1. www.iadi.org 1 Characteristics of Deposit Insurance Systems in Latin America and Spain LARC-IADI November, 2006 Presented by: Oscar Armando Pérez, Chairman Instituto de Garantía de Depósitos (El Salvador)

2. www.iadi.org 2 Table of Contents I.Background II.Objectives III.Methodology IV.Results V.Conclusions VI.Next Steps

3. www.iadi.org 3 I. Background June 1st, 2005: In Cartagena, Colombia, the Latin America Regional Committee (LARC) requested the Instituto de Garantía de Depósitos of El Salvador (IGD) to coordinate a survey of Deposit Insurance Systems in Latin America and Spain. Special thanks to the Instituto para la Protección al Ahorro Bancario of Mexico (IPAB) for its cooperation. I will go over the regional experience in this respect in the following slides.

4. www.iadi.org 4 Financial Safety Net CountryCentral BankDeposit Insurance AgencyBank Supervisor Argentina Banco Central de la República Argentina (BCRA) Seguro de Depósitos SA (SEDESA) Superintendencia de Entidades Financieras y de Cambios (BCRA) BoliviaBanco Central de Bolivia- [1] [1] Superintendencia de Bancos y Entidades Financieras (SBEF) Brasil Banco Central do Brasil (BCB) Fundo Garantidor de Créditos (FGC) BCB: Departamento de Supervisão de Bancos e de Conglomerados Bancários ChileBanco Central de ChileEstado de Chile Superintendencia de Bancos e Instituciones Financieras ColombiaBanco de la República Fondo de Garantías de Instituciones Financieras (FOGAFIN) Superintendencia Financiera de Colombia Costa Rica Banco Central de Costa Rica (BCCR) Fondo de Garantías para los inversionistas de los Bancos Privados [2] [2] Superintendencia General de Instituciones Financieras (SUGEF) EcuadorBanco Central del Ecuador Agencia de Garantía de Depósitos (AGD) Superintendencia de Bancos El Salvador Banco Central de Reserva de El Salvador Instituto de Garantías de Depósito (IGD) Superintendencia del Sistema Financiero Guatemala Banco Central de Guatemala BCG: Fondo para la Protección del Ahorro (FOPA) Superintendencia de Bancos Honduras Banco Central de Honduras (BCH) BCH: Fondo de Seguro de Depósitos (FOSEDE) Comisión Nacional de Bancos y Seguros (CNBS) [1] [1] In Bolivia there is no explicit Deposit Insurance Fund. Although, there is a Financial Reactivation Fund (FRF) whose objective is to support financial institution resolutions. [2] [2] There is no explicit deposit insurance system in Costa Rica, though there is a private banks deposit insurance fund which is managed by the Costa Rican Banks Association.

5. www.iadi.org 5 Financial Safety Net CountryCentral BankDeposit Insurance AgencyBank Supervisor MexicoBanco de México Instituto para la Protección al Ahorro Bancario (IPAB) Comisión Nacional Bancaria y de Valores (CNBV) NicaraguaBanco Central de Nicaragua Fondo de Garantía de Depósitos de las Instituciones Financieras (FOGADE) Superintendencia de Bancos y Otras Instituciones Financieras (SIBOIF) Panama- [1] [1] -Superintendencia de Bancos Paraguay Banco Central del Paraguay (BCP) BCP: Fondo de Garantía de DepósitosBCP: Superintendencia de Bancos Peru Banco Central de Reserva del Perú (BCRP) Fondo de Seguro de Depósitos (FSD) Superintendencia de Banca y Seguros (SBS) Dominican Republic Banco Central de la República Dominicana (BCRD) BCRD: Fondo de ContingenciaSuperintendencia de Bancos Uruguay Banco Central del Uruguay (BCU) BCU: Superintendencia de Protección al Ahorro Bancario por medio de Comisión de Protección del Ahorro Bancario (COPAB) BCU: Superintendencia de Instituciones de Intermediación Financiera Venezuela Banco Central de Venezuela (BCV) Fondo de Garantía de Depósitos y Protección Bancaria (FOGADE) Superintendencia de Bancos y Otras Instituciones Financieras (SUDEBAN) SpainBanco de España Fondo de Garantía de Depósitos en Establecimientos Bancarios [2] [2] Banco de España [1] [1] There is no Central Bank in Panamá. [2] [2] Spanish Deposit Insurance System includes three separate funds to cover the following institutions: Banks, Saving Banks and Credit Cooperatives

6. www.iadi.org 6 II. Objectives To compile basic information about the Deposit Insurance Systems in order to share it at a regional and international level. To build a quantitative and qualitative data base that will be periodically updated, so the practices developed in different countries will be available. To serve as a reference for the development of effective deposit insurance systems.

7. www.iadi.org 7 III. Methodology Countries included in the survey Questionnaire Format Data Collection

8. www.iadi.org 8 Countries included in the survey Survey was originally oriented to IADI members countries and Spain (invited country). (9) Afterward the scope was enlarged to all the countries under LARC jurisdiction and Spain. (19) Schemes under consideration or planned: Bolivia, Costa Rica and Panama. In operation: Argentina, Brazil, Chile, Colombia, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Paraguay, Peru, Dominican Republic, Uruguay and Venezuela.

