The Deposit Guarantee Scheme (DGS) of Andorra is an essential aspect of the country’s financial system, designed to protect depositors in the event of a bank failure. As a bank customer with accounts in Andorra, understanding the DGS is vital in ensuring the safety of your deposits.

The deposit guarantee scheme in Andorra is activated when a bank is declared insolvent or unable to meet its obligations to depositors. The Andorran National Institute of Finance (INAF) is responsible for determining a bank’s insolvency and initiating the DGS process. Key factors that can trigger the DGS include severe liquidity issues, capital inadequacy, and regulatory breaches.

The term “insolvency” is central to the activation of the DGS in Andorra. It refers to a bank’s inability to meet its financial obligations, repay depositors, or maintain the required minimum capital. Insolvency can result from poor financial management, economic crises, or fraud. Once the INAF has declared a bank insolvent, it takes immediate measures to protect depositors by activating the DGS.

Legal Framework

The legal framework governing bank deposit insurance in Andorra is established by Law 1/2011, of 2 February, on the creation of the Deposit Guarantee Fund for Andorran banks (FAGADI). This law outlines the responsibilities of the INAF, the operation of the DGS, and the rights of depositors in case of a bank failure.

The Andorran Deposit Guarantee Fund (FAGADI) is the institution responsible for operating the DGS in Andorra. Its official name is “Fons Andorrà de Garantia dels Dipòsits Bancaris,” and it is located in Andorra la Vella, the capital city of Andorra.

Coverage Amounts, Limits and Timeframes

The DGS in Andorra covers up to €100,000 per depositor and per institution. This limit applies to the aggregate balance of all eligible deposits held by the depositor in a single institution. It is not possible to exceed the coverage limit under the DGS. However, depositors with balances exceeding €100,000 may recover their funds through the bank’s liquidation process, subject to the availability of assets and the priority of claims.

After the activation of the DGS, depositors are notified and must submit their claims within three months from the date of the notification. The repayment process typically starts within 20 working days from the date of the bank’s insolvency declaration. Depositors are required to provide proof of identity and relevant account documentation. The DGS aims to complete the reimbursement process within seven working days from the date of claim submission.

Depositors have three months from the date of the DGS activation notification to file their claims. Failure to submit a claim within this period may result in the forfeiture of the depositor’s right to reimbursement under the DGS.

Exclusions, Claim Rejections and High Balances

Certain claims are excluded from the DGS coverage in Andorra. Exclusions include deposits made by financial institutions, government entities, or large corporations, as well as deposits resulting from transactions connected to money laundering or terrorism financing. Additionally, deposits in the form of debt securities, and deposits from persons convicted of crimes against the financial system are also excluded from DGS coverage.

In case of unexpected claim rejections, depositors have the right to appeal the decision with FAGADI. They should provide additional documentation or evidence to support their claim. If the appeal is unsuccessful, depositors may seek legal recourse through the Andorran courts.

After the DGS has completed reimbursements, the failed bank’s remaining assets are subject to liquidation under the supervision of the INAF. The liquidation process involves selling the bank’s assets and distributing the proceeds to the remaining creditors, in accordance with the priority of claims established by Andorran law.

Depositors with account balances exceeding the DGS coverage limit of €100,000 may recover a portion of their funds through the liquidation process, depending on the value of the bank’s remaining assets and the priority of other claims. However, there is no guarantee that depositors will recover the full amount of their deposits above the coverage limit.

Once the liquidation process is complete, the failed bank is officially dissolved, and its banking license is revoked. Account holders must find alternative banking arrangements, as their accounts with the failed bank are terminated.

Understanding the Deposit Guarantee Scheme of Andorra is crucial for bank customers, especially those residing outside the country. By familiarizing themselves with the scheme’s activation triggers, coverage limits, and claim procedures, depositors can better safeguard their funds in the event of a bank failure. Moreover, being aware of the legal framework, exclusions, and post-reimbursement scenarios will help depositors make informed decisions and ensure their financial security in the Andorran banking system.

Andorra DGS Fund Administration:

Andorran Deposit Guarantee Fund (FAGADI)
C/ Bonaventura Armengol, 10 Ed. Montclar, bloc 2, 4a planta
AD500 Andorra la Vella Principat d’Andorra