Amendment to the Act on Protection of Deposits

Act No. 492/2001 Coll. amending and supplementing the Act of the National Council of the Slovak Republic No. 118/1996 Coll. on Protection of Deposits and amending and supplementing certain other acts, as amended

The aim of the amendment to the Act on Protection of Deposits was mainly harmonisation of the Act on Protection of Deposits with requirements of the European Union in the area of protection of banking deposits. The amendment thus takes into consideration mainly the requirements of the European Union for systems of protection of deposits arising from the Directive No. 94/19/EC of the European Parliament and the Council of the EC from 30 May 1994 on Systems of Protection of Deposits.

The most significant difference in the legal regulation of protection of deposits is a difference in the scope of protected banking deposits. The Act on Protection of Deposits valid until recently applied only to protection of banking deposits of individuals (natural persons), whereas some types of deposits of individuals were excluded from the protection.

The amendment to the Act cancelled the limitation of the legal protection of banking deposits only to the banking deposits of individuals and at the same time extended legal protection of banking deposits also to banking deposits of selected non-profit and non-business legal entities, in particular to banking deposits of foundations, non-investment funds, non-profit organisations providing generally beneficial services, civil associations and communities of owners of flats and non-residential premises. In case of individuals being entrepreneurs the system of protection of deposits applies also to the banking deposits of individuals being entrepreneurs which are established for the purposes of business activities. For this purpose, the amendment also newly defines a term ``banking deposit'' as an obligation of a bank or a branch office of foreign bank towards an individual or a legal entity specified by this Act for payment of funds which the depositor deposited in the bank or the branch office of foreign bank at the banking transaction performed in his/her name and on his/her account or which the bank or the branch office of foreign bank received as payments in favour of the depositor. The banking deposit, as defined by the Act, includes also interests and other financial benefits connected with depositing of these funds. The banking deposit also includes (a) joint deposits and (b) a notarial custody deposited in the bank or the branch office of foreign bank if the entitled recipient of the funds from this custody is or is to be a person, deposits of which/whom are protected by this Act, and if before the date when deposits became inaccessible a notary public administering this notarial custody delivered to the respective bank or the branch office of foreign bank a written notification containing information on each entitled recipient stipulated by the law.

Pursuant to the Act on Protection of Deposits, the following deposits are not protected: deposits in bearer form, in particular depositor's books in bearer form and bearer form deposits in the form of securities, deposits in the form of publicly tradable securities, deposits in the form of bonds, notes or cheques, joint deposits (if the requirements stipulated by law are not fulfilled) as well as deposits such as notarial custody, if the requirements stipulated by law are not fulfilled. The Act also does not provide protection to the deposits if the depositor is a bank, security broker (which is not a bank), central depository of records of book-entered securities, stock exchange, commodity exchange, administration company including assets in share funds, insurance companies, supplementary retirement insurance company, post-office, legal entity operating lotteries and other similar games and the Export-Import Bank of the Slovak Republic, as well as a Slovak legal entity not specified above or a foreign legal entity which has at least partially the same scope of business activities as any of the legal entities stated above.

Neither deposits of a legal entity which is obliged to have its financial statements audited by an auditor, nor deposits of the state, state funds, municipalities, higher regional units, their budgetary or contributory organisations and public authorities, deposits of a legal entity established by law are protected

The next significant difference in the legal regulation of protection of deposits consists in determination of the maximum amount of a refund provided for inaccessible deposits. For the inaccessible deposit, the Deposits Protection Fund provides

(a)

a refund of 90% of the value of inaccessible deposits, and

(b)

from the validity date of the Agreement on Accession of the Slovak Republic to the European Communities and the European Union a total refund to one depositor or other person entitled for the refund under this Act pursuant to the letter (a) above in the maximum amount equal to EUR 20,000 converted into the Slovak crowns according to the exchange rate announced by the National Bank of Slovakia (``NBS'') as of the date when deposits in the bank became inaccessible.

According to temporary provisions of the amendment of the Act on Protection of Deposits, a refund in the above-mentioned amount for protected deposits which became inaccessible before the date when the Slovak Republic becomes a member of the European Communities and the European Union, shall be paid to one depositor or other person entitled under this Act. However, in case of occurrence of inaccessibility of deposits between 1 December 2001 to 30 June 2002 the total refund paid to one depositor or other entitled person cannot exceed thirty times of an average monthly salary in the Slovak Republic for the last four quarters according to the findings of the Statistical Office of the Slovak Republic known to the date when deposits became inaccessible. At the occurrence of inaccessibility of deposits after 30 June 2002 a refund in the maximum amount of forty times of the above average monthly salary in the Slovak Republic shall be paid to one depositor or other entitled person. Thus determined multiples of the average monthly salary are rounded to whole hundreds upwards. If the determined and rounded multiple stated above is however more than the amount equal to EUR 20,000 converted into the Slovak crowns according to the exchange rate announced by NBS as of the date when deposits in the bank became inaccessible, a refund from the Deposits Protection Fund in the maximum amount equal to such conversion of EUR 20,000 into the Slovak crowns shall be paid to one depositor or other entitled person.

The amendment has further regulated and stipulated in details several provisions of the recently valid Act on Protection of Deposits, e.g. provisions on yearly contributions and extraordinary contributions of banks to the Deposit Protection Fund, provisions on structure of some bodies (the Council and the Supervisory Board) of the Deposit Protection Fund, as well as provisions on the manner of evidencing of rights of depositors for refunds for inaccessible deposits from the Deposit Protection Fund.

This Act is in force from 1 December 2001, save for the Article I, point 4 of the provision of Sec. 3(3) lett. c) and Article I, point 17 of the provision of Sec. 9(2) lett. b), which will become effective on the validity date of the Agreement on Accession of the Slovak Republic to the European Communities and the European Union.

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