Financial Crisis: The global economy is once again facing uncertainty as the latest financial movements in the United States and Europe are being closely watched by financial markets. The fears of the 2008 financial crisis are resurfacing, causing concerns among investors and everyday citizens who have their savings in the bank.
What’s Happening in the Financial Markets?
The current situation began with the bankruptcy of two American banks, Silicon Valley Bank and Signature Bank. The fear of a possible replica of the 2008 crisis has spread among investors, as four more entities were suspended from listing in Europe, including Swiss Credit Suisse, Societe Generale, Monte dei Paschi, and UniCredit.
In Spain, banks fell by up to 12%, which affected the Ibex-35. As a result, people who have their savings in the bank are worried about what would happen if a bankruptcy situation occurs, and whether they can recover their money.
Are Your Savings Safe?
The Bank of Spain confirms that customers’ money in a bank is protected up to a certain limit. Checking account holders, savings book holders, and term deposit holders have their money guaranteed up to 100,000 euros for each holder and each entity. Thus, if two holders are present in an account, the figure will rise to 200,000 euros.
This protection is possible thanks to the Deposit Guarantee Fund, which ensures depositors recover their money, up to a certain limit, if the bank goes bankrupt. All Spanish banking entities that are registered in the Registry of credit institutions of the Bank of Spain are obliged to join this fund. Adhesion is voluntary for branches of banking entities authorized in another member country of the European Union since this guarantee is already covered in their country of origin.
When Does It Go into Action?
Royal Decree-Law 16/2011, of October 14, creates the Deposit Guarantee Fund for Credit Institutions, which clarifies the facts that will lead this fund to pay the amount of the guaranteed deposits. The first is if the entity “has been declared or has been legally considered to have requested the declaration of bankruptcy,” and the second is if the Bank of Spain determines that the entity is not able to return the deposits due to its financial problems. The Bank of Spain must make this determination quickly to ensure the client recovers their money as soon as possible.
Q: What caused the current financial crisis?
A: The current financial crisis started with the bankruptcy of two American banks, Silicon Valley Bank and Signature Bank.
Q: Are people with savings in the bank safe in a bankruptcy situation?
A: Yes, up to a certain amount. Checking account holders, savings book holders, and term deposit holders have their money guaranteed up to 100,000 euros for each holder and each entity.
Q: How is the Deposit Guarantee Fund helping to protect people’s savings?
A: The Deposit Guarantee Fund ensures that depositors recover their money, up to a certain limit, if the bank goes bankrupt.
Q: Are all Spanish banking entities registered in the Registry of credit institutions of the Bank of Spain obliged to join the Deposit Guarantee Fund?
A: Yes, all Spanish banking entities registered in the Registry of credit institutions of the Bank of Spain are obliged to join the Deposit Guarantee Fund.
Q: What happens if a bank cannot return deposits due to its financial problems?
A: The Bank of Spain must determine this situation quickly to ensure the client recovers their money as soon as possible.
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