# Opening a lump sum savings account with Anglo



## Warren (4 Sep 2010)

Hi,

I've got a good sum (approx 30k) that I've built up in a regular savers account over the past few years. My personal situation has changed now and I can now longer save monthly so Im going to close the regular savings account and move into a 1 year fixed account. Anglo have a good 1 year fixed rate at the moment so Im planning to open a new account with them. I understand my money will be safe under the Deposit Guarantee scheme but is there any reason why I shouldnt consider Anglo for the year? From what I've been reading in the media it appears that the likelihood of Anglo being wound up is pretty remote?

Thanks,
Warren


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## Lightning (4 Sep 2010)

Warren, there are plenty of other 'safer' options with good returns, such as the EBS offerings ...



> *5 Months* - EBS - *3.64%*
> *1 Year* - Irish Nationwide and Anglo Irish Bank - *3.50%* or Permanent TSB - *3.46%*
> *1 Year 3 months* - EBS - *3.50%*


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## skrooge (4 Sep 2010)

I don't really see any issue that the (orderly) winding down of Anglo might have.  Apart from the slight hassle of having to find a new home for your money there should not be any cost involved.  The winding down of Anglo would surely take a simialr form as what happened with Halifax.   There would be an announcement that no new deposits would be taken and that existing demand deposits would have to be withdrawn before a certain date while fixed deposits would continue til maturity. 

I think some people are confusing a winding down with a banking collapse.. lets not forget that horse has bolted from the anglo stable already.


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## Palerider (4 Sep 2010)

I agree, if it suits you to deposit with Anglo then do so, I have a one year fixed maturing next February with Anglo and whilst it is entirely normal to fret and worry about all the negative news the reality is that your funds are safe and are fully guaranteed, if Anglo is wound down then the process as outlined in the previous post is the logical process.


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## Lightning (4 Sep 2010)

skrooge said:


> Apart from the slight hassle of having to find a new home for your money there should not be any cost involved.  The winding down of Anglo would surely take a simialr form as what happened with Halifax.




Disagree, it will not be as simple as the Halifax closure. There are *24 billion* in deposits on the Anglo balance sheet that have to be paid back by the state if Anglo do a 'halifax style' closure. 

There is not a corresponding 24 billion in liquid cash form on the Anglo balance sheet. The government simply can't pay this back to deposit holders in the morning. The NTMA does not have the funds to do this. 

Hence, a good/bad bank split or a gradual closure of their deposit base, as they sell their assets, is more likely. 

Either way, Anglo is far from the safest option for your deposits nor do they offer the highest rates for most EUR deposit products.


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## skrooge (4 Sep 2010)

CiaranT said:


> Disagree, it will not be as simple as the Halifax closure. There are *24 billion* in deposits on the Anglo balance sheet that have to be paid back by the state if Anglo do a 'halifax style' closure.
> 
> There is not a corresponding 24 billion in liquid cash form on the Anglo balance sheet. The government simply can't pay this back to deposit holders in the morning. The NTMA does not have the funds to do this.
> 
> ...


 
My point was from the perspective of an account holder. A good bank/bad split or whatever strategy should not effect the deposit holder. The key points are surely if Anglo is to be wound down it would have to first stop taking new deposits and secondly either continue to maintain legacy accounts (fixed rate accounts) or sell them off to another bank. The Government, as ultimate owners of Anglo, would face a serious credibility issue if it failed to ensure that depositors recieve their money. The Government Guarantee would not be worth a damn. You'd quickly see a run on the other banks - if the Governemnt can't look after its own bank what change the other banks that are dependant on the guarantee for funding. I think international investors and ratings agency would take an equally dim view.

I'm not suggesting that orderly wind down would be painfree for the state (or indeed taxpayers) but in order for the Government to be credibile deposits in Anglo have to be safe.


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## Lightning (4 Sep 2010)

Sure, agreed, the state does not want to hit depositor's. My point is regarding the Anglo deposit exit strategy.

Specifically, my point is simply that the state does not have 24 billion to repay all the Anglo depositor's. There is nothing left in Anglo to repo out to the ECB, there isn't 24 billion in liquid assets on the Anglo balance sheet and the NTMA does not have 24 billion in reserves. 

The state might be able to borrow another 24 billion on a 5.7% coupon from international investor's. But this is not a practical option. 

The state cannot adopt a Halifax style 'get your money out of the bank by X date' strategy. The state will have to adopt a 'let's keep as many depositor's as possible' via some good/bad bank split strategy or 'existing customer deposits only' strategy or some other strategy that prevents the immediate exit of 24 billion in deposits.


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## skrooge (5 Sep 2010)

CiaranT said:


> Sure, agreed, the state does not want to hit depositor's. My point is regarding the Anglo deposit exit strategy.
> 
> Specifically, my point is simply that the state does not have 24 billion to repay all the Anglo depositor's. There is nothing left in Anglo to repo out to the ECB, there isn't 24 billion in liquid assets on the Anglo balance sheet and the NTMA does not have 24 billion in reserves.
> 
> ...