9. www.iadi.org 9 Questionnaire Format Original questionnaire was formulated using the proposal made by the Fondo de Garantía Financiera (FOGAFIN) of Colombia. In order to facilitate responses, a reduced version of the questionnaire (38 questions), proposed by IPAB (Mexico) was adopted.

10. www.iadi.org 10 Data Collection Information gathering started on August 2005 and ended on September 2006. The questionnaire requested the latest information available, which generated a disparity in the dates of the information. 13 countries answered the questionnaire. For the rest of the countries, the following sources were used: –Official internet sites of deposit insurance agencies –Surveys conducted by the IADI. –Other surveys.

11. www.iadi.org 11 IV. Results 1.General Characteristics. 2.Legal Nature. 3.Characteristics of the Deposit Insurance Fund or Reserve. 4.Coverage and Premiums structure. 5.Payment of obligations covered by Deposit Insurance.

12. www.iadi.org 12 1. General Characteristics: IADI Membership IADI MembersNon Members 1Argentina1Bolivia 2Brazil2Chile 3Colombia3Costa Rica 4El Salvador4Ecuador 5Mexico5Guatemala 6Nicaragua6Honduras 7Peru7Panama 8Venezuela8Paraguay 9 Dominican Republic 10Uruguay 11Spain Of the 19 countries, 8 are members of the IADI.

13. www.iadi.org 13 1. General Characteristics: Deposits Insurance Schemes 16 countries have an explicit and limited DIS Panama: In case of a bank liquidation, deposits under US$5,000 have priority over other obligations. Bolivia: deposits are ranked first and second in priority; but in case of a bank resolution, there is no limit to the preferential treatment. Costa Rica: most important banks are owned by the State. It is assumed that there is an implicit and unlimited guarantee. The oldest operating DIS in the region is the FOGADE of Venezuela (1985). The newest DIS in the region is the Comisión de Protección del Ahorro Bancario or COPAB of Uruguay (August 2005). The majority of systems were created in the last decade. In Mexico, Paraguay, Colombia and Spain, other financial intermediaries different from banks have their own DIS.

14. www.iadi.org 14 1. General Characteristics: Membership Explicit Deposit Insurance Systems: –Membership is compulsory in 16 countries with explicit schemes. –Even Chile: Exclusion is not an option. Implicit Deposit Insurance Systems: –Bolivia: Financing of the Financial Reactivation Fund is mandatory for financial institutions. –Costa Rica and Panama: not available.

15. www.iadi.org 15 1. General Characteristics: Board of Directors and Management Control Board of Directors appointment –12 countries: named by the Presidency of the Republic, Finance or Economy Ministry, Central Bank, Bank Supervisor Agency, or even the institutions covered by the Deposit Insurance System. –Brazil: Brazilian Banks Confederation (private) –Rest of the countries: not available or not applicable. Board Members: –Mexico: financial institutions covered by the Deposit Insurance Agency have no representation. –Rest of the countries: financial institutions covered have representation at the Board. Number of directors: –Between 3 (Argentina and Uruguay) and 8 (Spain). –Most frequent: 5 members.

16. www.iadi.org 16 1. General Characteristics: Board of Directors and Management Control Board Directors Period –Between 3 (Argentina, Peru and Brazil) and 8 (Uruguay) years. –Most Frequent: 4 years. Management Control –Most of the countries (12): State Controller and/or other type of control such as internal or external auditors, etc. –Guatemala, El Salvador and Venezuela (3): Bank Supervisor only, or in conjunction with other controller agencies. –Argentina, Brazil and Peru (3): External Auditors are the main control. – Spain (1): State Controller in addition to the external auditor.

17. www.iadi.org 17 1. General Characteristics: Staffing Number of employees depends on: mandate (broad or narrow) and type of regime (public or private). –Private Regime: Larger number of employees with a broad mandate: Argentina Smallest number of employees: Spain –Public Regime: Larger number of employees: Venezuela Smallest number of employees: Paraguay

18. www.iadi.org 18 1. General Characteristics: Staffing Total Deposits per employee: –Private Regime Highest: Spain (US$43,946 millions) Lowest: Argentina (US$693 millions) –Public Regime Highest: El Salvador (US$1,029 millions) Lowest: Venezuela (US$74 millions)

19. www.iadi.org 19 1. General Characteristics: Staffing [1] [1] Some figures were reported as of December of 2004 and others as of December of 2005. In the case of Mexico, total liabilities were used instead of total deposits. Country Number of Employees Total Deposits in US$ Millions [1] Total Deposits per employee (millions) Peru 4 10,605 2,651 Paraguay 5 1,050 210 Brazil 6 176,944 29,491 El Salvador 7 7,200 1,029 Nicaragua 9 1,852 206 Uruguay 9 8,314 924 Spain 12 521,946 43,496 Argentina 49 33,940 693 Ecuador 71 8,882 125 Colombia 100 33,517 335 Mexico 556 128,675 231 Venezuela 615 45,330 74 Information not available: Bolivia, Chile, Costa Rica, Guatemala, Panama, Dominican Republic and Honduras.

