07.07.2022

Bank. Signs of unreliability

The decision when choosing a bank must be made competently and responsibly. It depends not so much on the high interest from the deposit, as on its safety. How to choose a reliable bank which will not go bankrupt or lose its license?
1. License
A license is a document granting a legal entity or individual the right to conduct certain activities. Without this document any commercial organization is operating illegally. There are several types of licenses. Depending on the chosen type of activity, an appropriate license is issued. A bank receives a license once and for all, but under certain circumstances, the Central Bank has the right to revoke it. This happens if the commercial organization has systematic violations, fails to submit accounts, or in the case of bankruptcy. The bank must then be liquidated.
2. Insurance
If you do not want to be a defrauded depositor, you must also check whether your commercial bank has taken out deposit insurance. Especially banks that you do not know well must be insured. Deposit insurance is a one hundred percent guarantee of return of capital to the depositor, in the case of bankruptcy of the bank. But there is a nuance. You can return the entire amount, but not exceeding $25000.
3. Rating
Each bank has its own rating. It indicates the creditworthiness of the organization, and how well it copes with its commitments. A low rating can mean that it is not safe to cooperate with the bank. There are rating organizations that rate banks. The Web sites of these organizations provide information about the rating of any bank. It may happen that a bank has no rating. There are two reasons for this: the bank does not wish to disclose its financial figures or it simply does not want to pay for the expertise. In both examples – this bank is not reliable.
4. Failures
There were cases when banks temporarily suspended customer service, attributing it to technical circumstances, but after some time continued to work as usual. After some time had passed, it turned out that the licenses of the banks were soon revoked.
5. Bad News
Specialists advise to carefully study the information about the bank in question. The following should alert you:

a. A sharp downgrade. This should be taken into account that rating agencies do not always respond quickly to changes in banking organizations.
b. A sudden change in management. There is no smoke without fire. When one director is replaced by another – this is the first sign that the bank has some problems.

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