Deposit insurance Uruguay
 

 


Uuguay's government is planning to introduce deposit insurance following the problems of local banks Banco Galicia and Banco Comercial earlier this year, local daily El Observador reported, quoting government sources.

Finance minister Alberto Bension told the paper that deposit insurance is "an interesting proposal on which the government is currently working."

Uruguay was once known as "the Switzerland of Latin America" due to its economic stability, the large number of foreign banks operating within its borders, and strict banking secrecy laws.

 

 

Uruguay's government has launched a deposit insurance fund to protect the public in the case of a bank collapse, local press reported.

Economy minister Danilo Astori said the fund's launch was speeded up by the suspension of the country's leading banking cooperative Cofac because of equity problems.

The government has put US$60mn into the fund, which will be recovered through an annual 2% fee charged to banks on every 1,000 pesos in dollar deposits and on the same amount in local-currency deposits.

The fund will cover up to US$5,000 per person in the event of a bank collapse.
 

 

 

However, that reputation came to an end this year when the local subsidiary of Argentine bank Galicia was intervened because of liquidity problems and the government had to bailout the country's largest bank Comercial after a scandal involving the bank's Argentine co-owners, who are suspected of using Comercial to illegally take funds out of Argentina.

he Uruguayan government is ready to introduce a new deposit insurance guarantee, central bank chairman Julio de Brun was quoted by local daily La Republica as saying.

Uruguay was hit by a serious economic and financial crisis last year during which many of the largest banks suffered massive deposit runs. As a result, several banks were temporary closed and deposits frozen and later returned in gradual processes that are still ongoing.


De Brun said the insurance would favor deposits in local currency and would be implemented gradually.

 

 


Uruguay's private banks have criticized the new system as too costly. The banks have said they are not prepared to assume that extra cost, which will be transferred to clients who will gain almost nothing on their deposits that already earn low interest.


Most of the private banks in Uruguay are foreign-owned and they suffered less from the crisis and it could be understandable that they are hesitant to finance a domestic deposit insurance, Fitch Ratings managing director for financial institutions in Latin America, Peter Shaw told BNamericas.


Whether a deposit insurance is a good thing or not depends on each country and the design of the insurance, but when the public's confidence has been shaken by a crisis - like in Uruguay - then there is a place for a deposit insurance to help regain confidence, Shaw said.

 

1.1 Organization (deposit insurer) responsible for administering the deposit
insurance system:

1.1.1 Organization Name:

Superintendencia de Protección del Ahorro Bancario (SPAB)

1.1.2 Organization Address:

Diagonal Fabini 777, Montevideo, Uruguay,

1.1.3 Organization Telephone No:

(00598 2) 1967 1111

1.1.4 Organization Fax No:

(00598 2) 902.32.29

1.1.5 Organization Internet Address:

infospab@bcu.gub.uy

1.2 Contact Person(s):

1.2.1 Contact Person(s) Name:

Cr. Jorge Sánchez, Cra. Rosario Soares Netto

1.2.2 Contact Person(s) Address:

Diagonal Fabini 777, Montevideo, Uruguay,

1.2.3 Contact Person(s) Telephone:

(00598 2) 1967 1231

1.2.4 Contact Person(s) Fax:

(00598 2) 902.32.29

1.2.5 Contact Person(s) E-mail address:

jsanchez@bcu.gub.uy

1.2.6 Are there other deposit insurance systems operating in your country ? (i.e.
applying to other types of non-bank or non-depository institutions e.g.. insurance,
securities) Please state their name(s) and contact information:

No

1.3.1 Name of Central Bank:

Banco Central del Uruguay

1.3.2 Central Bank Address:

Diagonal Fabini 777, Montevideo, Uruguay,

1.3.3 Central Bank Telephone:

(+598 2) 1967

1.3.4 Central Bank Fax:

(+598 2) 1967

1.3.5 Central Bank Internet Address:

Info@bcu.gub.uy

1.3.6 Central Bank Contact Person:

Dr. Aureliano Berro

1.4 Financial Supervisor:

1.4.1 Financial Supervisor Name:

Superintendencia de Instituciones de Intermediación Financiera

1.4.2 Financial Supervisor Address:

Diagonal Fabini 777, Montevideo, Uruguay,

1.4.3 Financial Supervisor Telephone:

(+598 2) 90830509

1.4.4 Financial Supervisor Fax:

(+598 2) 9021360

1.4.5 Financial Supervisor Internet Address and contact:

siif@bcu.gub.uy

2.1.1 When and why was the DIS established (please provide details)?

The Deposit Insurance System was constituted on the 27th December, 2002 by means of the Law N°17.613. It has an independently assigned capital, and is managed by the Superintendencia de Protección delAhorro Bancario, a technically independent sector that operates within the Banco Central del Uruguay..

2.1.2 What are the stated public policy objectives or mandate for your countrys
DIS? When was the last time they were reviewed and changed?

Guarantee the limited coverage of insured deposits in Banks and financial intermediation cooperatives. TheSuperintendency can: 1. Require of financial intermediaries, directly or through the Superintendencia de Instituciones de Intermediación Financiera of the Central Bank of Uruguay, whatever information it deems necessary in order to comply with its responsibilities, with the periodicity and under the manner it considers necessary. 2. Administer the Deposits Insurance Fund. 3. Regulate the terms and conditions in which coverage is to be effective in situations of crisis affecting depository financial intermediation institutions. 4.Pay coverage of the deposit insurance. 5. disposal of banks shares that have not complied with plans for
reorganization or required recapitalization by the Central Bank of Uruguay. The resale of those shares mustfollow the bidding procedure determined by the Superintendency for reasons of good administration. 6. Propose to the Central Bank of Uruguay the issue of regulations, resolutions, specific instructions, prudence standards, penalties and any other measure within its competence deemed convenient towards achieving its targets. No changes have occurred from the beginning

7.1.2 What types of deposits are eligible for coverage in your DIS?

Savings account,Chequing account,Annuity contracts,Foreign currency deposits

7.1.3 Is coverage

per depositor per institution

7.1.4 What is the coverage limit per depositor?

Up to an amount of US$ 5,000 (five thousand USA dollars) for all the deposits in foreign currency of each physical or legal person in each member institution, and up to the equivalent to UI 250,000 (two hundred
and fifty thousand indexed units, equivalent U$S 22.000) for all the deposits in domestic currency of each and fifty thousand indexed units, equivalent U$S 22.000) for all the deposits in domestic currency of each person and in each member institution.

7.1.5 How was this figures arrived at?

The foreign currency deposits are riskier than domestic ones to the financial system. Besides, all are not to be covered because of moral hazard reasons. The Executive Power determined the coverages.

 

Source: Public news articles and www.iadi.org

 


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