Despite its unfairness, bank creditors must act diligently and with care to ensure they receive their total account balances when a bank is liquidated or fails. Few ‘victims’ realize that the bank resolution, recovery and liquidation process is characterized by singular events. This means that claim verification and ultimate repayment happens in a shielded transaction. Most bank depositors and other creditors therefore receive their full repayment via different isolated actions under the same umbrella of a recovery plan. Because of that, repayment to creditors in bank failure mostly happens in tranches at different moments in time.

Bank closure for non-voluntary reasons do not happen that frequently. Though, when they happen, these can have devastating effects on society and individuals. As a result, creditors should closely monitor the resolution procedures to submit their designated claims at the appropriate time and ensure a maximum repayment of their outstanding balances. The global connectiveness and complexity of banking enables distinct routes for recovery and justifies several alternative strategies. As such, a combination of public resolution, government guarantees, and insolvency and liquidation procedures should be combined with private civil action. This integral strategy is part of the proposed bank deposit recovery plan.

Bank deposit recovery plan

The banking industry plays a crucial role in the economy. The financial sector allows account holders to be involved in society. Customers may accidentally default on their loans when they are unable to honor their obligations during times of personal or systemic financial crisis. However, when a bank fails and goes into liquidation, most creditors expect a full refund of their account balance. Unfortunately, this is unlikely to happen. Financial institutions fail for a reason. They fail for financial reasons. Thus, even the most well-capitalized banks leave a difference between the value of their assets and the claims and liabilities of their creditors. As a result, unsecured creditors are often forced to write down part of their claim.

With the appropriate bank deposit recovery plan, creditors utilize every single possibility that is available in a flexible and agile environment to ensure repayment. The objective of this approach is to spread the risk over several recovery strategies to avoid dependence on unpredictable actions with uncertain outcomes, whilst focusing on reliable alternatives. All is outlined in this article.

Creditors do not always realize that repayment of their account balance as a result of bank failure requires very detailed attention. They must first accept that the bank does not reopen and that they must strategize for recovery accordingly. The number of creditors who fail to file their claims within the required timeframes, or whose claims are rejected due to carelessness of the claimant is substantial. Therefore, creditors are urged to take necessary steps and appropriate action to minimize risk and maximize repayment.