Did You Know – Depositing Money in a Securities Account is Safer Than in a Bank

There have been many cases of bank bankruptcies where people did not get their money back. In Vietnam, the state only provides a maximum compensation of 120 million VND.

As for Japanese banks, although the supported amount is higher, there is also a limit. If a bank goes bankrupt, you will receive a maximum of 10 million yen. Furthermore, when a bank goes bankrupt, the remaining accounts belong to the bank, and their machinery and assets will be liquidated – whatever money is raised will be divided and paid back to you, if the 10 million yen mentioned above still hasn’t covered the money you deposited in the bank.

As for securities accounts, the money you deposit will be 100% protected by the Securities Law. Even in Japan or Vietnam. So we don’t need to worry too much about what happens if a securities company goes bankrupt.

The investor protection mechanism is as follows:

Securities companies are required to store investors’ deposits separately from the securities company’s assets. That way, even if the securities company goes bankrupt, the customers’ assets will be returned to the customers.

This concept is a pillar in investor protection and separate storage is mandatory for all securities companies under the Securities Exchange Act.

The Japanese government has even planned ahead for the worst-case scenario where something might happen to delay the payout. An entity called the Investor Protection Fund has established a compensation system so that each person will be compensated up to 10 million yen.

However, since the law strictly requires securities companies to keep investor accounts separate (these financial investment companies are constantly audited, their operations monitored, and certified with proof of legal compliance), the assets entrusted by customers will be returned to them 100%. So basically, there won’t be a case where the Investor Protection Fund has to step in.

Therefore, even if you don’t want to invest, you should still deposit your money in a securities account instead of a bank account. For example, if you deposit 20 million yen in a securities account, even without investing anything, just leaving the money there, that 20 million yen is protected and returned in full even if this securities company goes bankrupt.

Of course, personally, I will invest to fight inflation. Because if left alone, in a few decades, that 20 million yen will only be worth about 18 million yen.