Bank guarantees for businesses and individuals

Banks all of us feel very safe and feel that once your money is deposited in a bank it is completely safe, but it is not at all because Banks go bankrupt from time to time, which in turn means that people can lose their money.

Banks go bankrupt from time to time

money cash

This is exactly what happened in 2011 when Latvijas Krājbanka went bankrupt and became unavailable for deposits. When the FCMC, or the Financial and Capital Market Commission, ascertained the unavailability of deposits, it initiated a process whereby all depositors receive deposits up to EUR 100,000, or LVL 70,000 at that time.

In accordance with the Deposit Guarantee Law, any individual or company has the right to receive all their deposits with the bank up to EUR 100,000 within 20 days of the inaccessibility of deposits. Such guarantees are provided by the Government of Latvia, which has established a special deposit guarantee fund, where mandatory contributions are made to finance precisely such cases. In 2011, this account, at the time of Krājbanka’s bankruptcy, had 149 million lats , but another 200 million lats had to be borrowed to fulfill its other liabilities, and this money was subsequently recovered by the government in the course of liquidation of the savings bank. At present, only EUR 90 million has been accumulated in this account in 2015, which would not be enough if one of the largest banks operating in our country goes bankrupt, but in an amendment made on June 4, the government decided that now from the state but also from other market participants, or other banks. But what is important to consumers and businesses is that now the time available to receive a guaranteed sum of up to EUR 100,000 will be reduced and reduced to 7 working days by 2024 instead of the current 20 working days.

Deposit or salary account with a Latvian bank

Deposit or salary account with a Latvian bank

All this means is that if you have money in a deposit or salary account with a Latvian bank or a current account of up to EUR 100,000 then you can be absolutely sure that you will get your money anyway. But the guarantee of 100 thousand is only for the total amount of all the accounts in the bank, which means that if you have 100 thousand in one account and 10 thousand in another, you will get only the guaranteed 100 thousand . And so, if your money to a company or to you as an individual is greater than these 100 thousand, it would be better to invest it across multiple banks, thus reducing the risk of losing money close to zero.

I’m delighted that the Government is providing its consumers and businesses with such an airbag , and also thinking about how to minimize this payout time, because when, for example, you have to run a business and you suddenly disappear from your checking account, you can quickly stay without customers, unable to pay for services and goods. But if you want to keep more than these 100,000 Euros in one bank then you do so with little risk of losing that money because banks, though rare, tend to fail!