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Gov Increases Deposit Guarantee Limit to €100k per depositor

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Posted at 1pm, server time issued announced in Dev & Ed section today (see here)

The Government has decided to increase the statutory limit for the deposit guarantee scheme for banks and building societies from €20,000 to €100,000 per depositor. The cover will apply to 100% of each individual’s deposit. This guarantee level will also apply to credit union savers.

Announcing the decision, the Minister for Finance, Brian Lenihan TD, said “I want it to be known that the Government is confident about the strength and resilience of the Irish financial system. The Government is committed to the stability of our financial system, so that money placed with an Irish credit institution would not be at risk. As I said yesterday, the Irish Government wants to protect the whole financial system, secure its stability and ensure that all deposits in Irish banks are safe.”

The Minister added “the Central Bank and Financial Regulator have stressed the soundness and stability of the Irish financial system. This measure provides additional reassurance to depositors in Ireland that their savings are safe. The new guarantee level is now among the highest in the EU.”

The Minister also commented that notwithstanding the uncertainty caused by the turbulence in international financial markets over the last week, it is encouraging that the banks have retained the confidence of their customers.

This measure has been under consideration for some time, and the Minister believes that this is the appropriate time to make the announcement.
 


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Legal basis to the Deposit Protection Scheme

The legal basis for the Deposit Protection Scheme in Ireland is the European Communities (Deposit Guarantee Schemes) Regulations, 1995. These Regulations implemented the European Union Directive on Deposit Guarantee Schemes (94/19/EC). The Irish regulations were amended in 1999 to provide for a maximum compensation of €20,000.

Legislation

Legislation will be introduced shortly by the Minister to implement the new guarantee level but this new level will have affect from today following the Government’s decision.

EU Guarantee Levels

The single largest number of EU Member States currently have guarantee thresholds of €20,000 – Austria, Belgium, Cyprus, Germany, Greece, Ireland, Luxembourg, Malta, Slovakia, Spain. Other States have thresholds variously in excess of this – e.g. Finland and Portugal €25,000, Netherlands €38,000, Denmark €40,300, UK €48,500 euro equivalent of £35,000) and Italy €103,000.

EU Review

Ireland is participating in the ongoing review of the EU Deposit Guarantee Schemes Directive. This review includes consideration of the minimum level of the EU guarantee but also focus on wider policy areas such as co-insurance requirements (under which depositors bore 10% of losses which is being abolished for the Irish scheme) improving the speed of payouts, better depositor information, the case for gross rather than net compensation (as at present) and cross-border interoperability of schemes. It is expected that the conclusions of this review will be reached by end-year. In the context of the conclusions of the EU review, any further changes required in the Irish Deposit Guarantee Scheme will be progressed to ensure that savers in Ireland benefit from safeguards in line with EU best practice.

Funding of the Deposit Guarantee Scheme

The level of contribution required from each credit institution is 0.2% of eligible deposits held at all branches of the credit institution in the EEA, including deposits on current accounts and share accounts with a building society, but excluding interbank deposits and deposits represented by negotiable certificates of deposit. A minimum contribution of €25,400 is required. Each contribution is maintained in a Deposit Protection Account at the CBFSAI. As of 2007, the total amount held in Deposit Protection Accounts was €526 million.

Appropriate, mechanisms will also be put in place, in consultation with the financial institutions to increase the level of funds in the Deposit Protection Accounts over time but in the interim, the existing system provides for the availability of additional funds from the CBFSAI if required.

Coverage of the Deposit Protection Scheme

The Deposit Protection Scheme currently covers:

• current accounts;

• demand deposit accounts;

• term deposit accounts; and

• share accounts with building societies (other than shares which fall within the definition of own funds)

held with banks, building societies and other types of deposit-taking institutions (other than credit unions) regulated by the Financial Regulator. It is now being extended to include share and deposit accounts in credit unions.

EU Branches

Deposits with credit institutions authorised in another European Economic Area (EEA) country and operating in Ireland on a branch basis are covered under that country's system.

