The information available on this page is purely for information and educational purposes. In case of doubt or should you require further information, please consult the law (LN383 of 2015) or alternative, click here to submit a question.
1. How would I know if I am covered by the Scheme in Malta?
If you are already an account holder with a bank in Malta, you are automatically protected by the Scheme if that bank were to ever fail. At least once annually, your bank is not only required to inform you whether your account is covered by the Scheme but it is also obliged to provide you with an information sheet describing the level and extent of protection you enjoy. For a specimen copy of the information sheet, click here.
If you are a new account holder, your bank is also obliged to give you the information sheet referred to above. You would also need to confirm to the bank that you have received a copy of the information sheet.
2. What accounts are covered by the Scheme?
All eligible deposit accounts are covered by the Scheme. This includes all savings, current and fixed deposit accounts, as well as any accounts which, at the time of the banks’ failure, may be in credit (such as credit card accounts and overdrafts).
Deposits which may be held evidenced by way of a certificate or which might be linked to an investment (such as products where the principal is not repayable in full upon maturity) are not considered to be deposits and therefore not covered by the Scheme. However, certificates of deposit made out to named persons and which existed in Malta on 2 July 2014 are covered by the Scheme.
3. I have a number of accounts with the same bank, denominated in various currencies. Are all currencies covered and how will payment of compensation be calculated?
The Scheme covers deposits in all currencies without distinction.
In addition, as you have more deposits at the same credit institution, all your deposits at the same credit institution are added up and the total is subject to the limit of compensation of EUR100,000 per depositor.
However, in the event that the Scheme pays compensation, it will pay such compensation in euro. Therefore if your account is in any currency which is not the euro, the Scheme will exchange the amount in your account (with any accrued interest) into euro at the official exchange rate of the European Central Bank (ECB) when the Scheme is requested to make such compensation.
4. If my bank fails, how much do I expect to be compensated by the Scheme?
The maximum amount which the Scheme is obliged to pay to depositors of a failed bank is €100,000.
This limit applies to the total amount of deposits held by the depositor with the failed bank, irrespective of the number of accounts, the currencies of such accounts as well as the location within the EEA.
However, you may also be eligible for additional compensation if you are able to prove that – at the moment the bank failed – you held amounts greater than €100,000 which had been derived from specific life events. See next question for further information.
5. Tell me more about the possibility of a greater amount of compensation that the Scheme may pay me, over and above the €100,000 compensation limit.
At the time when a bank fails, a depositor might have balances in his account which may have been derived from particular life or social situations. These would normally be temporary high payments made to the depositor.
In addition to the compensation of €100,000, some depositors may therefore also qualify to receive additional compensation not exceeding €500,000 if the amount to the depositor’s account is derived from the following life events:
In order to claim for such additional compensation, the depositor must provide the Scheme with a written application and evidence supporting the depositor’s claim that all or part of the deposit in excess of €100,000 qualifies as a temporary high balance. Further details will be made available in due course.
The depositor may make more than ONE claim if there are multiple events that give rise to temporary high balance, in which case the additional compensation of up to €500,000 would apply for each and every such temporary high balance claim.
Other than the criteria listed above, a temporary high balance would be eligible for compensation if the amounts derived have been credited in the depositor’s account within six months from the date the Scheme is required to pay compensation to that depositor. Therefore, if a depositor claims to have had a balance (derived from any situation described above) in an account for more than six months from the date the Scheme is required to pay compensation to that depositor, the Scheme would not be obliged to pay such additional compensation as described above.
Therefore, if you claim to have had a balance (derived from any situation described above) in an account for more than six months, the Scheme would not be obliged to pay such additional compensation as described above.
6. If I have loans as well as deposits with a failed bank, will I still be entitled to compensation by the Scheme?
Yes, you would still be entitled for compensation. The Scheme will not deduct or take into account any amounts which may be due to that failed bank. These amounts may include, for example, amounts due in respect to loans and overdrafts.
Any compensation payable by the Scheme will be calculated on the amounts credited to that depositor’s accounts, including any interest which is accrued up to the date that the Scheme is obliged to pay compensation.
That stated, the fact that a bank failed will not cancel your debts or dues to that bank. But the bank’s liquidator will deal with those aspects later.
