Special case: provider insolvency

Bank insolvency

In the event of a bank’s insolvency, two guarantee systems exist that may kick in: the deposit guarantee scheme and the investor compensation scheme.

In this instance a bank’s insolvency involves the deposit guarantee scheme. Deposit protection coverage is EUR 100,000 per credit institution and per depositor, whose identity has been verified. A depositor is deemed to have verified their identity where they are able to prove their right to the credit balance. More detailed information about deposit guarantee schemes can be found here.

The securities in your securities account belong to you, which does not change in the event of the bank’s insolvency. The investor compensation scheme takes action in the event that your bank is unable to return your shares to you for some reason.

The following are covered:

  • Shares, bonds, investment funds etc. which are not able to be handed over in the case of default,
  • Claims against the bank from trading in derivatives, equity swaps, futures and forwards contracts and money-market instruments,
  • and occupational provision fund business.

A maximum of EUR 20,000 is repaid per investor. The market value on the day on which the default occurs is relevant. For legal entities (e.g. companies) other arrangements apply.

Repayment must be applied for from the investor compensation scheme. You have one year to assert your claim from the time of the announcement of the occurrence of the default event. Pay-out occurs within three months once eligibility has been determined.

Please note that there are a number of exceptions – for example claims that are denominated in a currency other than the Euro, Swiss franc or the currency of an EEA signatory state are not eligible for reimbursement.

Insolvency of an insurance company

 

In order to be able to honour obligations arising from life insurance contracts at all times, insurance companies are required to hold a cover pool reserve (Deckungsstock) in the amount of its obligations, and to manage this reserve separate to its other assets.

In the case of the insolvency of the insurance undertaking the assets contained in the cover pool reserve form a special fund and therefore are available for the preferential satisfying of claims of policyholders.

The FMA appoints a fiduciary to monitor the cover pool reserve, who checks that legal standards are conformed with. Assets may only be bought or sold subject to the written permission of the fiduciary.

Insolvency of an investment firm

Investment firms active in Austria that provide one or more of the investment services under Article 3 para. 2 nos. 2 to 10 WAG 2018 are required to by a member of a compensation scheme.

If, in the event of its insolvency, an investment firm is unable to repay your money to you or to return your securities to you, the possibility exists for reimbursement by the investor compensation scheme. Investor compensation is not triggered where advice, management or disclosure obligations are breached.

A maximum of EUR 20,000 is reimbursed per investor. Under the currently existing case law, the amount of the original investment is relevant. Any apparent profits or entry charges / share premiums are not considered as part of the reimbursement payments. Other rules apply for legal entities (e.g. companies) in terms of the amounts involved.

An application for repayment by the investor compensation scheme must be applied for by registering the claim. You have one year to register this claim from the time of the investment firm’s insolvency. Caution: Any registration of a claim in the investment firm’s insolvency proceedings does not replace the duty to separately register the claim with the compensation scheme.

Investment firms and investment services providers that do not belong to a compensation facility, must advise their customers that this is the case at latest at the time of the contract being concluded.

Further information:

Entschädigung – AeW (in German only)