Deposit guarantee and investor compensation schemes
In 2018, the Principality of Andorra transposed Directive 2014/49/EU on deposit guarantee schemes and Directive 97/9/EC on investor-compensation schemes by approving Law 20/2018 of 13 September, which regulates the Andorran Deposit Guarantee Fund and the Andorran Investment Compensation Scheme.
This transposition led to the European adaptation of the regime that had already existed in Andorra since 2011 regulated by Law 1/2011 on the creation of a deposit guarantee system for banks and the standardisation with the European Union of the protection of deposit holders and investors in banks and financial institutions in the Principality of Andorra.
Like the Directive, Andorran law establishes a transitional period during which banks that are members of the Deposit Guarantee Fund (Fagadi) must make annual contributions to be determined by their Managing Commission. By 30 June 2024 they are required to have ex-ante financial resources in an amount equivalent to 0.8% of the guaranteed deposits.
Banks authorised to operate in the Principality of Andorra are obliged to be members of the Fagadi, and all depositors with balances in Andorran banks who are natural persons or legal entities, regardless of nationality or place of residence, are beneficiaries.
Following what is set at European level, the guaranteed deposit amount is limited to €100,000.
Fagadi’s ex-ante resources must reach 0.8% of the guaranteed deposits by 30 June 2024. In addition, starting on this date, banks will continue to make annual contributions to the ex-ante fund in order to raise the financial resources to 1.6% within eight years from 2024. This percentage far exceeds the 0.8% generally required by the Directive and the 0.5% target allowed for highly concentrated banking systems such as the Andorran one.
The Andorran investment compensation scheme (“Sagi”) is an ex-post guarantee system whose members, aside from banks, also include investment firms and management companies of collective investment undertakings.
The coverage limit is €100,000 per investment holder, which is more than the €20,000 established in the Directive.