amending and supplementing Act No. 21/199 of the Coll. of Laws on Banks, in the wording of subsequent prescriptions, supplementing Act No. 513/1991 of the Coll. of Laws, the Commercial Code, in the wording of subsequent prescriptions, and Act No. 328/1991 of the Coll. of Laws on Bankruptcy and Settlement, in the wording of subsequent prescriptions.

The Czech Parliament has passed the following Act:

Chapter I

Act No. 21/1992 of the Coll. of Laws on Banks, in the wording of Act No. 264/1992 of the Coll. of Laws and Act No. 292/1993 of the Coll. of Laws, has been amended and supplemented as follows:

1. Section 26 reads as follows:

(1) In the event that the Czech National Bank detects any shortcomings in the activities of a bank or foreign bank branch office, it is entitled, according to the nature of the detected shortcomings, to:

a) require the bank or the foreign bank branch office, to remedy within a set time the shortcomings detected, in particular, to restrict some permitted activities or to terminate unpermitted activities, to replace persons in the management of the bank or foreign bank branch office, to create the appropriate amount of provisions and reserves, or to decrease its equity in the given amount,
b) change the banking license by excluding or restricting some activities stipulated in S 1, Para. 3,
c) impose conservator ship,
d) impose a fine up to CZK 50 000 000,
e) decrease the bank's equity by an amount corresponding to the loss after its settlement with reserve and other funds if the loss exceeds 20% of the bank's own capital.

2) The procedure, in compliance with Para. 1, letters b) to e) shall be applied if the requirement is not fulfilled in compliance with Para. 1, letter a). According to the nature of the shortcomings detected, especially if the matter cannot be deferred, this procedure may be applied even without the previous requirement in compliance with Para. 1, letter a). The procedure in compliance with Para. 1, letter c) cannot be applied vis-a-vis a branch office of a foreign bank.

3) The following are considered shortcomings in activities:

a) breach of the terms set forth in the banking license,
b) breach of this act, special acts, legal regulations and measures issued by the Czech National Bank,
c) bank transactions effected in a way impairing the interests of its depositors or jeopardising the security and stability of the banking system,
d) management of the bank by persons lacking sufficient professional qualifications or clean records,
e) if the total reserves and provisions created by the bank are not sufficient to cover risks ensuing from the amount of classified assets reported by the bank.

4) Regulations on administrative proceedings shall apply to proceedings concerning a change in banking license, the imposition and termination of conservator ship, the imposition of a fine and decrease of equity effected outside the regime of conservator ship, unless stipulated otherwise in this act.

5) Only the bank in question shall participate in the proceedings.

6) Proceedings can be started also by delivery of a decision.

7) Delivery shall be effected by the Czech National Bank by passing the decision into the hands of a member of the bank's statutory body or to a member of the bank's Supervisory Board or to a person in charge of managing the bank or the branch office of a foreign bank. Should any of these persons refuse to accept the decision, the decision shall be considered delivered at the moment of this rejection.

8) An appeal may be filed against a decision. A filed appeal shall not defer execution of the decision. The appeal shall be decided by the Bank Board of the Czech National Bank.

9) The period for executing a delivered decision shall be at least 24 hours.

10) The Czech National Bank can also impose a fine under Para. 1, letter d) on persons who breach the provisions of S 2 or 3.

ll) The imposition of a fine under Para. 1, letter d) shall not affect responsibility in the light of other legal regulations.

12) A fine, under Para. 1, letter d) shall be a state budget revenue. This fine may be imposed within one year after the detection of shortcomings, however, no later than ten years from the day on which those shortcomings occurred.

2. Section 27 reads as follows:

The decision by which conservator ship is to be imposed shall contain:

a) the reasons for imposing conservator ship,
b) the name, surname and date of birth of the Conservator,
c) possible restrictions or prohibitions on deposit acceptance, credit provisions or other activities,
d) possible partial or complete suspension of client operations with their deposits at a bank. "

3. Section 28 reads as follows:

1) The Conservator shall be appointed and recalled by the Czech National Bank which shall also set forth the remuneration for the execution of conservator ship. The Conservator shall be an employee of the Czech National Bank.

