Banks are typically capitalized by a variety of assets, of which cash is typically a small amount.
In addition, the bank typically has its cash holdings distributed at a number of different branches.
Your account at the bank is technically it's liability. Essentially, you've loaned your money to the bank with an option to redeem it at any point in time (demand-deposit account, or checking account) or up to some period of time after asking for it (time-deposit account, or savings account).
So, let's say a bank's branch is robbed of $10,000. What happens? The banks shareholder lose $10,000.
Let's say all the cash and physical assets at a branch is robbed. The bank will typically cover those assets with assets from other branches. The bank's shareholders swallow the losses. Sometimes the bank will sell additional shares, or some of its remaining real assets to help provide it with more liquidity so it can continue to cover funds requests by account holders.
Let's say a bank has all its assets in cash in a single branch location and that location is robbed, meaning the bank now has no assets left. That bank is now bankrupt. It goes to bankruptcy court and you are a creditor. Once the banks remaining assets are sold, you may get a few pennies.
This is a major failing of the existing bitcoin repositories. They aren't banks and so aren't regulated as such. They're just storage lockers where you hide your cash under a mattress. In the event of a theft or fraud... oh well! It'd be interesting to see someone get a bank charter and backup those bitcoin deposits with real capital.
It should be obvious that the above is a gross simplification on my part and the FDIC and modern banking arrangements make things much more complicated when it comes to bank failures. That said, the simplification gets to the original question of what happens without modern banking arrangements.
>Let's say a bank has all its assets in cash in a single branch location and that location is robbed, meaning the bank now has no assets left. //
Governments can and do offer an insurance system whereby they will ensure that customers receive a substantial part of their monies back - this aids against bank runs (where customers panic and all try to withdraw their money as cash and so cause the bank to implode).
Banks are typically capitalized by a variety of assets, of which cash is typically a small amount.
In addition, the bank typically has its cash holdings distributed at a number of different branches.
Your account at the bank is technically it's liability. Essentially, you've loaned your money to the bank with an option to redeem it at any point in time (demand-deposit account, or checking account) or up to some period of time after asking for it (time-deposit account, or savings account).
So, let's say a bank's branch is robbed of $10,000. What happens? The banks shareholder lose $10,000.
Let's say all the cash and physical assets at a branch is robbed. The bank will typically cover those assets with assets from other branches. The bank's shareholders swallow the losses. Sometimes the bank will sell additional shares, or some of its remaining real assets to help provide it with more liquidity so it can continue to cover funds requests by account holders.
Let's say a bank has all its assets in cash in a single branch location and that location is robbed, meaning the bank now has no assets left. That bank is now bankrupt. It goes to bankruptcy court and you are a creditor. Once the banks remaining assets are sold, you may get a few pennies.
This is a major failing of the existing bitcoin repositories. They aren't banks and so aren't regulated as such. They're just storage lockers where you hide your cash under a mattress. In the event of a theft or fraud... oh well! It'd be interesting to see someone get a bank charter and backup those bitcoin deposits with real capital.