Are Our Savings Safe

[Watcher2]

Hi,

Do you think our deposit savings are safe? Simple question and it goes to the heart of whether this state can afford the deposit gurantee if it ever needed to be called in. Say for instance the IMF had mto come in here, which at this stage is not beyond the realms of possibilities. Since our banks are costing so much, is it inconceivable that the IMF, as part of its set of conditions, required the banks to write off X% of deposits held. This would then surely require the bank guarantee to kick in. Does the government have the resources to make good those guarantees? I suspect not.

What do you think?

 

[HarshBuzz]

read this

and, no, I don't think our savings are 'safe'

in increasing order of safety:

1. Irish bank deposits
2. Other bank deposits domiciled in Ireland (e.g. rabodirect)
3. EUR bank deposits in core Eurozone states
4. Gold

personally, I'm in (3). I've moved all my cash out of Irish-domiciled accounts.

 

[DCon]

In a word, no.

The great and the good have all moved their deposits offshore in the past year (see bank recapitalisations). If and when the smelly stuff hits the moving ventilation machine, the not so great and good might be left with a problem.

There is also the slight concern that the euro could break up/euro 2 be announced for the PIIGS or Ireland kicked out of the euro. Any of these happen and your nice euro deposits will be reclassified in punt nua, euro 2's or punt nua.

 

[Interista]

If I'm not mistaken, in one of the best known examples of recent IMF intervention - in Argentina after the crash - deposits were safe. They did lose value because the previous dollar peg was dropped and the Argentine currency plummetted, but afaik they were not lost, though strict withdrawal limits were imposed.

Another point here is that it's unlikely the ECB would allow the depositors of a Eurozone country to lose out in this manner. THis isn't due to altruism, but because they know that if Irish savers were to lose their savings, there would be an immediate run on the banks in the other PIIGS. Ireland is small enough that the ECB could step in to guarantee the savings if the worst came to the worst.

Or perhaps this is all wishful thinking from someone who has quite a lot of dough in Irish banks...

 

[HarshBuzz]

Or perhaps this is all wishful thinking from someone who has quite a lot of dough in Irish banks...

confirmation bias

those Argies you speak of lost almost everything when the peg was removed

 

[Interista]

those Argies you speak of lost almost everything when the peg was removed

Yes, but such a situation would only happen here if Ireland withdrew from or were forced out of the Euro. Despite what some people say, I can't see this happening in the near future.

 

[PrinceMax]

Ulster Bank is safe enough, surely? Is it easy to get a EURO account in another EU state?

 

[Interista]

Ulster Bank is safe enough, surely? Is it easy to get a EURO account in another EU state?

I thought Ulster Bank in the RofI was registered as an Irish bank?

 

[Watcher2]

In a word, no.

The great and the good have all moved their deposits offshore in the past year (see bank recapitalisations). If and when the smelly stuff hits the moving ventilation machine, the not so great and good might be left with a problem.

There is also the slight concern that the euro could break up/euro 2 be announced for the PIIGS or Ireland kicked out of the euro. Any of these happen and your nice euro deposits will be reclassified in punt nua, euro 2's or punt nua.

Well, on a selfish note (which drove the post in the first place) I have quite a few sheckles I'm glad to say, squirelled away, however, my debts (mortgage) exceed my savings. So if the worst came to the worst, being denominated in a second class currency, I wouldn't lose anything, would I, since my mortgage would be denominated in the second class currency as well.

Is that thinking correct?

 

[Squire Allworthy]

confirmation bias

those Argies you speak of lost almost everything when the peg was removed

The currency was originally pegged to the dollar. There was a run on the banks so the government basically froze all accounts for 12 months. Then there was "peso-ification". All bank accounts denominated in dollars were converted to pesos at the official rate. The peso fell in value to about 4 to the dollar.

So a lot of people lost the bulk of their savings.

Why place trust in any government.

 

[Libero]

If I'm not mistaken, in one of the best known examples of recent IMF intervention - in Argentina after the crash - deposits were safe. They did lose value because the previous dollar peg was dropped and the Argentine currency plummetted, but afaik they were not lost, though strict withdrawal limits were imposed

Argentine deposits in the local currency, the peso, were safe - although the peso itself fell in value against other currencies.

Many Argentines had savings in local banks in foreign currency, principally the US Dollar. A great deal of these savings were subject to forced conversion into pesos, leaving those depositors poorer.

In later years, the Argentine government issued special bonds to compensate for the effects of that forced conversion... to the banks involved!

in increasing order of safety:

1. Irish bank deposits
2. Other bank deposits domiciled in Ireland (e.g. rabodirect)
3. EUR bank deposits in core Eurozone states
4. Gold

I'm not sure Rabodirect bank deposits can be said to be "domiciled" in Ireland. They operate in Ireland through a local branch of the Dutch bank, and the deposit liability to Irish depositors is accounted for in that Dutch bank's books just as if the depositors were Dutch or French or whatever. (This is different from, say, Ulster Bank, which is a bank licenced in Ireland and not a local branch of a UK bank.)
No matter how much I wrack my brains, I can't see how any Irish government could lay it's hands on that cash, not unless the EU decides to suddenly junk the entire foundation of cross-border banking in Europe (with resultant dire consequences for commerce in general).

