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What Are Commercial Banks
 After the Great Depression, the US Congress required all the banks in the nation to engage just in banking activities and this leads us to what are commercial banks. Commercial banks are type of banks as well as financial intermediary. More..
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Surety Bonds For Commercial Bank Deposits
Many people do not know but it is quite possible to use surety bonds for commercial bank deposits. Basically a surety bond is an understanding by an independent third party to owner that contractor will perform according to the terms and conditions laid down in the contract. Hence, a surety bond is a three-party contract. |
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Although the contractor pays the premium on the surety bond, he is not the beneficiary of the bond. The beneficiary of the bond will the owner for home the contractor is working or performing. This bond is irrevocable and non-cancellable. If the contractor is not able to fulfill his promise, the owner of the bond can recover the money from the contractor. However, there is a credit risk especially if the owner is not able to recover the funds from the contractor.
Many banks allow surety bond deposits as alternatives to cash deposits. Surety bonds are basically issued by insurance companies and the bonds have to be issued on the account owner’s name and the amount covered by the bond should be equivalent to the account owner’s full service deposit requirement. The surety bond makes the insurance company liable for payment in case of default on any utility bills by the customer acquiring the surety bond. If the person requires additional money, then the original bond is amended to reflect the required coverage amount. On an annual basis the insurance company is sent a letter of confirmation to ensure that the coverage is continuous and is not stopped in abruptly.
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