History of FGCAM
1. The Establishment of FGCAM (1987)
The Fundo de Garantia do Crédito Agrícola Mútuo – FGCAM (Mutual Agricultural Credit Guarantee Fund – hereinafter referred to as “the Fund”) was established by Decree-Law No 182/87 of 21 April 1987 as the first deposit-guarantee scheme to operate in Portugal.
The Fund was established in recognition of the Mutual Agricultural Credit’s role in the development and progress of rural communities, as a cooperative organisation particularly geared towards the granting of credit to the agricultural sector.
Therefore, the Fund was established in order to “…provide a body for the (mutual agricultural credit) system capable of acting at any time and whenever necessary, namely by providing financial support to any mutual agricultural credit bank in need of such support” and, therefore, “…to contribute effectively to the solvency of such institutions”.
At the end of 1987, the Fund comprised 201 Caixas de Crédito Agrícola Mútuo (mutual agricultural credit banks – hereinafter referred to as “agricultural banks”) and the Caixa Central de Crédito Agrícola Mútuo (Central Mutual Agricultural Credit Bank).
2. The Integrated Mutual Agricultural Credit Scheme – SICAM
Principal among the transformations of Mutual Agricultural Credit since 1987 were: the adoption of a new organisational model, formed by the Central Mutual Agricultural Credit Bank and its associate banks – mutual agricultural credit banks –, which was called Sistema Integrado do Crédito Agrícola Mútuo – SICAM (Integrated Mutual Agricultural Credit Scheme). Within the framework of this Integrated Scheme, tasks and powers were conferred upon the Central Mutual Agricultural Credit Bank in the area of the guidance, oversight and financial representation of SICAM. A co-responsibility system was established between the Central Mutual Agricultural Credit Bank and its associates, making it possible to oversee their solvency and liquidity on the basis of consolidated accounts.
3. European Harmonisation
As European integration progressed, new legislation was enacted with the aim of regulating and harmonising the deposit-guarantee schemes. Directive 94/19/EC of the European Parliament and of the Council of 30 May 1994 established that all Member States should adopt measures to introduce schemes that ensure a minimum scope and protection of deposits to credit institutions’ depositors, in case deposits become unavailable, particularly in the event of the closure of an insolvent credit institution or shortage of liquidity.
However, that Directive provided some flexibility of action, given that it made it possible for credit institutions that already participated in a scheme, which ensured their liquidity and solvency – thus guaranteeing protection for depositors at least equivalent to that provided by a deposit-guarantee scheme – to continue to be a member of such a scheme. Therefore, by virtue of that possibility, agricultural banks that are members of SICAM were exempted from the obligation of belonging to the Deposit Guarantee Fund, established in 1992, given that they already were members of a similar scheme.
4. Changes to the legal framework of FGCAM (1998)
Given that it was necessary to put into legislation the profound changes seen in agricultural credit since the end of the 1980s as well as Community guidelines, a new legal framework of FGCAM was set up, as laid down in Decree-Law No 345/98.
This new legal framework aimed at changing the Mutual Agricultural Credit Guarantee Fund in order that, in addition to providing support to member institutions with financial difficulties, the Fund would guarantee deposits with banks belonging to SICAM. The Decree-Law, which transposed Community legislation into Portuguese law and accommodated the changes in agricultural credit, is similar to the Decree-Law governing the Deposit Guarantee Fund, taking on board the specific features of the agricultural banks belonging to SICAM.
5. FGCAM Today
Since then, FGCAM has pursued its mission to guarantee deposits with member agricultural banks and to encourage and implement the measures deemed necessary to ensure the solvency and liquidity of member banks, thus protecting SICAM.
The reduction in the number of member institutions compared to 1987 (the year of its creation) is directly related to the restructuring of SICAM, which started in the late 1980s. This process favoured the merger of geographically contiguous agricultural banks in order to mitigate structural shortcomings and at the same time to expand such banks, thus promoting a more integrated system.
In May 2006 FGCAM joined the European Forum of Deposit Insurers (EFDI), a non-profit organisation aimed at granting access to qualified information and cooperation among similar organisations. In this framework, FGCAM has worked with other deposit-guarantee schemes in a number of projects, particularly in EU countries.
Decree-Law No 126/2008 was published on 21 July 2008, amending Articles 1 (scope of application) and 6 (Management Committee) of Decree-Law No 345/98 of 9 November 1998.
Decree-Law No 211-A/2008 of 3 November 2008, which amended Decree-Law No 345/98 of 9 November 1998, introduced significant changes in the Legal Framework of FGCAM. Principal among the main amendments introduced were: the limit of the coverage provided by the Deposit Guarantee Fund was raised from €25,000 to €100,000, the payout delay of deposits was reduced, and the reporting and transparency obligations that must be fulfilled by financial sector institutions were strengthened towards both their clients and the supervisory authorities.
Directive 2009/14/EC amended Directive 94/19/EC on deposit-guarantee schemes as regards the coverage level and the payout delay. In order to maintain depositor confidence and attain greater stability on the financial markets, Directive 2009/14/EC of the European Parliament and of the Council of 11 March 2009 established that, by 31 December 2010, the minimum coverage level of deposits should be set at €100,000 (€50,000 being merely a temporary limit) and the payout delay should be reduced.
This EC Directive led to new changes in the Legal Framework of FGCAM. Despite some flexibility provided by the European regulation, Decree-Law No 162/2009 of 20 July 2009 kept unchanged the limit of the coverage at €100,000 and the repayment models (2 shares: one up to the amount of €10,000 and another share to make up the total amount of €100,000), but altered the payout delay for repayments established in Decree-Law No 211-A/2008 (the payout delay for the first share continued to be 7 days, but the payout delay for the remaining amount was changed from one month to a maximum period of 20 working days). In order to make it possible for FGCAM to check repayable sums within the applicable payout delay, this Decree-Law established that credit institutions shall provide the complete list of claims by depositors within 2 days (compared to 21 days previously), as well any other information that FGCAM may need.
On 31 December 2009 the Fund comprised 91 associate agricultural banks (including the Central Mutual Agricultural Credit Bank).