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This paper responds to an FSB request of IADI to ensure there is effective coordination across systems in jurisdictions with multiple deposit insurance systems and that any differences in depositor coverage across institutions operating within that jurisdiction do not adversely affect the systems’ effectiveness. The paper provides the enhanced guidance, such as:
- Membership in each deposit insurance organization should be compulsory for all deposit-taking institutions belonging to the class of institution (e.g. commercial banks, savings banks, credit unions, cooperatives) that the organization insures;
- multiple deposit insurance organizations operating in the same jurisdiction, covering similar types of institutions, should have similar, as well as credible and limited, coverage;
- separate deposit insurance organizations should administer their own separate funds;
- each deposit insurance organization should have its own backup liquidity funding in order to mitigate concentration risk;
- multiple deposit insurance organizations operating in the same jurisdiction should meet regularly in order to harmonize best practices, reduce opportunities for regulatory arbitrage and share information that could be relevant to one another’s operations;
- multiple deposit insurance organizations should engage in contingency planning, not only with other relevant safety-net agencies, but also with one another where appropriate;
- in its public awareness activities, each deposit insurance organization should ensure that the public understands by which organization(s) their deposits are insured and the exact scope of the specific guarantee it delivers;
- merging or consolidating multiple deposit insurance organizations within a single jurisdiction should be considered in cases where the original rationale for having multiple organizations (e.g. separate industry segments, classes of institutions, local specificities) no longer applies.