Don't forget the option of opening an account with a brokerage in the UK or on the continent and buying core Eurozone government bonds. German bunds offer a decent fixed rate along with the best government guarantee in the eurozone. (Although once you sell, you'll have to nominate a bank account to receive the proceeds!)

Holdings of gold are subject to volatility in the commodity price, and can be difficult to liquidate quickly, at least compared to a foreign bank account where a withdrawal is available from your nearest ATM.
Correction: nearest functioning ATM.

 

[Sariel]

Hi,

Do you think our deposit savings are safe? Simple question and it goes to the heart of whether this state can afford the deposit gurantee if it ever needed to be called in. Say for instance the IMF had mto come in here, which at this stage is not beyond the realms of possibilities. Since our banks are costing so much, is it inconceivable that the IMF, as part of its set of conditions, required the banks to write off X% of deposits held. This would then surely require the bank guarantee to kick in. Does the government have the resources to make good those guarantees? I suspect not.

What do you think?

No, there is no credible deposit insurance anywhere in Europe since the introduction of the euro. Don't take this as investment advice but if you are worried try putting it into sovereign countries that issue their own currencies such as Switzerland, Britain or the US but beware of countries that have hugh external obligations in a foreign currency e.g. Iceland/Latvia etc.

If it came to the push the government cannot honour the deposits because they do not issue their own freely floating non-convertible currency. It is ok at present but if Axel Weber takes over the running of the ECB, the euro problems will definitely resurface with his musings.

 

[PrinceMax]

I thought Ulster Bank in the RofI was registered as an Irish bank?

Probably, but would RBS not take the hit, to avoid scaring their own savers in the UK?

Anyway, surely Ulster Bank is in a better financial position than the AIB and BoI?

 

[Interista]

if you are worried try putting it into sovereign countries that issue their own currencies such as Switzerland, Britain or the US

But your deposits are only as valuable as the currency you deposit them in. In the case of the British pound or the US dollar, you risk losing quite a lot of value in your deposits due to the fact that these currencies are falling, and it seems that they will continue to do so. I have heard that investing in Norwegian kronur is a good idea, but I'm not sure how easy it is for non-residents to open bank accounts in Norway, especially as it's not even an EU member.

libero

Many Argentines had savings in local banks in foreign currency, principally the US Dollar. A great deal of these savings were subject to forced conversion into pesos, leaving those depositors poorer.

Sure, but as I said, a similar situaion would only happen here if Ireland left or were forced out of the Euro. That's not the same scenario discussed in the OP.

 

[PrinceMax]

But your deposits are only as valuable as the currency you deposit them in. In the case of the British pound or the US dollar, you risk losing quite a lot of value in your deposits due to the fact that these currencies are falling, and it seems that they will continue to do so. I have heard that investing in Norwegian kronur is a good idea, but I'm not sure how easy it is for non-residents to open bank accounts in Norway, especially as it's not even an EU member.

Yeah, you can't open a Norwegian bank account unless you're living there. I looked into it. So I guess if you really wanted to do it you could move there for a few months.

 

[Interista]

Yeah, you can't open a Norwegian bank account unless you're living there. I looked into it. So I guess if you really wanted to do it you could move there for a few months.

I doubt simply being in Norway would be enough to gain resident status. I'd imagine in order to open a bank account there you'd have to produce the same documents you do in order to open one here: PRSI number, proof of address etc. Also, given how horrifically expensive Norway is, hanging around for a few months would quickly cut through all those kronur you were planning to deposit in an account!

 

[Watcher2]

Thanks everyone, it sounds like no one here has any faith in the bank guarantee or the Irish banks.

I'm not saying thats good or bad, just making the point.

 

[PrinceMax]

I doubt simply being in Norway would be enough to gain resident status. I'd imagine in order to open a bank account there you'd have to produce the same documents you do in order to open one here: PRSI number, proof of address etc. Also, given how horrifically expensive Norway is, hanging around for a few months would quickly cut through all those kronur you were planning to deposit in an account!

Ah yeah, you have to have all that information, but as EU/EEA citizens we're entitled to work there so we can register to get all that.

 

[Interista]

Ah yeah, you have to have all that information, but as EU/EEA citizens we're entitled to work there so we can register to get all that.

How can you get a social security number if you're not paying any (hefty Norwegian) taxes? How can you provide proof of domicile if you're not domiciled?

 

[adrem]

Don't mind these hacks !! Most of the comments are (surprise surprise) from a political stand point (well you did pose your question on Politics.ie after all !!)

Watcher2 - Irish bank deposits are safe. Simple as that.

Just for info - no-one lost a deposit in Greece, or in the UK or in Germany or in Sweden or in Denmark - all countries that have had economic/banking crises and collapses of some shape or form.