About the FGD
The Fundo de Garantia de Depósitos (Deposit Guarantee Fund) is a public-law legal person with administrative and financial autonomy, which was established by the Decree-Law No. 298/92, of 31 December and started up in December 1994.
All credit institutions having their head office in Portugal and authorised to take deposits shall compulsory be members of the Fund, except the mutual agricultural credit banks and their Caixa Central, belonging to the Integrated Mutual Agricultural Credit System, which are covered by the Agricultural Guarantee Fund. Branches of credit institutions having their head office in non-EC Member States, shall also compulsory be members of the Fund, except when deposits are covered by a guarantee scheme in the home country under terms deemed equivalent by the Banco de Portugal to those of the Fund and without prejudice to any bilateral agreements on the matter.
From a macroeconomic point of view, the Fund was intended to meet the need of guaranteeing the stability of the financial and payment systems (preventing the adverse effects and the systemic consequences of possible bank runs). From a microeconomic point of view, its function of guaranteeing the payment of deposits is aimed at safeguarding the interests of depositors, mainly the small depositors, who have more difficulty in assessing the risks underlying the activities of credit institutions.
The Fund guarantees the repayment in full the value of the cash credit balances of each depositor, where that value does not exceed the amount of 100,000 euros.
The deposits are guaranteed regardless of the currency in which they are denominated, and whether the depositor is resident or non-resident in Portugal. However, some deposits are excluded from the guarantee scheme - such as those of credit institutions, financial companies, insurance companies, Investment Funds, Pension Funds and central or local Administration bodies. Moreover, in order to prevent a conflict of interests, the Fund does not cover deposits made by institution's managing bodies, qualifying shareholders, external auditors and non-financial companies under the control of the credit institution at
issue, or which together with the latter belong to the same group.
The Fund can also co-operate, on a temporary basis, in actions intended to restore the solvency and liquidity conditions of the said institutions, within a financial reorganisation plan conducted by the Banco de Portugal.
The financial resources of the Deposit Guarantee Fund are mainly composed of the initial contributions (from the Banco de Portugal and the participating credit institutions), annual contributions (from the participating credit institutions) and income from financial investments.
The annual contributions are defined according to the monthly average of the deposits made in the previous year and to the fixed contribution rate, weighted by the solvency ratio of each institution (the lower this ratio, the higher the contribution). The payment of the annual contributions may be partly (up to a limit of 75 per cent) replaced by an irrevocable contract, guaranteed where necessary by securities having a low credit risk and high liquidity.
If the resources are insufficient to comply with its commitments, the Deposit Guarantee Fund may ask for special contributions or resort to loans.
In an urgent situation, namely if systemic stability aspects are at stake, the Banco de Portugal may, under the conditions laid down in its Organic Law, grant temporarily to the Fund the financial resources required to meet its immediate needs.