Taking care to deter employee theft and dishonest from within help your financial institution from incurring a loss. However, it does not deter all forms of theft or fraud. A financial institution bond covers the loss for the institution and customer associated with a variety of internal and external crime.
What It Is
While it may be called a bond, the financial institution bond is a type of insurance against losses of tangible properties such as securities and money. The insurance protects the institution itself against the loss versus the shareholders, covered by deposit insurance. Any institution that handles the flow of money keeps a balance sheet. The bond covers that balance sheet if fraud happens.
Who It Helps
All financial institutions should have a bond for the institution. Investment managers, securities firms, community banks and commercial lenders all need to protect their balance sheets from internal and external hazards.
What It Covers
Regardless of origin, the bond protects against certain crimes and criminal behaviors. Limiting loss through safeguards helps the bank protect the assets and balance sheet against external threats. Internal hazards are harder to control and require diligent monitoring of employees.
Crime happens regardless of the protocols in place. Having a financial institution bond can help the bank recover from the losses associated with a host of crimes both within and outside of the institution.