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AN EXAMPLE OF HOW DEPOSIT INSURANCE DOES NOT WORK
A depositor has the following portfolio:-
- A deposit balance of $140,000;
- An outstanding loan balance of $130,000;
The uninformed depositor will apply the loan balance of $130,000 against the deposit balance of $140,000 leaving an incorrect net reimbursable amount of $10,000 since the $10,000 is less than $125,000.
EXAMPLE SHOWING AN INCORRECT CALCULATION OF WHAT THE DEPOSITOR EXPECTS TO RECEIVE
Account Type |
Account Balance With Loan |
|
|
TT Dollar Deposit |
140,000.00 |
|
|
Deduct: |
|
Loan Balance |
130,000.00 |
|
|
Net Position |
10,000.00 |
|
|
Maximum Reimbursable Amount (restricted) |
125,000.00 |
|
|
Incorrect Net Amount Due to Member |
10,000.00 |
The DIC will apply the limit rule accordingly:-
The deposit balance of $140,000 will be reduced to the maximum reimbursable limit of $125,000.
The reimbursable limit of $125,000 will be set off against the loan balance of $130,000 resulting in a nil balance due to the depositor. In simple terms, no payment would be made to this depositor.
RE. EXAMPLE ABOVE: THE FOLLOWING IS THE CORRECT CALCULATION OF WHAT THE DEPOSITOR WILL RECEIVE
Account Type |
Account Balance With Loan |
|
|
TT Dollar Deposit |
140,000.00 |
|
|
Maximum Reimbursable Amount (restricted) |
125,000.00 |
|
|
Deduct: |
|
Loan Balance |
130,000.00 |
|
|
Net Position |
(5,000.00) |
|
|
Correct Net Amount Due to Member |
0.00 |
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