What happens if my bank fails?

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The news of the arrest of financier Mario Conde, accused of repatriating the money he took from Banesto de Suiza, has shocked a large part of Spanish public opinion. And how could it be otherwise, it has made them return to the bad practices of the national banking system, or more particularly of its managers, which can lead to the bankruptcy of the bank. Just remember what happened to him Bank of Madrid, a subsidiary entity of the Private Bank of Andorra, which was intervened a year ago by the banking authorities, following the complaint by the United States Treasury against this entity for allegedly having laundered capital from organized crime.

It is not a general alarm, far from it, but if a wish of Spanish savers is preserve your heritage, no importa lo poco que be, si mi banco falla. Y eso puede afectar tanto a tus relaciones con los productos bancarios suscritos (depósitos a plazo, pagarés, deuda pública, etc.), como a las inversiones que realiza la entidad. Y que lleguen a involucrar a los accionistas de grupos financieros que algún momento podrían pasar por esta desagradable situación: la quiebra de la compañía. Sea cual sea el caso, será necesario ir punto por punto para aclarar todos los escenarios posibles en esta hipotética oportunidad.

First scenario: bankruptcy

As long as we talk about the bankruptcy of a bank, we believe in the hundreds and hundreds of small savers who have saved their monetary contributions in a very popular product, as in this circumstance are term deposits. Well, in a bankruptcy situation, customers who have subscribed to these savings models will have guaranteed by the Deposit Guarantee Fund of Credit Institutions up to a maximum of 100,000 euros by owner and account.

In spite of everything, they will not be recovered immediately, but will be at the expense of justice procedures, but in all cases they will go to your checking account. Those who have contracted the impositions for amounts greater than this amount will have it much more difficult, since under no circumstances will they be able to charge it. Unless the bankrupt bank passed to a new entity, and this one assumed the rights of the clients. And that there is a third option, that the affected entity is liquidated, and in which case it would be in the worst of situations, since it would later be on the waiting list of suppliers, shareholders and investors in general.

Sea cual sea el caso, existe una strategy absolutamente legal y muy sencilla de aplicar que te permitirá evitar que te sucedan estas situaciones si tienes más de 100.000 euros para guardar en depósitos bancarios. Y sería cuestión de suscribir diferentes productos de estas características, hasta el monto garantizado por el fondo de depósito. If it is viable in different banksand with accounts that are not the same. As a result of this effective action, you will be able to protect all the savings against the viable bankruptcy of a financial institution.

Another very different case is that of clients who, instead of deposits, have signed bank promissory notes. Even though they are products with similar characteristics, in the latter are not covered by the Deposit Guarantee Fund, in no case. So if this unwanted scenario occurs, you could lose all the savings, with no chance to get it back. Not surprisingly, and from this perspective, promissory notes are savings models that carry a greater risk, and it is convenient that you know them before signing a contract.

And what is more, the difference in profitability between the two savings models is practically non-existent, since they move under the same commercial margins imposed by the banks. And that as a result of the reduction in the price of money by the European issuing bank, they are established in a narrow range that goes from 0.15% to approximately 0.50%.

Second scenario: what about investors?

Another very different scenario is the one that affects small and medium investors, who have taken positions in the shares of a bank, which has then closed its line of business. Both in financial assets on the stock exchanges themselves, and through investment funds. Well, they must remain calm in those delicate moments, since you will not lose your investments. Not in vain, the entity is the administrator of its assets, do not forget. And the worst thing that can happen to you is that your securities account is not operational for a certain time, between 1 and 6 months. From this dynamic, you will not be able to carry out any type of operation.

Once the suspension is lifted, you will be in a position to market your shares. in the stock markets, or basically undo your mutual fund positions. The main problem that you may find yourself with is that the financial assets that you have in your investment portfolio are undervalued in their prices in terms of your purchase operations. And as a result of this procedure, you can leave a lot of euros on the way. It can also wait until in the coming months, or even years, they can recover their level of quotation in the equity markets.

Third scenario: how are the customers?

There is another dilemma, which does not affect investors or depositors so much, but rather bank users who only have subscribed basic products with the entity (accounts, passbooks, savings plans, etc.). Your situation, with rare exceptions, will be absolutely the same as in the case of customers who have subscribed a tax on time. And for the same reason as in this circumstance, it is more than recommended that for amounts greater than 100,000 euros prefer for open a different account, or at least it is in the name of other recipients. They can be your parents, siblings, or other family members.

De ahí la relevance de depositar el dinero en una entidad financiera segura y estable, y que no infrinja ninguna normativa sobre la regulación del sistema bancario español. A pesar de todo, hoy en día puede estar seguro de este escenario, puesto que todos los bancos nacionales have passed the solvency tests of their financial system with good marks, which have recently been drawn up from the highest regulatory bodies of the Monetary Union.

Fourth scenario: what happens to my credits?

There is another opportunity that can happen to you, and that has to do with the situations in which you have a line of credit granted (personal, consumer, mortgage, etc.) with a bank that can go bankrupt, and is rescued with public money. Initially, it would not lose its source of funding since it would go directly to another entity, or you would be directly in charge of paying it to the state itself.

Another very different case is when the bankruptcy is technical and there is no opportunity to rescue it. Subsequently, the debt contracted through your loan would be distributed among the creditors of the entity.

Recommendations from consumer institutions

Different associations in defense of consumers have made a series of tips to try to prevent these cases from happening in the Spanish banking system. And specifically, from the Association of Users of Banks, Savings Banks and Insurance of Spain (ADICAE) the Spaniards demand that the national management implement a large battery of medidas que disponen como target prevenir estas situaciones So detrimental to the interests of customers. And among which the following stand out:

1. Surveillance, control and report the increase in commissions and expenses that credit institutions apply to their financial products and services.
2. Review of the evolution of interest rates on credits, loans and other remunerative or late payment interests to avoid that they increase with greater spreads. Likewise, special attention will be paid to contracting conditions in mortgage loans, particularly in connection with the requirement of links such as contracting insurance, pension plans, use and sale of cards, etc.
3. Debugging of responsibilities of managers of the financial entities that choose or have chosen to bail out.
4. Fundamentally monitor and report when appropriate, the types of savings-investment products and their financial conditions and contractual that are placed with consumers by all those credit institutions that request aid from the FROB, as well as alternatives for marketing and sale.
5. Defense of the rights of small shareholders of these savings banks became banks that issued shares to recapitalize themselves and that must go to the FROB to clean up their accounts.

Self-defense of bank users

Whatever the case, customers have some loopholes to avoid extreme situations in the banks, and that will start from the importation of some lines of action that are undoubtedly useful to protect both their investments and their savings.

• Do not subscribe savings products for amounts greater than 100,000 euros.
• Stay away from models that are not guaranteed with the Deposit Guarantee Fund.
• Choose financial entities more solvents and that they comply with the solvency regulations of the banking system.
• Creates different checking accounts when the savings bag you have is very large.
• the best way to prevent its damage will inform you about them.