The European Union (Deposit Guarantee Schemes) Regulations 2015 S.I. No. 516 of 2015 sets out how the scheme is set up and operated. It is administered by the Central Bank of Ireland and funded by the credit institutions (banks, building societies and credit unions) covered by the scheme. Its objective is to protect depositors’ savings by guaranteeing deposits of up to a maximum of €100,000 and prevent mass withdrawal of deposits in case of a bank failure which can create financial instability. Each participating financial entity can confirm if an account is included in the scheme.

Who is covered?

Eligible depositors include individuals, sole traders, partnerships, clubs, associations, schools, charities, companies and small self-administered pensions. Funds held in trust or in client accounts by solicitors and other professionals may be eligible if the underlying beneficiaries are eligible in their own right.

Who is specifically excluded?

Depositors specifically excluded from the DGS are:

• banks, credit unions and building societies,
• persons charged with or convicted of money laundering offences,
• financial institutions,
• investment firms; insurance and reinsurance undertakings,
• depositors who have never been identified in accordance with anti-money laundering legislation,
• collective investment undertakings,
• public authorities,
• a pension scheme or retirement fund (other than a small self-administered pension scheme);
• debt securities issued by a credit institution, and
• liabilities arising out of own acceptances and promissory notes.

Regulation 10 gives a full list of excluded deposits.

What is the limit?

Eligible depositors are covered to a limit of the balance held, or €100,000 per person per institution. Eligible joint deposits are covered to a maximum of €100,000 per person. A deposit to which 2 or more persons are entitled as members of a partnership, association or grouping of a similar nature, without legal personality, shall be treated as a single deposit.

Temporary high balances

In certain circumstances the DGS may pay higher compensation for “temporary high balances”. To qualify, these deposits must arise from moneys deposited in respect of the purchase or sale of private residential property, or equity release; payments of compensation or insurance benefits (among others); benefits payable on death and legacies. The qualifying deposits are covered up to €1 million for 6 months after the deposits have been credited to an account or become legally transferable. Note that funds arising from a claim for compensation for personal injury are exempt from the 6-month time limit. For a full list, see Regulation 11.

Operation

Once the DGS is invoked, compensation is based on the balance held in the accounts on the date that a liquidator is appointed. All balances held in the depositor’s name are aggregated (including funds held in joint accounts or beneficiary accounts) and one payment is issued. From January 2021, subject to specific exemptions, payment may issue in no more than 10 working days following activation of the scheme.

For a solicitor’s client account, the specific information required by DGS may change depending on the specific circumstances of a case. In general, the DGS would require the clients’ names and addresses, and the breakdown of the balance due to the underlying clients for each client account. The full amount held on behalf of each client should be reported to the DGS. They will then apply the €100,000 limit per depositor, taking into account any other deposits held by that depositor with the same credit institution.

While solicitors carry out their own AML checks, further documentary evidence may be required if the identity of the depositor is unclear or if there are similar accounts within the credit institution which may be related, for the purpose of aggregating the amount eligible for compensation.

The DGS operates a separate application process for temporary high balance claimants.

The DGS has paid out on five occasions to date, the most recent in July 2020 where €12.9 million was paid following the dissolution of Drumcondra and District Credit Union. Previously €39.2 million was paid to depositors in the Charleville Credit Union in October 2017.

Further information is available from www.depositguarantee.ie.