Depositor Pay-Off

From Open Risk Manual

Definition

Depositor Pay-Off is an exit strategy whereby a bank is closed and the liquidators pay creditors, including depositors, under insolvency laws applicable to banks from the proceeds of the liquidation of assets.

Where there is Deposit Insurance, the deposit insurer pays all of the failed bank’s depositors the full amount of the insured portion of their deposits. The deposit insurer then participates in the liquidation allotments as a creditor (the insured depositors having exchanged their claim against the receivership estate for payments under the deposit insurance protection scheme) together with depositors with uninsured funds and other general creditors.[1]


References

  1. BCBS, Supervisory Guidance on Dealing with Weak Banks, March 2002

Contributors to this article

» Wiki admin