General Guidance for Developing Differential Premium Systems

October 31, 2011
There is a Guarantee Fund which is the accumulation of contributions, return
flows and interest income. The assessment base for most member
institutions is lending to customers and there is a uniform assessment base
for some special institutions (e.g. the Cooperative Central Banks).
Contribution rates established yearly by the BVR differ between 0.5 basis
points to a maximum of 2.0 basis points of the assessment base of the
corresponding bank. Since 2004, banks pay 90 to 140% of the contribution
rate depending on the rating of its soundness. Beginning in January 2010,
80% will apply for A++ classified banks, the minimum contribution lowers to
0.4 basis points and the contribution base was expanded to address risks in
bonds and other capital market assets held by the banks. Since then, the
new contribution base is the risk weighted assets as it is more risk oriented,
treats banks more fairly, and there is no additional cost to calculate as the
supervisory authorities require this data by law. The BVR has chosen to use
assets (notwithstanding a general move toward using covered deposits as a
contribution base) as the contribution base because they are the source of
difficulties which may lead to a situation where a member bank may need
the support of the Protection Scheme.
In addition to the Guarantee Fund, the BVR Protection Scheme has a
Guarantee Network , composed of “declarations of guarantees” of each
member bank. The scope of liability of each is limited to a maximum of 5.0
basis points of the assessment base for the Guarantee Fund. Drawing on the
Guarantee Network for restructuring measures is only possible if it can be
repaid within five years. The Guarantee Network is used only as an ultimate
solution – a kind of internal lender of last resort.
The ex ante funding, and contribution levels, are calculated and fixed yearly
based on expected risks of the following year.
Banks are evaluated according to their assets, liabilities, income and risk
situation. They are classified into one of nine rating grades (from A++ to D),
and the rating grade translates into a contribution factor from 80% to 140%.
A++ A+, A A-, B+, B B- C D
80% 90% 100% 110% 120% 140%
Classification model
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