Do not hesitate, unworthy, unworthy or what are the guarantees for my money in the bank?

Do not hesitate, unworthy, unworthy or what are the guarantees for my money in the bank?

 

I use bank services on a daily basis. I have saved savings, I get my salary on bank account, I have a current account and a debit card. I am not quite aware of the banking system and I am worried about the risks of my bank problems. What are my rights if the bank goes bankrupt?

 

What happens when many people at one time decide to withdraw their savings from one bank?

It is important to understand that when I bring my money into a bank, something special happens to them. They become the property of the bank, and I get the right to ask her to pay me an equivalent amount, possibly together with interest, under certain conditions. The Bank has the right to use this money in its business, namely to provide it to third parties as a credit. It is not required at any time to maintain reserves to allow it to pay the total amount of all deposits, but only such reserves to cover part of that amount. This means that it is not possible for all persons with deposits to withdraw their money at the same time because the bank is not ready to return all funds immediately.

 

Does that mean that if enough people decide to withdraw their money at once my bank will go bankrupt?

Not exactly. If my bank is unable to pay the money due to all the people who have requested it, it is insolvent. The bank is insolvent when it can not fulfill its obligations at a certain point in time. This does not mean that it does not have enough assets to pay in the long run, but simply that assets that can serve as a quick payment to customers (cash) are not enough. Potentially, in a short time, the bank would be able to provide funds that would serve to repay liabilities, for example by selling property or collecting loans. By law, this period is 7 business days. If my bank fails to repay me the amount of my deposit during this period, then the BNB will assess the seriousness of the situation. If it is found that my bank will not be able to settle its obligations within a reasonable time, the BNB will withdraw its banking license and then insolvency proceedings. The concept of insolvency is analogous to bankruptcy and relates to the bank's inability to meet its obligations or to the fact that the bank's assets are not sufficient to cover all the obligations it has. However, this is different from insolvency, which concept in terms of banks means a momentary impossibility to repay current obligations, not a principled one. The bank is bankrupt, ie. bankrupt after a decision to withdraw the license from the BNB.

 

 

In simple words, the bank has not gone bankrupt if it can not immediately repay the value of my deposit. It is necessary for this impossibility to continue for a longer period of time and to be established by decision of the BNB.

 

What if my bank goes bankrupt?

If my bank goes bankrupt, I will have the opportunity to take advantage of the Bank Deposit Guarantee Fund. The Fund collects annual contributions from the banks in the country, which contribute to the deposit insurance in Bulgaria.