Deposit Insurance System is an important component of financial safety net, which upon occurrence of an insurance case helps to maintain stability in the banking sector and protect depositors from losing their funds (within the coverage limit). The system in Georgia was enacted from January the 1st, 2018. Introduction of the system was supported by the World Bank and International Monetary Fund (IMF).
Insurance case is the event of commencement of liquidation proceedings of a commercial bank and a microbank according to the Georgia Laws on „Activities of Commercial Banks“ and „Activities of Microbanks“.
Deposit insurance protects depositors from losing their funds in the amount of the set coverage limit. It also helps to maintain stability of the financial sector, since it reduces the risk of expanding the problem, panic and mass deposit outflow upon emergence of problem in any bank.
According to the Georgian Law on “Deposit Insurance System”, all deposits in any commercial bank is automatically insured.
The Deposit Insurance System does not imply any additional costs for the depositors.
Deposits are insured within the limit of GEL 30,000 for each individual persons’ and legal entities' deposit in each bank/microbank. In the event depositor has several accounts, his/her accounts will be summed for the bank/microbank, though the maximum reimbursed amount will be the same GEL 30,000.
At the initial stage of the reform, the maximum amount of compensation is set as GEL 30,000. In case your deposit exceeds GEL 30,000, only 30,000 GEL will be reimbursed by the Deposit Insurance Agency, regardless the currency of the deposit. The amount above GEL 30,000 shall be compensated as provided under the effective legislation of Georgia.
The coverage level of GEL 30,000 limit was established based on best international practice and peculiarities of the local banking sector. The coverage level is optimal, since it fully covers most of the depositors. However, the set coverage level will be gradually reviewed and be increased, while considering market characteristics.
Insurance premium is paid by commercial banks and microbanks operating in Georgia.
Insurance contributions paid by commercial banks and microbanks are accumulated in the Deposit Insurance Fund. Upon occurrence of the insured case, depositors will be reimbursed out of this Fund.
Deposit Insurance System is administered by the Deposit Insurance Agency. Organizational structure of the Agency was established with consideration of the best international practice. The Agency has 5 employees including its Head. Operational expenses of the Agency are covered from the Deposit Insurance Fund. In the event of commencement of liquidation proceedings in any of the banks and microbanks (according to the Laws of Georgia on ,,Activities of Commercial Bank'' and ,,Activities of Micronank''), the Agency will ensure uninterrupted compensation of deposits.
Deposit Insurance System is supervised by the Supervisor Board consisting of the Minister of Finance of Georgia, President of the National Bank of Georgia, Minister of Economy and Sustainable Development and two independent members.
All type of deposits of resident and nonresident Individuals, Legal Entities and non-organizational units are insured – including current accounts, term deposits, call deposits, certificates of deposit, etc.
Insurance does not apply to deposits of a depositor whose right to access the deposit is restricted according to the Georgian legislation (loan guarantee amounts, sequestered amounts, etc.). Also, commercial bank and microbank administrators and their family members, as well as deposits of shareholders holding at least 5% or more of the bank’s capital and deposits of their family members are excluded from insurance. Additionally, deposits of Financial Institutions and Administrative Bodies are not insured.
All commercial banks and microbanks operating in Georgia are members of the deposit insurance system, therefore, all deposits of individual persons and legal entities in any bank/microbank are insured under the same rule.
In the event of merger of commercial banks/microbanks, upon occurrence of an insurance case, depositor, within 6 months following such merger, can claim compensation of deposits insured in each bank/microbank before merger separately within the coverage level. For insurance cases, occurred after the mentioned period, individual depositors will be compensated with standard procedure.
If a depositor has several accounts in one commercial bank and microbank, they will be summed up. The maximum amount to be reimbursed for each commercial bank and microbank is GEL 30,000. Deposits of individuals placed in various commercial banks and microbanks are insured within the set coverage level separately in each commercial bank and microbank.
Yes, the insurance terms are identical for deposits placed in any currency.
If a liquidation process starts towards a commercial bank/microbank, the Deposit Insurance Agency within 20 calendar days ensures payment of compensation in the amount of the set limit (GEL 30,000). For payout purpose, one of the commercial banks/microbanks operating in Georgia will be selected. All required information will be provided to depositors by the Agency upon occurrence of the insurance case. The period for compensation of deposits will be gradually reduced to 7 days according to the international best practice.
Insured deposits will be reimbursed in GEL - the national currency. If deposit is in the foreign currency, the compensation is calculated and compensated in GEL based on the exchange rate set by the National Bank of Georgia, at the date of the insurance case occurrence, though not exceed the maximum coverage level.
If upon occurrence of the insurance case, there is no sufficient amount in the Fund to compensate depositors, the Agency is entitled to borrow from the state, or from local and international financial institutions or search for the other alternate sources.
The funds accumulated in the Deposit Insurance Fund are managed by the Deposit Insurance Agency in accordance with the investment policy. Also, it is entitled to outsource the Fund for management to the Treasury of the Ministry of Finance or the National Bank. Investment policy is based on the principles defined in the legislation according to which the Fund resources will be invested in risk-free assets. Profit generated from investment will be also transferred to the Fund’s account.
Depositor will retain the right to claim compensation from the Agency for 3 years following occurrence of the insurance case. After expiry of this term, the amount due to depositor will be directed to the National Bank of Georgia for compensating depositor in accordance with the Georgian legislation.