 

You sum up the catch 22 situation well. It points to Anglo having to continue offer reasonbly (open to interpretation) competitative rates for the time being while facing the prospect of not really being able to pay for it.  Good/bad bank split would be interesting as you say theres not much left thats good.  Given that the Government is involved in all the banks and the pressure on the Government to put Anglo out of its misery the selling the deposits to other banks at a discount might mimimise the costs of a run while also improving the funding position of the other banks.  I think something similar was done with Bradford and Bingley.


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## Wig (5 Sep 2010)

Right, that does it, I am taking my 200k deposit out of Anglo tomorrow. 

Irish state guarantee or no state guarantee, there is too much uncertainty over Anglo and the solvency of the Irish state, to hold deposits with them.


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## Lightning (5 Sep 2010)

From reading the paper's today, it seems that a good/bad bank split is not going to happen. It is going to be am Anglo wind down over 7-10 years. 

So what will happen to Anglo's depositor's? 

1) Halifax style deposit exit --> Not possible, as discussed above. 
2) Service existing deposit customers only for X years and stop new deposits ???
3) Allow Anglo to continue to take new deposits for X years then stop ???
4) As mentioned above, a sale of Anglo's deposit book. This will be difficult. The Anglo deposit book is full of deposits at unsustainable rates. Particularly, their Isle of Man deposit book has some of the highest USD and GBP deposit rates in the world. Who would want to acquire a bunch of fickle rate chasing deposit holders who are been paid unsustainable rates?


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## skrooge (5 Sep 2010)

CiaranT said:


> From reading the paper's today, it seems that a good/bad bank split is not going to happen. It is going to be am Anglo wind down over 7-10 years.
> 
> So what will happen to Anglo's depositor's?
> 
> ...


 

Your arguments are valid over the short term but if we're talking about 7-10 year horizon its possible that the Government might consider this in the hopes that the economy should have recovered by then (playing devils advocate slightly but would you really be suprised!!). 

As for who would buy them I think alot of the other Irish banks would have an interest. Irish banks have lent a lot relative to their deposit base and this is going to be a key ratio in the future. There was a short lived hike in deposit rates about 2 years ago as they tried to bump up their deposit base. It wasn't sustainable and only resulted in banks paying more for the same. A different approach would be to buy a deposit book.

Fair point about the cost of the deposits, I couldn't see anything in Anglo's account about the average rate paid but it would be interesting to compare this rate to other banks. Right now I'd say most deposits with Irish banks are sensative to bad news.

As for fickle rate chasing deposit holders I blame those comparison websites with their fancy best buys and the people who use them....oh wait!


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## Lightning (5 Sep 2010)

Sure, the loan to deposit ratios are well above 100% for Irish banks and they need to bring them down. IL&P have a 240% loan to deposit ratio, for example. That is a reason to think that IL&P or the like will acquire the dwindling deposit book of Anglo. 

However, no bank wanted to acquire the PostBank or the Halifax deposit book, but yet the Anglo deposit book is a disastrous mismatch of unsustainable offshore Isle of Man GBP & USD rates and high domestic EUR rates. 

I mean, does IL&P want an offshore deposit presence like Anglo has? Does anyone?



skrooge said:


> As for fickle rate chasing deposit holders I blame those comparison websites with their fancy best buys and the people who use them....oh wait!



Nothing wrong with consumers that look for a good return for their money ...  It is just bad for banks that are forced to offer these high rates  



skrooge said:


> Right now I'd say most deposits with Irish banks are sensative to bad news.



For sure, the news over the last few weeks in particular has had to have hit their deposit base.


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## Lightning (8 Sep 2010)

So, based on today's announcement, it appears that Anglo will continue to take deposits in the IOM and ROI. 

That stop's the government having to pay back 24 billion to deposit holders or postpones the problem for a while.


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## theresa1 (8 Sep 2010)

The Government need all the money they can get - be nice if they would do some DIRT free a/c's. If they handle it well they could see alot of deposits go in again but then they wouldnt be going into AIB,BOI etc. and maybe strange thing's might happen people will feel alot safer going with Anglo and the other bank's may come under even more pressure.


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## Lightning (8 Sep 2010)

Nah, they can't do that. Competition. 

They still have to persuade the EC that the deposit 'bank' is not distorting competition. I wrote a piece, a while ago and sent it to José Manuel Barroso in the EC on how Anglo Isle of Man are seriously distorting deposit competition. 

The EC have not yet fully approved the Anglo plan. I get the sense that there will be conditions attached to the deposit bank to prevent the ongoing crazy Anglo IOM deposit rates.


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## Warren (11 Sep 2010)

thanks for all your replies guys. I went for National Irish Bank and their 3.5% rate om the end. All the permutations above just lead to too much uncertainty and I just dont need the hassle of thinking about it all


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## Lightning (11 Sep 2010)

NIB do not pay 3.5% on any of their deposit products. 

Did you go for NIB eSaver? That pays 3% in months where there is no withdraw.


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