# Irish Nationwide and deposit guarantees



## Chris (20 Apr 2010)

kaplan said:


> The deposit guarantee scheme does not expire next September - retail deposits including share accounts will continue to be protected up to 100k.
> 
> Brendan, you once said that the limit of 90% max €20k was sufficient - do you still hold this contrarian view?
> 
> K



I actually think that there should be no deposit guarantee at all. This would force banks to act more prudently, as potential depositors would look for banks with highest reserves to meet deposits. As a depositor you would have the choice of higher interest for lower reserves (i.e. higher risk) or lower/no interest for high/100% reserves and low risk.
Between deposit gurantees, intervening in bank runs and bailouts, banks have no real threat of actual insolvency/bankruptcy, which is a major moral hazard. No amount of new regulations will change that, and banks will go straight back to their old games.


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## Chris (20 Apr 2010)

kaplan said:


> Chris
> 
> There is a point of view that argues for no guarantees at all - but this is largely defunct - theoretically it's possible but expecting ordinary people to judge the safety of banks is not a runner in the real world. Which is why deposit insurance / guarantees exist- the jury is out on how these should be priced - riskier banks should have to pay more for coverage and say so - thus letting people know they are considered high risk.
> 
> K



I see your point but I do not believe that the view is defunct. People need to take more responsibility, especially for their own financial matters. As I stated above, if people wanted absolute safety of deposit, they would choose a bank that holds 100% reserves. Currently there are no such banks (not that I'm aware of), as people do not have to worry about the safety of their bank. 
Don't want to stray too much off topic here, but want to reiterate that the curent financial mess is merely a symptom of the desease that is the global monetary system. Regulations and guarantees are not doing anything about the desease.


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## mcaul (20 Apr 2010)

Here's the way Irish Nationwide did business for many years.

Customer: Hi, I'm looking for a loan, Joe Blogss told me to give you a call.

INBS Person: Drop over and we'll discuss it. Don't forget the envelope. (Told £500 was standard fee)

Customer arrives, quick chat, hands over envelope, loan approval arrives next day.



Not a myth  - that's how I bought my first home!


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## Duke of Marmalade (20 Apr 2010)

kaplan said:


> Brendan, you once said that the limit of 90% max €20k was sufficient - do you still hold this contrarian view?
> 
> K


You want a contrarian view, try this. The first 20K of a Building Society account should be regarded as equity and therefore fair game, the balance should be regarded as funding and treated the same as any other bank deposit. 

My argument? Like me, I suspect the vast majority of small account holders in INBS in September 08 were carpetbaggers. Thought I was sure for a 10K windfall at some stage for my share in the "equity" of the society. Well the society went belly up and so too should my little carpetbag just like my AIB shares. Now anybody who had more than 20K in an account was clearly more than just a carpetbeggar.


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## Complainer (20 Apr 2010)

Duke of Marmalade said:


> You want a contrarian view, try this. The first 20K of a Building Society account should be regarded as equity and therefore fair game, the balance should be regarded as funding and treated the same as any other bank deposit.


You can't make a change like this retrospectively. 

On a separate issue, I'm a bit confused by this quote from the Directors Report;



> On 3rd February 2010, the Society and its Isle of Man subsidiary, Irish Nationwide (IOM) Ltd,, became participating institutions in the Credit Institutions (Eligible Liabilities Guarantee) Scheme 2009


Was INBS not covered by this scheme long before Feb 2010? Why would the State be taking the additional liabilities for IOM transactions, which by definition, relate to non-residents?


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## kaplan (20 Apr 2010)

@ Duke: I suggest you read the building society and deposit guarantee legislation along with EC banking directives - I think you will find building society deposits and share accounts are not considered as "equity". Your view is plainly wrong. 

Carpetbaggers and dominant managers are know to have colluded to convert mutual capital for their personal benefit. Vocal supporters of demutualisation unwittingly play into the hands of dominant managers and their boards. INBS is a classic example of this phenomena.

There's a good example of carpetbagging thinking : Wonder if Brendan would care to comment on his active online promotion of demutualisation which dosen't appear to have considered the risks being run by INBS? 

_*"Could the Irish Nationwide be broken up instead of being sold?* _
_At the end of 2006, the break-up value of the Irish Nationwide according to the accounts was €1.2b. That is if they collected all the loans outstanding and repaid all the borrowers, they would have €1.2b left over. This year, they are rumoured to have made another .3b in after tax profits, so the break-up value is €1.5b. The bidders are offering around €1.1b. _

_So here is a suggestion. _

_Convert it immediately into a plc without seeking a quotation. The share account holders would then have shares which they could sell on a grey market or pass on. _

_Then start winding it down. Stop making new loans. The bulk of the loans are short term property development plays. Collect these in as they mature. Don't replace the staff. Most will leave anyway as soon as they get their shares for better paid jobs elsewhere. _

_The company will have lots of cash which it can use to pay out special dividiends. Eventually, it will sell its mortgage book which is quite small anyway._

_That way the share account holders would get €1.5b rather than the rumoured €1.1b which is currently on offer._

_Brendan (01/01/2008)_


Kaplan


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## Duke of Marmalade (21 Apr 2010)

_Kaplan_,  I was being provocative.  Of course, a share deposit is not technically equity.  But on the moral scale those, including myself, who where in for a quick and easy buck deserved to get toasted when they were proved wrong.


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## Chris (17 Jun 2010)

Truthbetold said:


> Not having a guarantee at all, what a great way to wreck the public's confidence in the banking system they already have little faith in! It would be suicide for the banking/financial sector and the government to remove it!  If they did, we'd go back to money under the bed, and then where would we be? Lost that's where



That's exactly the point, the public should have zreo confidence in the banking system. What kind of shaky business system is built on government protecting companies that are permanently insolvent. There is not a single bank operating under the fractional reserve system that would withstand a bank run without government intervention.
Banks messed up, they should be out of business and replaced by new banks.


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