# When deposits return to Irish banks - gov actions



## Firefly (29 Nov 2010)

We know that the government has had to borrow to capitalise the banks as a lot of deposits have been withdrawn. I imagine that a lot of these deposits will drip-feed their way back into the Irish banks *if & when* the present situation passes. At that stage, will be government be able to de-capitalise from the banks? How much will they get and more importantly how do we know what it will do with the money?


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## Protocol (29 Nov 2010)

If corporate and other deposits flow back into Irish banks, they will use these new liabilities to reduce their other liabilities, i.e. ECB loans.


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## Firefly (29 Nov 2010)

Protocol said:


> If corporate and other deposits flow back into Irish banks, they will use these new liabilities to reduce their other liabilities, i.e. ECB loans.



That's what IMO should happen, but will the government suddenly find themselves with a stash of cash that can be used for their own political needs?


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## Brendan Burgess (29 Nov 2010)

Hi Firefly

The government has to capitalise the banks to increase their provisions against losses.

The withdrawal of funds is separate from it. The ECB has put in the funds which have been withdrawn. But these are not "capital". When the Irish depositors start putting money back in, then these loans will be repaid to the ECB. 

The capital is permanent. The Irish government won't be able to withdraw it as such. They may be able to sell their shareholding.


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## Sunny (29 Nov 2010)

Firefire, Deposits aren't capital. Capital in the banking sense means equity that is loss absorbing. Deposits, senior bonds etc is simply working capital to the banks that they use for funding. Increasing deposits will simply lead to less reliance on the ECB and capital markets for that working capital. It won't free up money for the Government.


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## Firefly (29 Nov 2010)

Thanks for clarifying that for me. Just thought about the gov having a "che ching" moment in a few months time!


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## mmclo (29 Nov 2010)

But surely if banks improve a levy must be introduced...for about a 100 years!


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