2) The Conservator shall be authorised to take other persons for the performance of conservator ship in the bank. These persons shall be entitled to learn matters which shall be subject to banking confidentiality in the bank in question. At the same time, they shall be obliged to maintain secrecy with respect to these matters. "

4. Section 29, including footnote 7, reads as follows:

1) At the moment of delivery of the written version of the decision on an imposition of conservator ship, the performance of the functions of all bank bodies shall be suspended. At this moment the decision shall be in effect against everybody. The Conservator, who convenes the General Assembly and is entitled to participate in it, has the status of a statutory body.

2) Matters within the competency of the General Assembly shall be decided by the Conservator, except for a decision on bank liquidation. He shall decide on those matters within the competency of the General Assembly with the prior consent of the Czech National Bank. A decision by the General Assembly on bank liquidation may be effected only following the written approval of the Conservator.

3) Should the bank situation require, the Conservator may, with the prior consent of the Czech National Bank, in agreement with the Ministry of Finance, partially or completely suspend depositors' operations with their deposits at the bank.

4) The Conservator may, with the prior consent of the General Assembly, file a bankruptcy petition. 7/

5) Should the Conservator find that a bank is too far in debt, he is entitled, with the prior consent of the Czech National Bank, to file a proposal for bankruptcy."

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7/ Of S 46 and of the following Act No. 328/1991 of the Coll. of Laws, on Bankruptcy and Settlement, in the wording of subsequent prescriptions.

5. Section 31, including footnote 7a), reads as follows:

A conservator ship shall be entered into the Commercial Register. 7a/ Proposals for entries relating to conservator ship shall be submitted by the Czech National Bank.

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7a/ Of S 27 and the following of the Commercial Code.

6. Section 33 reads as follows:

Conservator ship shall be terminated by:

a) delivery of a decision by the Czech National Bank on the termination of conservator ship,
b) a declaration of bankruptcy, or,
c) the passage of 24 months since the imposition of conservator ship. "

7. In S 35, Para. 1, the words " the decision of the State Bank of Czechoslovakia shall be published in the Commercial Journal 1/ prior to that day; in respect to a branch office of a foreign bank, in addition, notification" shall be replaced by the words "the decision shall be published in the Commercial Journal; with respect to a branch office of a foreign bank, it shall be notified in addition. "

8. In S 38, Para. 2, the existing text shall be supplemented by the following sentence." The exchange of information between the Czech National Bank, banking supervision bodies and similar institutions of other states, shall not be deemed confidential if the information exchanged is about subjects operating or intending to operate in the territory of a relevant state".

9. Part nine, including the title and footnotes 12 and 13, shall be inserted after ¤ 41, and reads as follows:

PART NINE
DEPOSIT INSURANCE OF NATURAL PERSONS

SECTION 41a

1) This act shall establish a Deposit Insurance Fund (hereinafter "Fund") which shall be a juridical person. The Fund shall be entered into the Commercial Register.

2) The Fund shall not be a state fund within the meaning of a special act. 12/ Special insurance regulations shall not apply to deposit insurance.

3) All banks and branch offices of foreign banks (hereinafter "banks") shall be obliged to participate in the deposit insurance system of natural person and contribute to the Fund in the amount stipulated in this act.

4) The Fund's resources shall be created through bank contributions, yields from financial investment, returnable financial assistance, interest-free credits and yields from concluded bankruptcy and liquidation proceedings.

5) It shall be possible to draw from the Fund for compensations granted under the terms set forth in this act, only for deposit owners who are natural persons (hereinafter "depositor") and for installments of returnable financial assistance and interest-free credits. The costs of Fund activities shall be paid by yields from the investment of financial means.

