ANDORRA Law and Practice Contributed by: Miguel Cases and Laura Nieto, Cases & Lacambra
7. Prudential Regime 7.1 Capital, Liquidity and Related Risk Control Requirements Law 35/2018 is aligned with: • Directive 2013/36/EU of the European Parlia - ment and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institu - tions and investment firms, amending Direc - tive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC; and • Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms, amending Regulation (EU) No 648/2012. It requires banking entities to have minimum internal capital that is adequate in quantity, qual - ity and distribution, having regard to the risks to which they are or may be exposed. Accordingly, Andorran banking entities must develop strate - gies and processes for assessing and maintain - ing the adequacy of their internal capital. The amount of capital maintained by banking entities is subdivided as follows: • Common Equity Tier 1 capital, intended to ensure business continuity; • Additional Tier 1 capital; and • Tier 2 capital, intended to cover losses in the event of a liquidation scenario. As far as the minimum capital requirements are concerned, the total amount of capital required to be held by banking entities must be at least 8% of their risk-weighted assets. The part cor - responding to the highest quality capital – Com - mon Equity Tier 1 capital – must represent 4.5%
The key regulatory features of the deposit guar - antee system are as follows: • if an Andorran banking entity becomes insol - vent, the clients’ deposits would be repaid up to EUR100,000, and additional coverages are foreseen in exceptional cases that guarantee the following, up to a limit of EUR300,000: (a) deposits from real estate transactions of a residential and private nature; (b) payments received by the depositor on a one-off basis and linked to marriage, divorce, retirement, dismissal, disability or death; and (c) payments that are based on the payment of insurance benefits or compensation for damages and are the result of a crime or a legal error, provided that these balances have been paid to the covered accounts during the three previous months; • the FAGADI’s ex ante resources must have reached 0.8% of guaranteed deposits by 30 June 2024, through the bank’s annual contri - butions; • the FAGADI will receive the available finance through contributions that its members sub - mit at least once a year; • if the FAGADI’s available financial resources are not sufficient to reimburse depositors in cases of coverage, the FAGADI board of directors may solicit extraordinary contribu - tions from member entities – these contribu - tions may not exceed 0.5% of their guaran - teed deposits per calendar year; and • the FAGADI board of directors, with prior consent from the AFA, may request higher contributions in exceptional circumstances that in no case imply exceeding the maximum limit of coverage established by the FAGADI Law.
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