Bank choice: which bank is still good to work with?

Banks are the cornerstone of society because they form the basis of the economy. There must therefore be one hundred percent confidence in those banks, so that society can continue. If minor doubts arise about the integrity of banks, this can have an influence on financial progress or decline. If a serious circumstance arises, it can cause great panic among the civilian population. How reliable are banks and is the choice of bank still reliable?

Bank choice

  • Coming out deceived!
  • Influence of economic growth
  • Signs of decreased trust
  • Risks from bank investments
  • Declining economy, what then?
  • They can’t go bankrupt?
  • Security provided by DNB
  • Bank choice: what do you choose?

Coming out deceived!

If the economy is not doing well, everyone will be on their own. This is completely different when things are going well. Everyone stops being careful and people take greater risks. More money is invested sometimes without thinking about it. This also applies to banks. If there are opportunities to make big money, the risks become less important. Staff and managers with even more far-reaching ideas to make money are rewarded with commensurately high salaries and rewards. But is that right? After good times, there also come bad times. The higher the risks taken, the harder a bank and economy can fall. And the bill often ends up with the citizen.

Influence of economic growth

If the country is doing well, the economy is growing. The government’s financial balance is favorable and everyone benefits from this. A strong economy provides jobs, more income, security and provides good income for everyone. House prices are rising because demand is increasing. The overall picture is that people are doing well. This confidence continues to grow and grow, increasing investments across the entire economic spectrum. However, the principle of economic growth is limited to the capabilities of the economy. At a given moment:

  • the number of loans from banks increases, regardless of the interest that must be paid;
  • the risk of certain investments is underestimated;
  • is there insufficient staff available to meet expectations;
  • and so on.

This circumstance is also called an overstrained economy. Because of good returns, banks are more than happy to cooperate and also benefit greatly from this. Nevertheless, everyone cooperates in a circumstance in which returns on investments can no longer be achieved. In other words, the speed of the economy will catch up with the bank, the citizen and all companies.

Signs of decreased trust

As soon as it slows down, it goes quickly. Overall confidence is declining, causing consumers to suddenly spend less and investments to fail. One is saved in what one spends. This is the direct change which is characterized by:

  • freezing of salaries;
  • failure to honor secondary employment conditions;
  • postponement of construction projects;
  • failure to make payments;
  • increasing rates of bankruptcies;
  • declining number of people employed through employment agencies;
  • sharply rising gold prices, and the like.

Many signals can mean the end of good times. This is also reflected on the bank. Investments and mortgages were taken out when things were still going well and can cause enormous problems for institutions.

Risks from bank investments

During good times, banks are inclined to lend money en masse in the expectation of achieving very high returns. If the economy turns around, the banks run very high risks due to the investments made. This means that the influence of banks decreases and damage is also caused by banks. This reflects on the banks’ figures and may mean that the liquidity and solvency of the bank is jeopardized. Bad results have a direct effect on consumer confidence and how people handle money. The reserves will therefore also quickly decrease, potentially putting the bank at risk.

Declining economy, what then?

If the economy declines, the importance of the bank decreases considerably. It is limited to savings protection. If the economy is declining, investments will not be made and mortgages will not be taken out due to falling prices. The banks are therefore exposed to additional risk due to outstanding contracts entered into during the good years. Obligations must be fulfilled contractually, but the losses can be enormous. If a bank or a banking group has collectively invested in a risky investment, the losses due to the economic downturn can be very large.

They can’t go bankrupt?

We expect established large banks not to go bankrupt. However, it has become apparent that the risks taken can be so high that there is a chance that it could potentially go bankrupt. Banks can also run aground. Reforms can result in a concentration of bad investments in crisis banks with the intention of keeping good banks. This obviously damages consumer confidence, as well as confidence in the banks themselves. If you have saved up a nice amount of money, the question is which bank you put it at. You want to have certainty about your hard-earned and saved money.

Security provided by DNB

An important point of security within the Dutch banking system is the Deposit Guarantee Scheme. Savings amounts for every resident in the Netherlands are guaranteed up to an amount of one hundred thousand euros per citizen per registered bank. In other words, a great deal of certainty has been achieved for the consumer. Savings are guaranteed! However, this says nothing about mortgage debts. If a bank where a mortgage loan has been taken out goes bankrupt, the question is whether the trustee wants to immediately claim the outstanding debt or whether a transitional arrangement will be implemented. That uncertainty is great. So make sure that you choose a bank that is reliable for your banking matters to arrange your financial affairs.

Bank choice: what do you choose?

Strictly speaking, you can always go to any bank based in the Netherlands with savings of up to one hundred thousand euros. However, a degree of sound bank choice is important. You never know how they will handle your money. We regularly hear reports about what types of investments are being made and what poor returns are being achieved. Always to the detriment of the saver himself. So when doing your savings business, go for a bank that not only offers good returns, but also has a proven sustainable policy. And that does not mean risky policy, but wise use of money. It is therefore left to the citizen to become more active regarding who they do business with. Especially in less favorable times, it is important for citizens to consider which bank to work with. Not so much about returns but about continuity during good and especially bad times.

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