Other Solutions

Overview

Some jurisdictions have implemented alternate mechanisms to protect customer funds.

Safeguarding Customer Funds

Advantages & Disadvantages

Private Insurance

Advantages

  • Could provide protection in countries that lack deposit insurance scheme.

Disadvantages

  • Cost and availability of insurance (and financial strength of private insurers) will vary from country to country.

Guarantee from Bank’s Parent Group

Advantages

  • Could provide protection in countries that lack deposit insurance scheme.

Disadvantages

  • Available only in countries with competitive banking sector and multinational banks.
  • Strength of guarantee depends upon financial strength of parent group.

Float Diversification

Advantages

  • Reduce total loss in event of bank failure.

Disadvantages

  • If funds not protected, e-money issuer must cover losses through own capital.

Bank Strength Requirement

Advantages

  • Reduce risk that funds are held in weak bank.

Disadvantages

  • Bank failure difficult to predict.
  • Signaling risk to market.

Minimum Capital Requirements

Advantages

  • Ensure e-money issuers can cover losses and remain solvent.

Disadvantages

  • High requirements could affect sustainability.
  • Insufficient to cover losses in event of catastrophic bank failure.
Safeguarding Customer Funds

Country Examples

Country Examples

Link to El Salvador case studies
El Salvador
Link to European Union case studies
European Union
Link to Tanzania case studies
Tanzania