The Scheme may also withhold payment of compensation on deposits which the bank might have blocked as a result of legal and court obligations (such as anti-money laundering and seizure).
Am I always covered by the Scheme once I hold a deposit account, or do I have to renew my protection?
No, you do not need to renew your protection. The application of the guarantee is applicable for all existing accounts, as well as any future accounts opened with banks. In addition, such protection will not expire.
7. Do I need to apply to the Scheme for compensation?
No, you will not be required to apply for compensation as the Scheme shall be required to obtain information about your deposits directly from the failed bank’s systems. Payment of compensation will be effected on the basis of information which the bank will pass on to the Scheme.
8. How long does it take for the scheme to pay compensation?
By 1 January 2024, the Scheme is obliged to pay compensation within 7 business days from the date when a bank has been declared in default because it is unable to repay deposits to its depositors.
Until such target date, the Scheme is required to pay compensation within 20 business days from the date when a bank has been declared in default because it is unable to repay deposits to its depositors. The Scheme is also obliged to ensure that depositors have access to an amount – equivalent to three times the gross weekly minimum wage (as applicable at the time of compensation) to cover the cost of living – within five working days of a request from the depositor. Further details about this will be provided in due course.
The scheme may also defer payment in regard to balances held in dormant accounts. A dormant account is an account in which there have been no transactions within the previous 24 months (two years). Therefore, if your bank has classified an account to be dormant any balances will not be taken into account by the Scheme for the purposes of calculating compensation. You may apply to the Scheme – at a later stage – for additional compensation (i.e. within the maximum limit of €100,000) for any amounts held in such dormant account.
However, the Scheme may still refuse to pay such additional compensation if the value of the deposit is lower than the administrative cost that would be incurred by the Scheme in making such a payment.
Payment for accounts under nominee or trusteeship may also be deferred
9. How will the Scheme be able to calculate the amount of compensation due to me?
All banks will be required to identify and classify all depositors and deposits in such a manner which would enable the Scheme to calculate the amount of compensation due to each depositor.
Such classification of information will be done electronically in accordance with standards as required by the Scheme.
The legislation provides that the Scheme should be able to test the manner in which the banks are classifying such accounts. For this purpose, it requires the Scheme to carry out periodic rigorous tests to ensure that the banks are in conformity with the legislation.
Both the Scheme and the banks are required to treat depositor information with strict confidentiality and data protection legislation, to the highest extent possible.
10. Does the Scheme cover companies as well as individuals?
As stated earlier, most types of eligible deposits are covered, including current, fixed and savings accounts.
Similarly, most depositors are covered by the Scheme.
A company which holds accounts with a failed bank, and is not excluded from receiving compensation as allowed by law (see below), is likely to be covered by the Scheme and eligible to receive compensation within the maximum allowed of €100,000.
The Scheme will not cover a deposit with a bank falling under any of the categories below:
In case of doubt, it is advisable that you seek confirmation from your bank whether you are eligible to receive compensation by the Scheme.
11. Do you cover investment services?
Investment services are not covered by this Scheme. They may however be eligible to protection under a different arrangement, namely the Investor Compensation Scheme.
12. What triggers payment of compensation by the Scheme?
Compensation is not triggered if a licensed bank could hand over your deposit but is refusing to do so for reasons unconnected with its adverse financial circumstances. So the Scheme will not cover such claims.
13. How does the Scheme obtain its funds to pay compensation to depositors?
The Depositor Compensation Scheme is not an insurance company. It is not funded by the Government or by the taxpayer. The Scheme is funded by cash contributions and assets pledged by all banks which are licensed by the MFSA.
14. What if I have a joint account or a trust, or my holdings are held under nominee?
The share of each depositor of a joint account shall be considered separately in calculating compensation. In the absence of contrary provisions, the joint account shall be divided equally among the depositors.
Deposits in an account with two or more persons are entitled as members of a business partnership, association or grouping of a similar nature, without legal personality, shall be aggregated and treated as if made by a single depositor for the purpose of calculating compensation.
Where a depositor is not absolutely entitled to the sums held in an account and another person is absolutely entitled to such sums, the person who is absolutely entitled shall be entitled to compensation in respect of the deposit.
