The Deposit Insurance System and the Agency
The deposit insurance system covers the relationships — regulated by this law — between depositors, commercial banks, microbanks, the public-law legal entity Deposit Insurance Agency, the National Bank of Georgia and the Government of Georgia. Its central institution is the Deposit Insurance Agency, an independent public-law legal entity. In its day-to-day operations and activities the Agency is independent: no other body may interfere in its activities except in the cases provided for by law. The Agency has its own funds and a seal bearing the state coat of arms of Georgia; it acquires rights and assumes obligations in its own name, enters into transactions and may appear before a court both as plaintiff and as defendant. The Agency's statute is approved by the Government of Georgia, and the Agency submits an annual report on its activities to the Government, the Parliament and the National Bank of Georgia.
A fundamental guarantee is that the Agency may not transfer the insurance risk, in whole or in part, to another insurer — the obligation towards depositors is performed by the Agency itself. To perform its deposit insurance functions the Agency receives initial and regular insurance contributions and, where necessary, special insurance contributions; it manages the Deposit Insurance Fund and ensures that contributions are accumulated in it. The Agency is obliged to carry out internal control and risk management, to develop crisis management policies, procedures and systems, and — to ensure prompt payment of compensation — a management information system and procedures, and to run a simulation of the occurrence of an insurable event at least once a year. Where the Agency's total financial liability has increased because of an unlawful action by the leadership, an auditor or an employee of a commercial bank or microbank, the Agency is entitled to claim compensation from the relevant person through the courts.
What Counts as a Deposit and as an Insurable Event
A deposit is money credited to a depositor's account — including funds credited to a current account, a term deposit and a demand deposit — which the commercial bank or microbank must repay to the depositor in accordance with the terms of the agreement concluded between them. Note that funds received in exchange for electronic money are not a deposit and are therefore not insured. A depositor may be a natural person, a legal person, or an organizational entity provided for by Georgian legislation that is not a legal person, holding a deposit at a commercial bank or microbank. An insurable event is the initiation of a liquidation process against a commercial bank or a microbank in accordance with the Georgian law on the activities of commercial banks or the law on the activities of microbanks — it is from this moment that the procedure for reimbursing depositors' insured deposits begins.
The Coverage Limit and How It May Change
The limit is the maximum amount of the insured deposit payable to a depositor. The Agency periodically submits to its Board an analysis of the limit's compliance with international standards and practice, and where necessary, in agreement with the Board, decides to change the limit — a decision formalized by a legal act of the Head of the Agency. A depositor is entitled to receive his or her insured deposit irrespective of the number of deposits or their currency held at a commercial bank or microbank, within the limit established by law or by a legal act of the Head of the Agency. The concrete amount in force at any given time is determined precisely by those legal acts, so always verify the current figure against the officially published Agency information before relying on it.
How the Insured Amount Is Calculated
The amount payable to a depositor is determined by aggregating the credit balances of all insured deposits held at the commercial bank or microbank, including interest accrued as of the moment of the insurable event. The calculation is made as of the day of the insurable event, minus matured obligations. The insured deposit is reimbursed in the national currency: if you hold a deposit in a foreign currency, the amount payable to you is calculated and paid in the national currency at the official exchange rate set by the National Bank of Georgia on the day of the insurable event, but not more than the limit.
It is important that deposits of the same depositor held at different commercial banks and microbanks are insured separately for each bank, up to the established limit. Where commercial banks or microbanks merge and an insurable event occurs within 6 months of the merger, the depositor is entitled to demand separate reimbursement, within the limit, of the insured deposits held at each bank before the merger, in accordance with the rules laid down by a legal act — an instruction — of the Head of the Agency. The right to demand reimbursement from the Agency remains with the depositor for 3 years from the occurrence of the insurable event; after this period expires, the amount payable to the depositor is transferred, in the manner established by Georgian legislation, to the National Bank of Georgia for payment to the depositor.
Which Deposits Are Not Insured
The law states exactly which categories of deposits are not covered by insurance and are not reimbursed when an insurable event occurs. Each such category is listed separately, and none may be merged or reduced:
- deposits registered in the name of the administrators of the relevant commercial bank or microbank;
- deposits of shareholders holding 5 percent or more of the capital of the relevant commercial bank or microbank;
- deposits of the persons covered by the previous categories, of their family members, or of third parties acting in their name, held at the relevant commercial bank or microbank;
- deposits of depositors who directly audited the financial statements of the relevant bank or microbank during the last 3 years before the insurable event;
- deposits placed on nominal ownership accounts, and deposits whose owner cannot be identified in the manner established by Georgian legislation before the insurable event;
- deposits against which security measures have been applied within a criminal case investigation, or the right to use which is restricted on another basis provided for by Georgian legislation;
- deposits of an administrative body as defined by the General Administrative Code of Georgia.
If your deposit falls within any of these categories, the Agency will not reimburse it when an insurable event occurs — the fate of an uninsured deposit is determined by the general rules of the liquidation process. This is why, in your relationship with a bank, it matters to know exactly whether your account is held in unified or nominal ownership and in whose name it is registered.
Payment Terms and Procedure
After an insurable event occurs, the Agency is obliged to immediately notify depositors, electronically, through its official website and its official print publication, of the occurrence of the insurable event and of the procedure for paying compensation. That announcement is the first and official source of information: the specific deadlines and procedural details for receiving compensation are determined by the Agency's relevant legal acts and are published precisely in that announcement. Your claim to the Agency remains available for 3 years from the insurable event, so timely action is up to you.
Once compensation has been paid, the law produces an important consequence: the depositor's claim against the commercial bank or microbank in which the insurable event occurred is reduced by the amount of the compensation paid. The money received from the Agency is therefore not a bonus — it is set off against your claim in the liquidation process, and from the remaining liquidation assets you may claim only the remainder.
Depositors' Information Rights and Confidentiality
The Agency is obliged to publish electronically information about the commercial banks and microbanks participating in the deposit insurance system, about the amounts accumulated in the Fund and the placement of the Fund's resources, as well as its annual report, statute, instruction, annual budget and auditor's report. Commercial banks and microbanks, for their part, must provide actual or potential depositors with information about insured and uninsured deposits and about the limit for insured deposits, and must publish information on deposit insurance electronically.
Confidential information about a bank, a microbank or its client held by the Agency may be transferred only to the National Bank of Georgia, to the relevant bank or microbank — the agent bank — and to the Interagency Committee for Financial Stability, of which the Head of the Agency is a member; any other person may receive such information only on the basis of a corresponding court decision. The Agency's employees may not disclose, distribute or use confidential information for personal purposes — this protection is the guarantee of the security of your banking data.