Banker’s Blanket Bond – Definition

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Banker’s Blanket Bond Definition

Banker’s blanket bond (BBB) refers to a fidelity bond bought from an insurance broker which safeguards a bank from losses from a wide range of criminal acts executed by employees. Certain states request the condition of a blanket bond coverage before a bank can operate.

A Little More on What is a Banker’s Blanket Bond

A fidelity bond refers to insurance which protects against losses which occur from employees’ acts of dishonesty. The banker’s blanket bond might be applied to either job positions or individual employees in the company. For instance, a bank can insure a particular bank manager or can decide to insure this position in itself, in order for any employee who assumes such job responsibilities to be automatically covered. Some loss types which arise from employee’s criminal acts covered by the banker’s blanket bond include robbery performed by an employee, as well as, forgery. Also, losses which arise from fraudulent activities perpetrated by non-employees are covered as well under this bond policy.

Banker’s blanket bond refers to an insurance policy which covers against direct financial loss from cyber fraud, forgery, extortion, alteration to or physical loss of property, and employee dishonesty. It is mandatory for this employee to have committed these frivolous acts for personal gains before the company can make claims again the bond. What this means is that the bond doesn’t cover losses from the activities of employees who carry out unethical transactions in order to make the financial institution look healthier. For instance, losses arising from an employee who cooks the book or better still uses other creative methods to improve the company than the way it was previously would be exempt from this coverage.

The blanket fidelity bond is categorized as a first-party coverage in that it covers the institution as a whole, not the shareholders or account holders. However, the blanket fidelity bond isn’t to be termed a kind to be a kind of credit insurance. A BBB neither extends credit nor bears a borrower’s credit risk. This is solely the financial institution’s responsibility. This bond is a regulatory prerequisite in some states that request that banks get fidelity bonds before operating.

Measuring the external risk level, as well as, loss of securities and money due to cybercrime or fraud, like ransomware, can be a bit easy to determine as against the financial loss which might internally arise as a result of employee shenanigans. Hence, concluding on the necessary bond coverage amount that a financial institution needs can be a major challenge. Insurers usually analyze the specific number of employees, as well as, their responsibilities, average exposure level from daily operations of a business, employee turnover rate, types and the average number of transactions conducted each day, an amount of cash which the bank holds.

References for Bankers Blanket Bond

Academic Research on Bankers Blanket Bond

BankersBlanket Bonds: Contracts of Adhesion, Kirwan, F. P. (1976). Ins. Counsel J., 43, 386.

Bankers Blanket Bonds-What They Cover and What They Do Not, Fields, E. W. (1960). Ins. Counsel J., 27, 318.

The Swan Song of a Dishonest Duck: A Prototype for Analyzing Converage Under the Bankers Blanket Bond, Howard, D. J. (1988). Loy. U. Chi. LJ, 20, 81.

An Overview of the Financial Institution Bond, Standard Form No. 24, Broeman, P. I. (1993). Banking LJ, 110, 439.

Timely Review of Bankers Blanket Bond, Tabor, B. W. (1956). Ins. Counsel J., 23, 121.

Risk and regulation in banking: Some proposals for federal deposit insurance reform, Scott, K. E., & Mayer, T. (1970). Stan. L. Rev., 23, 857.

Mischief or” Manifest Intent”? Looking for Employee Dishonesty in the Uncharted World of Fiduciary Misconduct, Kirwan, C. (1994). Tort & Insurance Law Journal, 183-194.

Financial Institution and Fidelity Coverage for Loan Losses, Neel, E. L. (1985). Tort & Ins. LJ, 21, 590.

Direct Loss Under the Fidelity Insuring Agreement of the Financial Institution Bond, Bassett, J. W. (1987). Def. Counsel J., 54, 487.

The Nature and Extent of Subrogation Rights of Fidelity Insurers Against Officers and Directors of Financial Institutions, Hlafcsak, J. J. (1985). U. Pitt. L. Rev., 47, 727.

Fidelity Insurance and Financial Institutions in the Post-FIRREA Era, Winn, J. M. (1992). Banking LJ, 109, 149.

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