Latvia wins over Sweden in the dispute about contributions to the bank deposit guarantee system

Latvia filed a lawsuit against Sweden, which was also supported by Lithuania, Estonia and the European Commission.

In the application, Latvia asked the court to recognize that Sweden has not fulfilled the obligations arising from the EP directive on deposit guarantee systems. Also, Latvia asked Sweden to compensate the amount not received in the amount of about 500,000 euros, as well as to cover court costs.

The representatives of the Bank of Latvia state that the Bank of Latvia is satisfied with the court’s verdict and thanks the Ministry of Justice for the work invested. Latvijas Banka will provide a broader comment after familiarizing itself with the CJEU ruling.

As the court notes, the directive is an essential instrument for the creation of the internal market in the field of credit institutions, both in terms of the right to do business and in terms of the freedom to provide financial services, while improving the stability of the banking system and the protection of depositors. Considering the costs of insolvency of a credit institution to the economy as a whole and its adverse effects on financial stability and depositors’ confidence, it is desirable not only to provide for repayment to depositors, but also to provide Member States with sufficient flexibility so that the NGS can take measures to reduce the possibility of further claims against the NGS.

These measures should always comply with state aid rules. Deposit protection is an essential part of the creation of the internal market and a mandatory addition to the supervision system of credit institutions, thanks to the solidarity it creates between all credit institutions in a given financial market in cases where one of them goes bankrupt. Member States should therefore be able to allow NCAs to voluntarily lend money to each other.

“Nordea Bank” is a European financial services concern. While it was based in Sweden, it was a member of the Swedish NGS. Until September 30, 2017, it also operated through branches in Estonia, Latvia and Lithuania.

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On October 1, 2017, the bank implemented the transfer of its branches located in these three member states to the subsidiaries of “DNB Banka” AS registered in the mentioned countries. On the same day, the operation of these branches was transferred from the Swedish NGS to the responsibility of the Estonian, Latvian and Lithuanian NGS, respectively.

On October 3, 2017, the Swedish deposit guarantee institution decided not to transfer to the Latvian NGS the contributions that the bank had made to the Swedish NGS for deposits related to the operation of its branch in Latvia. In this decision, this institution argued that in the 12 months before the transfer of the operation of the bank’s branch to the responsibility of the Latvian NGS, that is, in the period from October 1, 2016 to September 30, 2017, “Nordea Bank” had not made any contributions to the Swedish NGS and that therefore the conditions of the clauses of the directive on the transfer of contributions have not been met.

As required by Swedish law, the bank had one month to make its annual contribution after the relevant decision of the Swedish Deposit Guarantee Authority. Regarding the year 2016, the annual decision of this institution was adopted on September 2, 2016, and the bank made its contribution to the Swedish NGS on September 30. Regarding the year 2017, the bank made its contribution on October 13 in accordance with the annual decision of the said institution. Therefore, in the period from October 1, 2016 to September 30, 2017, that is, in the 12 months before the relevant transition, the Swedish NGS did not collect this contribution.

The Swedish Deposit Guarantee Authority also decided not to transfer – respectively to the Estonian NGS and the Lithuanian NGS – the contributions that “Nordea Bank” had made to the Swedish NGS for deposits related to the operation of its branches in Estonia and Lithuania.

The CJEU recognized that Sweden had failed to comply with the claim for deposit guarantee schemes, but rejected the claim for monetary compensation as well as for legal costs.

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