My offshore bank stopped operating. How do I reclaim my deposit?
The global financial system is complex. Offshore financial centers further this complexity by their enhanced privacy protection and quest for personal financial freedom. This sometimes creates conflicting situations in other jurisdictions. Especially where misconceptions and other misunderstandings arise, asset and fund recovery becomes arduous. Creditors of offshore banks must therefore pay close attention to the applicable rules so that they can minimize risk and maximize repayment.
When an offshore bank fails or is likely to fail, several mechanisms are triggered. Regulatory interventions allows for the appointment of a special administrator whilst assuming control over the financial institution. Swift action is necessary to mitigate risk and protect the capital position of the bank. To give creditors access to their insured deposit, the domestic deposit guarantee scheme and the investment compensation scheme are activated. Creditors must apply with the administrator of the respective schemes for repayment of the maximum insured amount. The administrator verifies the legitimacy of the claims and pays out within a month after submission when the claim is approved. Disqualified creditors, those who have amounts exceeding the insurance coverage and claimants who missed the deadlines of the schemes are subject to resolution decrees and the traditional liquidation and winding down procedures.
Offshore banking has two distinctions. It either utilizes the offshore financial center and its local banks, or a company incorporated and registered in an offshore jurisdiction holds a direct relationship with a financial institution abroad. Failure of these institutions therefore requires a different approach towards recovery. Preparation and dedication is critical to avoid unnecessary damage and financial losses.
Creditors in offshore bank failure are urged to take the matter seriously. A staged recovery plan is recommended because it includes several steps of repayment. Most of these staged recovery plans combine different isolated strategies to collect some of the outstanding account balance. At the end repayment does not happen as a bullet payment but arrives in a staged sequence. It follows that such approaches spread risk of repayment over different actions and thus lowers the reliance on for example the bank liquidation.