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12/ Act of the Czech National Council No. 576/1990 of the Coll. of Laws on the Regulations of performance with budgetary means of the Czech Republic and districts of the Czech Republic (budgetary rules of the republic), in the wording of subsequent prescriptions.

Section 41 b

1) The Fund shall be headed by a five-member Board of Directors.

2) The Chairman, Vice-Chairman and other members of the Fund's Board of Directors shall be appointed and recalled by the Minister of Finance.

3) The members of the Board of Directors shall be appointed by the Minister of Finance for a five-year term, and that also repeatedly. Each year one member shall be appointed. The exercise of the function of a member of the Board of Directors shall not be remunerated.

4) At least one of the members of the Board of Directors shall be appointed from CNB employees, on the proposal of the Czech National Bank. At least two members of the Board of Directors shall be appointed from the members of banks' statutory bodies. A member of the Board of Directors is entitled to recover costs which occurred to him in connection with the exercise of his function.

5) Details about the Fund's activities and competence shall be regulated by a Fund Statute which shall be issued by the Board of Directors following the prior consent of the Ministry of Finance.

Section 41c

1) The yearly bank contribution to the Fund represents 0.5% of the amount of natural persons' deposits held in Czech crowns under the name, surname, address and depositor's birth date (hereinafter "insured deposits" ) as of December 31 of the previous year, including interests to which a depositor becomes entitled as of the same day. The purchase of a security issued by the bank (e.g. deposit certificate or other bond) shall not be an insured deposit.

2) A bank shall be obliged to pay the contribution to the Fund for the previous calendar year by January 31 of the current year at the latest.

Section 41 d

1) Compensation from the Fund for an insured deposit shall be granted to a depositor in the case that the Fund receives written notification from the Czech National Bank effected in agreement with the Ministry of Finance of a bank's inability to redeem commitments to a depositor on the basis of legal and contractual terms.

2) The Fund, in agreement with the Ministry of Finance and the Czech National Bank, shall set the day for commencing payments from the Fund and publish this date in a suitable manner.

3) The reason for payment of compensation from the Fund shall not be a suspension of depositors' operations with their deposits within the framework of a conservator ship under S 27 or S 29, Para. 3, when it does not last longer than 90 days.

Section 41 e.

1) Compensation shall be calculated on the basis of adding up all insured deposits of a client with the bank, including his shares in the accounts held for two and more co-owners. The share of an account co-owner shall be equal to the fraction whose numerator is expressed by the total amount in the account and the denominator by the number of co-owners. The commitments due by a depositor in Czech crowns to the bank shall be subtracted from the resulting amount. Interests calculated as of the day on which payments commence shall be part of the insured deposit.

2) A depositor shall be provided compensation amounting to 80% of the amount calculated under Para. 1, however, only up to CZK 100 000 per depositor in a bank.

Section 41 f

1) Financial means of natural persons placed in official custody 13/ and deposited in one account shall, for the purposes of this act, be deemed deposits of natural persons.

2) When opening this account or on the occasion of the earliest transaction with an already existing account, the depositor is obliged to inform the bank in writing that financial means of natural persons are deposited in the account. From the moment of this notification, the bank shall treat the deposit in this account in the same way as any other insured deposit.

3) For the purpose of calculating the compensation for the deposit in this account from the Fund, the depositor is obliged to submit to the Fund a deposit breakdown according to individual persons and amounts belonging to each of them, and to provide evidence of their veracity. The information shall be passed on to the Fund.

4) Compensation for the deposit shall be provided in the same amount which would be granted in the case that each of the above-mentioned persons had financial means deposited in his/her own account.

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13/ S 568 of the Civic Code.

Section 41 g

1) The place and method of compensation payments from the Fund shall be set forth by the Ministry of Finance in agreement with the Czech National Bank.

2) The Fund, in co-operation with the Ministry of Finance, shall, in a suitable manner, ensure information to the public on the facts stated in Para. 1.

