EFDI Research Paper on the Assessment of DGS' Contingent Liabilities
The European Forum of Deposit Insurers (EFDI) is pleased to present a new research paper examining the use of contingent liability assessments among Deposit Guarantee Schemes (DGSs) in Europe.
Under Article 10(1) of the Deposit Guarantee Scheme Directive (DGSD), DGSs are required to have adequate systems in place to determine their potential liabilities, and to ensure that available funds are proportional to those liabilities. However, the directive does not define what constitutes “adequate systems,” “potential liability,” or “proportionality.”
This paper aims to examine the use of contingent liability assessments among EFDI members. Examining the applied practices and methodologies could shed light on the DGSs’ individual interpretations of the terms mentioned in DGSD Article 10 (1).
The DGSD Article 10 also sets minimum requirements of available funds to 0.8 percent of covered deposits of each DGS’ member. However, a contingent liability assessment may conclude that the target level set out in DGSD is not sufficient (or too high), which makes the Article’s requirement of proportionality between potential liabilities and available funds all the more relevant.
This paper investigates how EFDI members interpret and apply these concepts in practice. It outlines the European legal framework, discusses key terms, and explores both the benefits and challenges of assessing contingent liabilities. A literature review is followed by practical implications and a description of methodologies used by DGSs. A survey conducted among EFDI’s 67 active members revealed a gap between academic approaches and actual practices, prompting reflections on the causes and suggestions for further research.
📚 This paper is the result of collaborative efforts within the EFDI Research Working Group. We extend our sincere thanks to Riccardo de Lissa and Theodoros Kiriazidis, co-leaders of the Research WG, as well as the authors of the paper: Espen Sørlie, Marcin Gomulka, and Theodoros Kiriazidis. We also thank the rest of the Research WG members for their valuable input and support.
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