Irish Bank solvency?

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Autotroph

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Hi all, I just read an article about bank solvency. It relates to the dangers associated with the increased exposure to the construction over the past few years... surprise surprise. Anyone have information on how safe are our deposits/investments with irish banks? Autotroph!
 
Check out the credit/financial ratings of the various institutions based or operating in Ireland.
 
Also check the requirements of the Capital Adequacy Act / Regulations which govern financial institutions
 
Autotroph said:
Hi all, I just read an article about bank solvency. It relates to the dangers associated with the increased exposure to the construction over the past few years... surprise surprise. Anyone have information on how safe are our deposits/investments with irish banks? Autotroph!
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Couple of things - rating, reliance on funding other than customer deposits - e.g. interbank lending, term debt issuance
the maturity profile of this funding is also important e.g. >1y year
 
While solvency is clearly important for banks (as it is for any type of business) its liquidity that you really should be interested in. Banking is a confidence trick. Banks borrow money from you the depositer (liabilites) and use this to make loans (assets). Banks keep a small amount of money sitting around to pay out to you and me when we come looking for it but in order to make money (and pay us interest) they have to use this money to make money (loans). So for normal day to day activites they have enough money sitting around to pay us. However, if we all come running at the same time no bank would have enough funds there to pay out. So at any one time theres enough money for you and me but not every one. Look at the northern rock case.

Its like if a bill arrives today and I don't have any money at the moment but I get paid next week. I'm illiquid but solvent - if my pay check is great than my bill. If my paycheck is not enough to cover my bill I'm illquid, insolvent and likely to be bankrupt

Solvency only means your assets are greater than you liabilites. So it tells you if you money is safe but it doesn't say anything about how easy it is to get access to your money.

Also banks pay into a deposit protection scheme. Which is designed to cover small savers in the event of a bank collapsing....[broken link removed]

Its not desined to cover all your deposits as afterall you have to take responsibility for your own actions.

The Financial Regulator is responsible for regulating Banks and making sure they are both liquid and solvent
 
ClubMan said:
Check out the credit/financial ratings of the various institutions based or operating in Ireland.
Click to expand...

Because I remember being shafted with Equitable Life; I therefore dont feel much of an improved sense of security from the credit ratings given by organisations such as 'Standard & Poors' etc

'The Equitable' were bragging about the high rating given to them by Standard&Poors (therefore getting more suckers in to buy the with profits policies) not long ( circa 2 months) before it held up it's hands and acknowledged their financial problems which went back for decades.
If the ratings organisations dont actually audit or investigate a company and have no real access to its balance sheet such as with Equitable (or Enron) then how trustworthy is the rating they give when they give it ? :confused:
 
I'm not sure if this is the same article or not but there is a piece by Richard Douthwaite in the March/April 08 issue of Construct Ireland magazine (there's no sign of it on their website yet ) which would certainly make you consider just how stable the Irish banking system is at the moment. There is also a link at the end to a piece by Morgan Kelly, Professor of Economics in UCD which is [broken link removed]. You'll need a PDF reader to read it which you can get for free from www.adobe.com if you haven't got one.

Interesting reading if nothing else.
 
I have nearly all my savings, including a large amount from a house sale, with Permanent TSB. I am not feeling too confident with this anymore considering what is going on in the US credit institutions and the lack of liquidity worldwide. My concern with PTSB is that they seemed to have built their client base primarily on mortgage business whilst offering free banking. Can this business model survive in this climate? Is anybody else having doubts about how safe their savings are right now and has anyone moved money around? I'm thinking of splitting money up and moving to other banks but with only €20k guaranteed in any bank it is impossible to protect it. I would have thought the big two banks, AIB and BoI would be safer havens but I just don't feel confident with any of them anymore. I know no one can give me a definitive answer as no one knows which banks are over exposed and what affect lack of confidence can have on a bank in the face of bad news but the thoughts of others would be interesting. I would like to re-invest a large chunk of the money back into another house but think better value could be had at a later date, although I could regret that if I were to lose the money in a bank meltdown....
 