Section 41 h

1) As of the day of the commencement of payments, a depositor's claim against a bank shall decrease by the amount corresponding to his right to compensation from the Fund.

2) The Fund, on the day under Para. 1, becomes a bank creditor in the amount of rights of bank depositors for discharge from the Fund.

3) A depositor's right for discharge from the Fund shall be forfeited following the passage of five years from the day set forth as the beginning of the execution of payments.

Section 41 i

In the case that the financial means of the Fund are not sufficient for payments of compensation as stipulated by the act, 50% of the necessary financial means shall be provided to the Fund by the state in the form of returnable financial assistance, and the other 50% by the Czech National Bank in the form of an interest-free credit.

Section 41 j

1) The Fund can invest financial means in:

a) state securities,
b) state securities guaranteed by the state,
c) Czech National Bank bonds.

2) The Fund can also deposit financial means with the Czech National Bank, free of interest.

Section 41 k

In the case that the Fund is granted returnable financial assistance and an interest-free credit according to S 41i, the banks' contributions to the Fund shall be increased to twice the percentage rate stated in S 41c, Para. I from the year following the loan provision. In the year following the reimbursement of returnable financial assistance and interest-free credit according to S 41i, the contribution shall be decreased to the percentage rate stated in S41c, Para. 1.

10. S 44a, which reads as follows, shall be inserted after S 44:

Section 44a

Commitments of the Consolidation Bank, the state financial institution, shall be guaranteed by the state.

11. The present Part Nine shall be marked as Part Ten.

Chapter II

Act No.513/1991 of the Coll. of Laws, Commercial Code, in the wording of Act No. 264/1992 of the Coll. of Laws, Act 591 /l992 of the Coll. of Laws, Act No. 600/1992 of the Coll. of Laws and Act No. 286/1993 of the Coll. of Laws, shall be supplemented as follows:

1. A new paragraph 3, which reads as follows, shall be inserted into S 27 after Para.2:

(3) Provision of Para. 2 is not valid if conservator ship is imposed in compliance with a special act.

The present Para. 3 shall be marked as Para. 4.

2. In S 762, the present text shall be marked as Para. 1 and a new Para. 2, which reads as follows, will be added:

" (2) Provision of S 187, 191, S 211 Para. 1, S 213 Para. 4, S 215 and S 216 Para 1 of this Act shall not be applied if the Czech National Bank decides on the procedure under S 26 of Para. 1, letter e), of Act No. 21/1992 of the Coll. of Laws on Banks, in the wording of Act No. 156/1994 of the Coll. of Laws."

Chapter III

In S 1 of Act No. 328/1991 of the Coll. of Laws on Bankruptcy and Settlement in the wording of Act No. 122/1993 of the Coll. of Laws, Act No. 42/1994 of the Coll. of Laws and Act 74/1994 of the Coll. of Laws, a new Para. 4 shall be added which reads as follows: "(4) If a bank has more creditors and is unable to fulfill its due commitments for quite a long time, creditors cannot effectively file a bankruptcy petition during conservator ship. "

Chapter IV

Preliminary Provisions

1. Up to one month from the day of the Fund entering the Commercial Register, banks and branch offices of foreign banks shall be obliged to pay to the account half of the assumed contribution for 1994. As of January 31, 1995, the contribution shall be settled between a bank and the Fund in the amount of the contribution calculated under S 41c, Para.l.

2. On the first appointment of members of the Fund's Board of Directors, the Minister of Finance shall appoint one member for one year, one for two, one for three, one for four and one for five years.

3. The provisions of this act shall also be applied to conservator ship imposed before the act's coming into force.

4. The deposits of natural persons with the Czech Savings Bank, a.s. shall be guaranteed by the state for a period of six months from the day this act enters into effect.

Chapter V
Effectiveness

This act shall enter into effect on the day of its promulgation.