Credit Unions

The Irish League of Credit Unions (ILCU) has since 1989, operated on an all-island basis a savings protection scheme (SPS) for credit unions. The SPS has, to date, operated by providing financial support to credit unions that get into difficulty and it has never been necessary to make savings protection payments to individual credit union members. Under the SPS regime no credit union has become insolvent and no member of a credit union has experienced any loss of shares or deposits. The Registrar of Credit Unions in the Financial Regulator is working closely with ILCU to approve a reform to SPS. It is expected that these discussions would conclude shortly.

It is intended that the guarantee that has now been announced for credit institution savers would act as a backstop to an approved SPS scheme for credit unions.

Operation of the DGS

The Deposit Protection Scheme in Ireland is administered by the Central Bank and Financial Services Authority of Ireland (CBFSAI).

Other compensation schemes

The Minister will be requesting the views of consumer interests, industry and other stakeholders regarding the implications of the announcement for investor compensation levels and the case for introducing an insurance guarantee scheme for the life sector.

Further Information

Further information on the Deposit Protection Scheme in Ireland can be found at the Financial Regulators consumer information website http://www.itsyourmoney.ie (this will be updated shortly to reflect the increased guarantee level).
 

Helium Three

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where is youngdan when he is needed?
 

constitutionus

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knew it would happen but the timing makes it look like the gov is shite scared of a run on the banks.

particulary as leniahan said he wouldnt do anything till january, so there mustve been REAL conscern from the ol biddies legging it to the post office.

long term though its good news. certainly it'll stop people stuffing their cash in foreign banks with higher coverage rates, in this day where liquididty is king that'll help no end.

and the credit unions TOO. wasnt expceting that :)

be fun to see how this is recieved. personally i think it'll work out ok and better to bite the bullet now than wait till a major builder defaults
 

Harpo

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This is an absolute disgrace! The government just doing whatever big business tell them to as usual. I can understand a guurantee of up to €30,000 say to protect the vurnerable but that is designed to protect the deposits of the rich.

As far as I'm concerned at least one bank should be nationalised and if people want guarantees they can put their money there.
 

constitutionus

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as another poster said

"safe as houses" :mrgreen:
 

SPN

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lowtaxireland said:
irish banks are fine.
Another couple of days of deposit withdrawals like we saw Thursday and Friday and they wouldn't be.
 

CookieMonster

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digoutday said:
so, if a bank goes tits-up then the taxpayer gets screwed? thanks Zanu-FF.
Which they would have anyway to the tune of €30k. This is being done in an effort to avoid a run on the banks so that it won't have to happen.
 

SPN

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CookieMonster said:
digoutday said:
so, if a bank goes tits-up then the taxpayer gets screwed? thanks Zanu-FF.
Which they would have anyway to the tune of €30k. This is being done in an effort to avoid a run on the banks so that it won't have to happen.
...... until later than it would otherwise.
 

YukonTom

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eddie hobs soaid on the late late show last night that one irish bank would fail , he knows which one but he wasnt telling us as he said he had to be responsible, everybody is talking about it today. could we have queues at the bank on monday morning?
 

greengoose

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Thanjk God for taxpayers. Who else is there to bail out those moneygrabbers? This will come back to bite Lenehan in the ar$e.
 

CookieMonster

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digoutday said:
CookieMonster said:
Which they would have anyway to the tune of €30k. This is being done in an effort to avoid a run on the banks so that it won't have to happen.
its was 20k before, now its 100k, they have increased the exposure of the irish tax payer by a factor of 5. This is a stupid move.
Many of those taxpayers are the ones with the deposits.
 

constitutionus

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digoutday said:
CookieMonster said:
Which they would have anyway to the tune of €30k. This is being done in an effort to avoid a run on the banks so that it won't have to happen.
its was 20k before, now its 100k, they have increased the exposure of the irish tax payer by a factor of 5. This is a stupid move.

actually digout the banks have to contribute to a fund on this so its only if the LOT of em go tits up that the taxpayer would be royally screwed .
 

SPN

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CookieMonster said:
digoutday said:
CookieMonster said:
Which they would have anyway to the tune of €30k. This is being done in an effort to avoid a run on the banks so that it won't have to happen.
its was 20k before, now its 100k, they have increased the exposure of the irish tax payer by a factor of 5. This is a stupid move.
Many of those taxpayers are the ones with the deposits.
Yah, but this allows the Banks to make off with our deposits, and we will pay ourselves back our own money.

Totally barmy! :roll:
 


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