection Law, and the provisions of the Deposit Guarantee Law apply to clients’ cash deposits with Swedbank.
We welcome you to familiarize yourself with the investor-protection scheme and deposit-guarantee scheme regulations applicable in the Republic of Latvia.
INVESTOR-PROTECTION SHEME AND MEMBERS
The investor-protection scheme is a set of measures for the protection of interests of investors, the provision of financial resources necessary for such protection and payment of compensation in accordance with the Investor Protection Law. Scheme members are all legal persons which have received a special license from the Financial and Capital Market Commission to provide investment services.
Who is entitled to compensation?
Entitled to compensation are investors - persons who transfer money or financial instruments to a scheme member for the provision of investment services.
When is the compensation payable?
A compensation is paid for irreversibly lost financial instruments and for loss caused by a non-executed investment service in situations where the a scheme member, due to reasons directly related to its financial standing, is not able to meet its obligations to the investor in full and within the prescribed term, but not in situations where an investment service was not executed in the normal course of business of the scheme member.
An irreversible loss of financial instruments means a fact, established by the Financial and Capital Market Commission, that the data, which attest to the ownership right of an investor to financial instruments and which are stored in the computer system of a scheme member or are held is other type of records, are irreversibly destroyed or damaged due to some act or failure to act or criminal offence and the scheme member refuses to restore such data based on the documents presented by the investor.
A non-executed investment service means an investment service, which a scheme member has accepted for execution, but has failed to carry out in whole or in part, and the investor has incurred loss or financial instruments have irreversibly been lost as a result.
What is the size of compensation?
Irrespective of the date of accepting the investment service by the scheme member for execution, the guaranteed compensation to one depositor is 90% of the irreversibly lost financial instruments or the loss resulting from the non-executed investment service but not more than EUR 20,000 translated into Latvian lats at the Latvian Central Bank’s exchange rate in force on the day on which the decision to satisfy the compensation application is taken.
No compensation will be paid:
1) to a person for transactions in respect of which a verdict of guilty in a criminal case for money laundering has been made;
2) to investor-protection scheme members, insurance companies, investment companies or other investors which have informed of the fact that they are professional investors;
3) to persons which are in the same group of companies as the scheme member;
4) to pension funds;
5) to the State and local governments;
6) to board and council members of a scheme member, the head of an audit commission and members of such commission, the head of an internal audit service and members of such service, other employees of a scheme member who are authorised to plan, manage and control activities of the scheme member and who are responsible therefor, as well as to persons who have directly or indirectly acquired more than five per cent of the capital of a scheme member;
7) to persons who are responsible for the audit of the accounting documents of scheme members stipulated by law;
8) to persons who are relatives of the first degree of kinship, or spouses of the persons referred to in point 6 and 7 above;
9) to persons who act on behalf of the persons referred to in point 7 above;
10) to persons regarding whom the Financial and Capital Market Commission has established that, under special provisions of a contract concluded individually, they have received high interest rates or financial concessions, or have caused or have taken advantage of circumstances which have resulted in financial difficulties or have lead to deterioration in the financial situation of a scheme member.
How to claim the compensation?
The compensation will only be paid to those investors who have submitted an application to the Financial and Capital Market Commission regarding irreversible loss of financial instruments or losses caused by a non-executed investment service.
An application for compensation must be submitted within a one-year period as from the time the investor has become aware of the default by the scheme member on obligations, but not later than five years from the date of default on obligations.
DEPOSIT-GUARANTEE SCHEME
The deposit-guarantee scheme has been designed and operates on the basis of the Deposit Guarantee Law. The scheme been set up with a view to ensuring that investors are paid a compensation for deposits made with a member of the deposit-guarantee scheme, but have become unavailable i.e. in cases where a member of the deposit-guarantee scheme is unable to pay out a client’s deposit to them due to the fact that the Financial and Capital Market Commission has revoked a scheme member’s licence, the court has declared the deposit taker insolvent or in other cases where the Financial and Capital Market Commission (hereinafter – the Commission) has established that the deposit taker is unable to pay the guaranteed deposit to the depositor and has made a decision on the occurrence of the unavailability of deposits.
Members of the deposit-guarantee scheme
The members of the deposit-guarantee scheme are deposit takers, who are banks and their foreign branches, branches of foreign banks or credit unions registered in the Republic of Latvia. Exceptions:
1) foreign branches of banks registered in the Republic of Latvia if the legislation of that foreign country requires those branches to belong to its deposit-guarantee scheme;
2) branches of banks registered in the European Union Member States if the legislation of those Member States provide for guarantees on deposits held with foreign, including Latvian, branches of banks and cover all the deposits provided for by the Deposit Guarantee Law, and, the guaranteed compensation is not less than the minimum guaranteed compensation under the European Community legislation;
3) branches of other foreign banks in Latvia if the legislation of those foreign countries provide for guarantees on deposits held with foreign, including Latvian, branches of banks and cover all the deposits provided for by the Deposit Guarantee Law, and, the guaranteed compensation is not less than the minimum guaranteed compensation under the Deposit Guarantee Law.
In relation to a Latvian branch of a bank registered in a Member State of the European Union, the unavailability of deposits occurs when it has occurred in accordance with the legislation of the relevant Member State of the European Union.
