Q.1: What is the Depositors Protection Fund(DPF)
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Ans.: The DPF is a fund established to protect eligible depositors. All banks including the branches of foreign banks licensed under the Banking Control Law that conduct banking business in Saudi Arabia are members of the DPF. The DPF will provide full protection to depositors having deposits of up to SAR 200,000, including principal and accrued commission/retum, with a member bank. For example, if a person had a deposit in a member bank with a principal balance of SAR 194,500 and accrued commission/return on this deposit of SAR 5,000 on the cut-off date, the full SAR 199,500 would be insured, since principal plus commission/return did not exceed the SAR200,000 protection limit for a single depositor.
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Q.2: Why the coverage under DPF is restricted to SAR 200,000?
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Ans.: The objective of the DPF is to provide adequate protection to eligible depositors. The protection limit of SAR 200,000 would fully insure more than 97% of depositors of banks. This is a high level of coverage and exceeds international norms of 80% to 90%.
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Q.3: Why is the DPF established? I thought Saudi Arabia’s banking system is very safe?
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Ans.: Yes, Saudi Arabia’s banking system is safe and sound. SAMA has a regulatory framework in place to ensure the safety and soundness of individual banks as well as the overall Banking System. SAMA also ensures that banks are well managed, well capitalized and have enough liquidity to meet their obligations to depositors. The DPF is a financial safety net and layer of protection for depositors. The objective is to build up a protection fund in good times rather wait for a crisis to happen.
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Q.4: How does the DPF work?
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Ans.: In the unlikely event of a member bank failure, SAMA premiums paid by member banks and other resources available with it.
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Q.5: Who is covered under the DPF?
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Ans.: Individuals and other non-bank depositors with accounts in member banks are covered. Non-bank depositors include sole proprietorships, partnerships, companies, unincorporated entities, etc. However, the following are not covered:
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| | | a) | members of the board of directors and senior management of Bank (including its chief executive officer and Key Executives) as well as their Family Members; |
| | | b) | other Banks or financial institutions; |
| | | c) | shareholders holding in excess of 5% shares in the Bank |
| | | d) | Saudi government or quasi-government institutions; or |
| | | e) | Persons acting on behalf of any of the Persons mentioned in a) through c) above;
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Q.6: What types of deposits are covered for protection under DPF?
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Ans.: All types of deposits whether in local or foreign currency with member banks including current accounts, savings accounts, time deposits, inheritance accounts, unclaimed accounts, escrow accounts, client accounts, trust accounts, structured deposits, etc. are covered except the following:
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| | | a) | a deposit that is not payable in Saudi Arabia; |
| | | b) | an inter-bank deposit; |
| | | c) | a negotiable instrument of deposit and any other bearer deposit; |
| | | d) | a repurchase agreement; and |
| | | e) | any other deposit or financial instrument as may be specified by SAMA.
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Q.7: If I have deposits in several member banks, will all my deposits be added up for deposit protection purposes?
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Ans.: No. Your deposits in different member banks are protected separately. The SAR200,000 deposit protection limit is applicable per depositor per member bank.
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Q.8: If I have deposits in different branches of the same member bank, will all my deposits be protected separately?
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Ans.: No. Deposits held in different branches of the same member bank will be consolidated for deposit protection purposes.
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Q.9: As foreign currency deposits also enjoy protection under the DPF, are they separately protected from Saudi Riyal deposits?
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Ans.: No. Saudi Riyal and foreign currency deposits are not separately protected if they are placed in the same member bank. Foreign currency deposits will be converted to Saudi Riyals and aggregated with local currency deposits for protection of up to SAR200,000.
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Q.10: Do I need to sign up or pay a premium to be covered by the DPF?
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Ans.: No action is needed from you as a depositor as all premiums and costs relating to coverage under the DPF are borne by member banks.
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Q.11: In the event that a compensation is to be claimed from a failed bank, do I need to file a claim with the DPF or the bank?
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Ans.: The DPF will provide details on how the compensation will be made. You do not need to file any claims. The DPF will make announcements for payment of compensation to eligible depositors through the public media and at the affected bank and its branches. If your deposit exceeds the compensation from the DPF, you can file a separate claim with the liquidator of the affected bank for the difference but you cannot claim what has already been compensated under the DPF.
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Q.12: How the DPF will affect credit rating of a bank?
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Ans.: The DPF is a regulatory financial safety net and should have a positive impact on credit ratings of member banks. The statement earlier issued by the Supreme Economic Council in October 2008 stating that the Saudi authorities continued to ensure the safety of local banks and bank deposits, has not been withdrawn. As the protection provided by the DPF is a designated layer of protection for the eligible depositors, it should provide additional comfort to the external rating agencies.
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