The last collapse of a Czech bank that “really mattered” was the fall of IPB Bank twenty-two years ago. In 2003, Union Bank also went bankrupt, but it was not among the Czech top five, and time has healed most emotions anyway. The 2008 financial crisis did not affect Czech banks, unlike their American and Western European counterparts. And when the Czech-Russian ERB Bank failed in 2016, only banking “connoisseurs” really noticed.

And suddenly, Sberbank—a medium-sized, economically healthy bank—had no money to pay out deposits! The recent collapse frightened quite a few bank clients. So, are my funds in my bank truly safe? Wouldn’t it be better to withdraw everything and go back to cash and postal orders?

Deposit Insurance in Banks

Funds in banks, building societies, and credit unions are insured by law. If the bank where you hold accounts goes bankrupt, you receive compensation from the Deposit Insurance Fund, managed by the Financial Market Guarantee System (GSFT), a body established by law.

The payout limit is set in line with EU legislation at EUR 100,000, assessed separately for each bank. The euro limit is converted into Czech crowns according to the exchange rate of the Czech National Bank (ČNB) on the day the central bank notifies the guarantee system to start compensation payments.

This limit covers the total of all deposits of a single depositor in current accounts, savings accounts, and term deposits. The insurance also applies to accounts held in foreign currency at Czech banks.

When the Limit Doubles

There are situations where this limit is doubled to EUR 200,000 (≈ CZK 5,000,000). These include:

• Funds from the sale of real estate used for private housing

• A lump-sum payout from pension savings or supplementary pension insurance

• Settlement of marital property in the case of divorce

• Insurance payouts for accident, illness, disability, or death

• Inheritance and severance payments from employment

• Compensation for damages caused by a criminal act

In general, these are extraordinary deposits. If such funds arrived in your account within three months prior to the bank’s failure, they are insured up to the EUR 200,000 limit. A request for compensation must be submitted to GSFT within two months of the ČNB announcement of the institution’s bankruptcy.

“Such an amount must be credited directly in connection with the relevant life event. For example, in the case of payment of a purchase price for housing, it must be an amount credited directly by the buyer or an intermediary/escrow agent in accordance with the purchase contract. Deposits are insured until the first transaction is made—if transferred, say, from a current account to a term deposit, the depositor loses their right to extraordinary protection,” explains Renáta Kadlecová, Executive Director of GSFT.

(Source of quote: penize.cz)

Applies to Individuals and Businesses

This protection applies not only to private individuals but also to entrepreneurs and companies—under the same rules.

Covered accounts include:

• Current and savings accounts

• Term deposits

• Passbooks

• Building savings accounts

When Does Payout Begin?

Payouts from the Deposit Insurance Fund begin within seven working days from the ČNB’s announcement that a financial institution is unable to meet its obligations.

It does not start from the moment you find the bank’s doors closed. The ČNB must first assess whether the institution is truly insolvent, and only then does the seven-day period begin. Bank supervision in the Czech Republic is robust, meaning no bank “shuts its doors” overnight. Any potential problems would already be known within the upper levels of the ČNB before such an event, so it would not come as a bolt from the blue.

What If I Have More Than the Insurance Limit?

If you hold funds above the insurance limit (EUR 100,000 or EUR 200,000 in special cases), you must register as a creditor like any other. These remaining funds (a receivable) become part of the insolvency or liquidation proceedings. If anything is left after settlement, obligations towards clients are partially satisfied.

That’s why it’s prudent to keep in any single financial institution only the amount covered by insurance. Even better: don’t focus solely on limits or rely on advice from friends or anonymous discussions on social media—seek guidance from professionals who manage wealth as their vocation.

Alternatives to Bank Deposits

An alternative to holding all funds in banks is investing. Investments can be tailored to your risk tolerance—from very conservative to highly dynamic. From relatively lower-yield, short-term options of one to two years, to higher-yield, long-term strategies spanning ten to twenty years.

With both selection and professional ongoing management, we can help every client in line with their goals, wishes, and financial plans.