In respect of deposits held by a person acting as trustee or nominee for one or more persons, the deposit making up the claim shall be deemed to belong to the beneficial owners equally unless there exists specific information which may otherwise determine the beneficial interests of such persons. It is up to the trustee or nominee to provide the Scheme with information about the names and amounts due to such beneficial owners. Indeed, such types of accounts would not be paid by the Scheme within the time limits explained to above. When a bank fails, the Scheme will invite account holders operating such accounts to provide it with a detailed list of the beneficial owners of such accounts to enable the Scheme to pay such compensation that may be due to such beneficial owners.
15. Are there any particular instances where the payment of compensation may be withheld or deferred?
Ordinarily, the payment of compensation will be made within the periods explained in question 8 above.
However, there may be instances where the Scheme may defer the payment of compensation beyond these time period.
Temporary High Balances (see question 5) will not be paid within the respective time period because the depositor would have to apply to the Scheme to be considered for any additional payment under this category of payments. If the Scheme is satisfied that you are entitled to any additional amounts because there are balances in your account which qualify for a further amount of compensation, the Scheme will be obliged to pay such additional compensation as due within three months from receipt of all information and documentation by the claimant.
The scheme may also defer payment in regard to balances held in dormant accounts. A dormant account is an account in which there have been no transactions within the previous 24 months (two years). Therefore, if your bank has – after contacting you – classified an account to be dormant – any balances in that account will not be taken into account by the Scheme for the purposes of calculating compensation. You may apply to the Scheme – at a later stage – for additional compensation (i.e. within the maximum limit of €100,000) for any amounts held in such dormant account. However, the Scheme may still refuse to pay such additional compensation if the value of the deposit is lower than the administrative cost that would be incurred by the Scheme in making such a payment.
Payment for accounts under nominee or trusteeship may also be deferred (as explained in question 2 Above).
16. I am a depositor with a branch located in an EEA member state of a bank incorporated in Malta. Under which Scheme will I be covered – the Scheme in Malta or that in the country where the branch is located?
The scheme in the member state where the host is located will be responsible for the payment of compensation due to you. For example, if you hold an account with a branch in Spain of a bank incorporated and licensed in Malta, the Scheme in Spain will be responsible for the payment of compensation due to you.
17 I am a depositor of a branch in Malta of a bank incorporated in another EEA country. If that bank were to fail, which Scheme will compensate me for my losses?
The Scheme in the member state where the branch is located will be responsible for the payment of compensation due to you, and will make such compensation in line with the time periods described above. For example, if you hold an account with a branch in Malta of a bank incorporated and licensed in Germany, the Scheme in Malta will be responsible for the payment of compensation due to you.
18. I am a depositor of a branch in Malta of a bank established outside the EEA. Will the Scheme in Malta cover my deposits?
No, your deposits are not covered by the Scheme in Malta. You should check with your bank under which scheme your deposits are covered, if at all. For example, if you hold an account with a branch in Malta of a bank incorporated and licensed in Turkey, the Scheme in Malta will not be responsible towards you and you should check with your bank if you are protected by a similar scheme to that in Malta.
19. I am a depositor of a branch located outside the EEA of a bank established in Malta? Will the Scheme in Malta cover my deposits?
No, your deposits are not covered by the Scheme in Malta. You should check with your bank under which scheme your deposits are covered, if at all. For example, if you hold an account with a branch in the USA of a bank incorporated and licensed in Malta, the Scheme in Malta will not be responsible towards you and you should check with your bank if you are protected by a similar scheme in the country where the branch is located.
20. Do I have any rights if I reject a decision taken by the Scheme in my regard?
Your legal rights will not be prejudiced if the Scheme fails to repay you within the deadlines established above, or you reject a decision taken by the Scheme in your regard, It is important to note that the time to claim reimbursement may be barred after a certain time limit. For instance, if you delay by more than two years to claim for additional compensation as explained above (i.e. up to €500,000), you will lose your right to receive such additional compensation.
And one last thing …
To receive compensation you will be required to sign some statements including a subrogation in favour of the Scheme. This subrogation gives us the right to recover the amounts which we have paid you, in the event that the failed institution has any money or assets left. A subrogation will also enable us to claim back money from other persons who may be responsible for your losses.