Deposit-guarantee fund
The deposit-guarantee fund means a pool of assets composed of:
1) payments by deposit takers – a one-time initial contribution prescribed in the Deposit Guarantee Law and the regular quarterly payments calculated according to the Deposit Guarantee Law at the extent of percentage of the deposit taker’s average guaranteed deposit balance in the preceding quarter;
2) a one-time contribution from the state budget;
3) a one-time contribution by the Latvian Central Bank;
4) income (interest) earned through management of the deposit-guarantee fund.
If the deposit guarantee fund lacks funds to make guaranteed compensation payments as prescribed by the law, such payments shall be made from the state budget via the Financial and Capital Market Commission.
Who is entitled to compensation?
The Deposit Guarantee Law stipulates that the guaranteed compensation shall be paid to those depositors who are entitled to it in accordance with the law. The guaranteed compensation is calculated in accordance with the data held in the accounting registers of the deposit taker as of the day on which the unavailability of deposits occurs. The depositor does not have to provide any applications or other documents that prove the depositor’s right to the guaranteed compensation.
It should be pointed out that the deposit taker itself prepares a list of the depositors entitled to the guaranteed compensation. The list includes those depositors who are entitled to the guaranteed compensation under the law, and it contains information as it was on the day on which the unavailability of deposits occurred.
In accordance with the Deposit Guarantees Law, Section 141 :”(1) If the Commission, the deposit taker, its attorney, administrator or liquidator establishes that the guaranteed compensation has been paid to a person not entitled to it in accordance with this Law or that the amount paid out has been excessive, the person shall be obliged to repay, in accordance with a relevant request from the Commission, the deposit taker, its attorney, administrator or liquidator, the unjustified guaranteed compensation they have received
(2) If the person does not repay voluntarily the unjustified compensation referred to in Paragraph 1 above, the Commission, the deposit taker, its attorney, administrator or liquidator shall be obliged to make a claim for the repayment of the said compensation”.
Section 17 of the Deposit Guarantee Law stipulates that the guaranteed compensation will not be paid for:
1) deposits of central banks and deposit takers;
2) deposits of financial institutions;
3) deposits of those institutions that are financed from the state budget or local government budgets, including transit funds;
4) deposits of depositors who in compliance with law are persons related to deposit takers;
5) third party deposits made on behalf of or under instructions (authorisation) of the persons referred to in clause 7;
6) deposits granted to depositors on an individual basis for exceptionally high interest rates or on other conditions, the fulfilment of which has led to the deterioration in the financial condition of the deposit taker;
7) guaranteed deposits that are related to money laundering or that are to be acknowledged as proceeds derived from criminal activity, provided a verdict of guilty has come into force;
8) guaranteed deposits resulting from a claim that has arisen or may arise against a deposit taker due to the fact that the deposit taker has made transactions in bearer certificates of deposit or bearer bonds;
9) deposits that in accordance with law constitute the equity capital of a deposit taker.
What is the amount of guaranteed compensation?
Regardless of the day of making the deposit, the guaranteed compensation to one depositor per deposit made with the deposit taker from 18.10.2008 is the full amount of the guaranteed deposit but not more than 50,000 euros converted into lats at the exchange rate set by the Bank of Latvia on the day on which the unavailability of deposits occurred.
How to claim the guaranteed compensation?
The Commission pays the guaranteed compensations to the depositors in accordance with the list of entitled depositors made by the deposit taker.
The depositor does not have to provide any applications or other documents that prove the depositor’s right to the guaranteed compensation.
The deposit taker should submit the list to the Commission not later than on the next day following the occurrence of the unavailability of deposits.
How is the guaranteed compensation determined and paid?
The guaranteed compensation will be paid in Latvian lats (guaranteed deposits in foreign currencies are converted to lats in accordance with the respective exchange rate set by the Bank of Latvia on the day of the occurrence of the unavailability of deposits). The guaranteed compensation will be determined according to the size of the guaranteed deposit on the day of the occurrence of the unavailability of deposit, considering the following conditions:
1) if a depositor has several guaranteed deposits with one deposit taker, all the guaranteed deposits of one depositor will be summed up and treated as one guaranteed deposit;
2) the right of a depositor to guaranteed compensation and those liabilities of a depositor to the deposit taker, which fall due by the end of the term specified for submission of claims for guaranteed compensation of depositors, will be set off against each other, and it will be taken into account in the calculation of the guaranteed compensation;
3) also a person’s share in a joint deposit will be taken into account (the share is determined in the contract with the deposit taker or, if not determined there, the joint deposit is to be split in equal shares).
The Commission pays the guaranteed compensations to the depositors in accordance with the list of entitled depositors made by the deposit taker.
The deposit taker should submit the list to the Commission not later than on the next day following the occurrence of the unavailability of deposits.
The guaranteed compensation will be paid out within a maximum of 20 business days of the day when the event of unavailability of deposits occurred. This timeframe may be extended upon decision of the Commission for the period of time specified in the Deposit Guarantees Law.
The procedure, time and place for payout of the guaranteed compensation will be determined by the Commission, and the relevant information will be published in Latvijas Vēstnesis, the official gazette of the Republic of Latvia, and in another newspaper.
