Information on the Andorran Deposit Guarantee Fund and the Andorran investment guarantee system
The Monetary Agreement between the European Union and the Principality of Andorra envisions, among other matters, a process of bringing the Andorran legal system and financial law in line with EU regulations. To deliver on this commitment, Law 20/2018 has been enacted in order to set up and govern the Andorran Deposit Guarantee Fund and the Andorran investment guarantee system.
Article 24 of this new law states that banks and investment firms authorised to operate in Andorra must make available to existing and potential investors the necessary information on both the Deposit Guarantee Fund (known as "FAGADI") and the investment guarantee system (known as "SAGI"), as well as the associated terms and conditions.
Andorran Deposit Guarantee Fund (FAGADI):
The Law has set up the Andorran Deposit Guarantee Fund (FAGADI) as a deposit guarantee scheme under the terms of Directive 2014/49/EU. It also provides an additional buffer of funds to ensure that the FAGADI has more funds than the minimum amount required under the Directive right from the outset.
This Law, as with the Directive, establishes a transitional period during which FAGADI member banks must pay the annual contributions determined by their Governing Board so as to ensure that the scheme has ex-ante funds equivalent to 0.8% of covered deposits, subject to a deadline of 30 June 2024.
The main regulatory features of the deposit guarantee scheme are as follows:
- Coverage is maintained at 100,000 euros per depositor and per entity and additional coverage is provided in exceptional cases so as to guarantee, up to a limit of 300,000 euros, deposits resulting from real estate transactions relating to private residential properties, deposits linked to particular life events of a depositor such as marriage, divorce, retirement, dismissal, disability or death, and deposits based on insurance benefits or compensation for criminal injuries or wrongful conviction, provided those balances were paid into the covered accounts during the preceding three months.
- The ex-ante funds of the FAGADI must amount to 0.8% of covered deposits, subject to a deadline of 30 June 2024, to be achieved through the annual contributions received from the banks. Additionally, and as of that date, banks will continue to make annual ex-ante contributions to the Fund so as to ensure that it has funds equivalent to 1.6% within a period of eight years running from 2024. This percentage is comfortably clear of the 0.8% general requirement under Directive 2014/49/EU and of the 0.5% envisaged as a possible reduced threshold for highly concentrated banking sectors, as is the case with Andorra. In exchange, the Law establishes a total cap on FAGADI funds and increases the total maximum coverage set out in Law 1/2011.
Andorran investment guarantee system (SAGI)
The Law maintains the Andorran investment guarantee system (SAGI) as an ex-post guarantee system to now comprise, along with existing member banks, financial investment firms, financial investment agencies, asset management companies that offer discretionary and individual portfolio management services under a direct management mandate, and operators of collective investment schemes authorised to provide services that involve the management and custody of financial instruments on their clients' behalf within the Principality.
The main regulatory features of the investment guarantee system are as follows:
- Coverage now amounts to 20,000 euros per investor, as per the level of coverage provided under Directive 97/9/EC. The law also establishes a total limit on SAGI funds and increases the total maximum coverage set out in Law 1/2011.
- Losses incurred from fluctuations in the value of the investments are not covered. The guarantee covers situations where it is impossible to recover the securities due to the failure of the institution providing the securities administration and custody services.
C/Bonaventura Armengol, 10
Edifici Montclar, bloc 2, 4a planta
AD500 Andorra la Vella
Principality of Andorra
Telephone: +376 808898