I know the feeling. Crazy thing is that there is no reassurance forthcoming out there from any of the Banks. I own two Bank properties, subs of a huge UK bank, and for the second time in three months, the rent is late. First times in 12 years. Saying that I think the most liquid of the Irish would be AIB (who I don't bank with), as thedy saw the writing on the wall 2 years ago and stopped careless lending in the property sector. Banks make their profits from lending money - remember this and which of the Gang,(so to speak) are most heavily involved in property lending in Ireland and the UK. Guess ??
 
This is a very interesting topic. My husband and I were discussing this over the past few days when we heard about the Bear Stearns issue.

We have an outstanding mortgage of €84000 and savings of €150000 which was hard earned. We were thinking how sickening it would be if the compensation scheme had to come into play for Irish banks and you lost all but 90% up to a max of €20000. All our eggs in one basket is certainly an issue for us.

Currently we are earning a higher rate ofinterest on the savings than we are paying on the loan but are considering clearing our mortgage and continuing to save the loan amount each month. At least that way if the banks do have problems our house is our own. Like a previous poster said, it is definitely time to spread the investment and look for maximum protection. Should have done it before now I know but we've been lazy.

I always thought that we had little or no money we had problems, now with a few bob in the bank, there are still problems!!

Keeps us on our toes.

Phoenix
 
OverseasCafe said:
I'm not sure if this is the same article or not but there is a piece by Richard Douthwaite in the March/April 08 issue of Construct Ireland magazine (there's no sign of it on their website yet ) which would certainly make you consider just how stable the Irish banking system is at the moment. There is also a link at the end to a piece by Morgan Kelly, Professor of Economics in UCD which is [broken link removed]. You'll need a PDF reader to read it which you can get for free from www.adobe.com if you haven't got one.

Interesting reading if nothing else.
Click to expand...

I saw another article by Morgan Kelly in which he says all Irish banks will be nationalised http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/11/cnirish111.xml. I thought it was a rather reckless piece - yes banks are facing a challenge with the whole subprime issue and a slowing economy but I think some people have gone too far. "Nationalisation" is the word of the day given what happened to Northern Rock but the article was just scaremongering. How many banks in the world have colpased and how many savers have lost there money as a result?? Northern Rock deposited were guranteed and eventually nationalised, some German banks were bought out and Bear Sterns will probablly be bought out as well....The only thing that went bust is Morgan Kellys credibility http://www.independent.ie/business/irish/banking-collapse-economist-was-just-spouting-off-1318359.html

I'm not saying we shouldn't be careful but there are plenty of people out there "spouting off" about things they don't know anything about.
 
recent takeover of bear stearns must have sent shivers to people worried about solvency. purchase price just 1% of the value of the company at beginning of this month. it is hard to comprehend. my understanding of solvency is ones ability to pay its debts as they fell due. as, at least in the past, substantial portion of banks deposits were repayable on demand or short term it would be difficult for any bank to pay out if everyone demanded their money. hence the key word, as previously stated, is confidence and hopefully here in ireland no one will start panicking.
 
Is each a/c in a bank covered or just a maximum amount per customer under the compensation scheme for small savers?
e.g. if I have 5 a/cs all with €20k - does that mean it's all covered, or just €20k regardless?
 
Have you considered state guaranteed alternatives? An Post (No, not Postbank!) & Northern Rock (3 month notification period in the event of any change) come to mind.
 
Is there a likelihood of a bit of a run on Irish banks when they open tomorrow? My confidence is certainly shaken and I will be taking steps tomorrow.

Slim
 
What kind of steps can Joe Public take ? If a move from Bank A to Bank B or C or D might be like playing Russian Roulette. At this point in time, the Central Bank do need to make a Statement - not end of the week, month or quartre . NOW and IMMEDIATELY
 
From the central banks website

[broken link removed]



Not that this report will make any difference if panic sets in.
 
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