Circular CSSF-CPDI 25/48

Context & Purpose

This circular updates the method for calculating ex‑ante annual contributions that the FGDL collects from credit institutions (and certain investment firms) under Luxembourg’s December 18, 2015, deposit guarantee law.
It aligns with the European Banking Authority (EBA) guidelines on deposit guarantee schemes (EBA/GL/2023/02).

Key Changes

• The weight of the Return on Assets (ROA) indicator increases from 7.5 % to 10 %.

• The Deposit-Size Risk weight decreases from 15 % to 12.5 %.

• The formula for the Aggregate Risk Weight (ARW) for each institution is aligned with EBA recommendations.

• Contributions remain split into two components:

  • Component 1: Proportional to the covered deposit variation of the institution.

  • Component 2: Fixed portion independent of deposit changes.

  • New rule: Component 1 cannot be negative to offset Component 2.

• These methods apply to contributions due from 2025 onwards.

Methodology Overview

• FGDL targets a fund level equal to 0.8 % of covered deposits as of December 31 of the previous year.

• Two “compartments” are distinguished:

  1. Available financial resources.

  2. Buffer of financial resources.

• Contribution calculation considers:

  • Covered deposit changes per institution.

  • Each institution’s risk factor (ARW).

• The ARW is based on indicators like capital, liquidity, asset quality, business model, ROA, and deposit size.

Implications for Institutions

• Higher-risk institutions (e.g., lower profitability, higher NPLs, large deposit bases) will have an ARW above 1, increasing their contribution.

• Component 1 can no longer reduce total contributions if deposits fall.

• Transparency is strengthened: contribution invoices will show ARW, applied rates, and other details.

Why It Matters

• Changes the cost of participation in Luxembourg’s deposit guarantee system, potentially influencing deposit management and growth strategies.

• Moves toward European harmonization, enhancing predictability for cross-border institutions.

• Enhances depositor protection and system resilience by emphasizing institution-specific risk.

https://www.cssf.lu/wp-content/uploads/CSSF_CPDI_2548eng.pdf