PUBLIC AWARENESS OF DEPOSIT INSURANCE AND INVESTOR COMPENSATION SCHEMES IN BULGARIA

Abstract

The purpose of deposit insurance and investor compensation schemes is to protect the clients of banks and investment intermediaries by providing compensation in the case of unavailability of clients’ deposits or assets. Generally, knowledge about the activities of both schemes is rather limited by the public. This is observed not only in developing countries, but also in the developed ones. This problem is called public awareness. The paper investigates the public awareness of the main components of the financial safety net in Bulgaria – the deposit insurance scheme and investor compensation scheme - based on a random distribution of a questionnaire among 232 people. The investigation is not considered as being representative but it indicates tendencies in the public awareness of both schemes in Bulgaria. The analysis in the paper is focused on the questions regarding the main activities of the deposit insurance and investor compensation schemes as well as the amount of guarantee, scope of both schemes, compensations payments events, the behavior of depositors and investors in cases of trouble events, etc. The survey shows that in terms of the deposit insurance the awareness of participants is above average, while regarding investor compensation, the results are well below average, one could even say that such awareness is lacking at all. The results of the survey provide information that the efforts of the regulators and financial safety net schemes should be directed to increasing the awareness of depositors and investors in Bulgaria about the benefits and limitations of both schemes.