20. www.iadi.org 20 1.General Characteristics: Coordination and Interrelation among the Financial Safety Net members. Coordination tools: –Most countries: in the boards of directors there are representatives of the Central Bank, Bank Supervisor, Ministry of Finance, and insured financial institutions. –Others: notifications, consultations or special committees that are settled by Law or inter institutional agreements. –Exceptional cases: a dependency of the Central Bank (as a lender of last resort or as a supervisor).

21. www.iadi.org 21 2. Legal Nature Public and Explicit Systems: 12 countries. –8 have their own form (independent or as departments of other financial safety net institutions) –3 (Guatemala, Paraguay and Dominican Republic) have the form of a trust or fund managed by the Central Bank. –Chile: explicit government guarantee. 3 Public and Implicit Systems (government guarantee): Bolivia, Costa Rica and Panama. 3 Private regime systems, incorporated companies: Argentina, Brazil and Peru. 1 system under private law regime for their acts: Spain.

22. www.iadi.org 22 3. Characteristics of the Deposit Insurance Fund or Reserve Major source of funds –Ex ante funding: premiums paid by insured institutions. –Chile: government resources. There is no special institution or fund. Back-Up funding –There is no back-up source in the case of Guatemala and Bolivia Indebtedness Limits –9 countries: no limit. –7 countries: some kind of limit.

23. www.iadi.org 23 3. Characteristics of the Deposit Insurance Fund or Reserve Accumulated fund balance / total deposits: –Private Regime: Highest: Argentina (1.27%) Lowest: Peru (0.6%) Reference: Spain (0.42%) –Public Regime: Highest: Colombia (3.28%) Lowest: Mexico (deficit) Reference: USA (0.8%) –There is no information about the characteristics and availability of the funds.

24. www.iadi.org 24 3. Characteristics of the Deposit Insurance Fund or Reserve: Accumulated Fund available/ Total Deposits [ 1] [ 1] Some figures were reported as December/2004 and others as December/ 2005. In the case of Mexico, total obligations were used instead of total deposits.

25. www.iadi.org 25 4. Coverage and Premiums structure Obligations covered –Most of the countries: deposits. –Spain: deposits and other obligations such as securities. –Colombia: deposits, unemployment insurances and other obligations. Premium Structure –Risk Adjustment Flat rate: 11 countries Risk based premiums: 5 countries –Base of Calculation Total Deposits (except Mexico: total liabilities) –Rate Lowest: Spain ( 0.06% annual) Highest: : Ecuador (0.65 annual)

26. www.iadi.org 26 4. Coverage and Premiums structure CountryPremium (annual percentage) Argentina0.18 Spain0.06 Dominican Republic0.1 El Salvador0.100-0.150 Guatemala0.100-0.200 Honduras0.100-0.250 Bolivia0.125 Brazil0.3 Mexico0.4 Nicaragua0.43 Peru0.450-1.450 Paraguay0.48 Colombia0.5 Venezuela0.5 Ecuador0.65 Uruguay0.10-0.20 Chile, Costa Rica, PanamaNA

27. www.iadi.org 27 5. Payment of obligations covered by the Deposit Insurance Calculation of coverage –Coverage per depositor: 16 countries –Coinsurance: Brazil, Colombia and Chile. Period to pay out insured obligations varies between 30 and 90 days. Amount of coverage –Highest: México (US$ 133,000) –Lowest: Guatemala (US$ 2,630)

28. www.iadi.org 28 5. Payment of obligations covered by the Deposit Insurance

29. www.iadi.org 29 V. Conclusions Main similarities among Deposit Insurance Systems in Latin America and Spain: –Fundamental pillar in the Financial Safety Net. –Explicit systems and limited coverage. –Compulsory membership. –Ex ante funding through premiums paid by covered institutions. –Accountability

30. www.iadi.org 30 V. Conclusions Main differences among Deposit Insurance Systems in Latin America and Spain: –Insured amount and coverage. –Premiums calculation: risk adjustment or flat rates. –Corporate government: Board of Directors. –Mechanisms of participation in depositors protection. –Origin.

31. www.iadi.org 31 V. Conclusions Deposit Insurance Systems in the region are here to stay and are playing an increasingly credible role in their home countries. Deposit Insurance Systems contribute to regional and global financial stability.

32. www.iadi.org 32 VI. Next Steps Periodic updates of information –Cooperation of countries to provide timely information. Close coordination with other IADI committees. –Research and Guidance Committee Subcommittee on Establishment of IADI Database for DIS. Results available to Deposit Insurers.

33. www.iadi.org 33 Characteristics of Deposit Insurance Systems in Latin America and Spain LARC-IADI November, 2006 Presented by: Oscar Armando Pérez, Chairman Instituto de Garantía de Depósitos (El Salvador)