What does deposit insurance mean?

The Hungarian deposit insurance system and its head institution, the National Deposit Insurance Fund, was created by the Act XXIV of 1993 and is currently regulated by the Act CXII of 1996 as amended. This Act provides for the regulation of credit institutions in Hungary in accordance with the EU’s standards and practice. The primary aim of the regulation regarding deposit insurance is to protect depositors' money. Compliance with the statutory rules is strictly and regularly checked by the Hungarian Financial Supervisory Authority (PSZÁF).

The Fund is governed by the independent board of directors. Its management is overseen by the State Audit Office, who reports its findings to the Parliament. The National Deposit Insurance Fund is not an authority, but it does possess the necessary information, examination to act in the interests of the depositors. The sources for the Fund’s performance of its duties are the compulsory regular payments of the member institutions and the yields earned on the accumulated funds. Moreover, for the purposes of reimbursing depositors the Fund may order the payment of extraordinary premiums or - by government guarantee - draw loans.

According to the Act, if insured deposits cannot be withdrawn (are frozen) due to the insolvency of a credit institution, the Fund shall compensate each depositor and credit institution for the capital and interest on frozen deposits up to the statutory maximum amount.

The essence of deposit insurance under the Act can be summarised in three points:

• If a credit institution falls insolvent, the Fund reimburses all registered deposits (where the owner can be identified).
  
• The statutory upper limit for reimbursement per depositor is HUF 13 million
  
• The insurance is valid particularly for each credit institution. Therefore, if a depositor deposits money in more than one place, he/she is insured up to the statutory limit at each institution.