# INBS - should we be concerned?



## PetPal (7 Sep 2008)

Just read the leading article in today's Sunday Indo where Reuters have retracted a news article that stated INBS was in trouble.  Although they've retracted and apologised, should we be concerned?  No smoke without fire?  What does everybody think?  I've got a fair amount of money in there.


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## Brendan Burgess (7 Sep 2008)

Irish Nationwide has very strong reserves so it's unlikely to get into liquidity difficulties. 

However, there is no advantage to you in having "a fair amount of money" in the Irish Nationwide when you could have a UK Government guarantee with Northern Rock or triple A rating with Rabobank. 

It's probably worth keeping the minimum amount required to get the windfall - €20,000. 

This also happens to be the maximum amount for the compensation fund. If you have €20,000 on deposit and the Irish Nationwide fails, you will get €18,000 back - you will lose €2,000.  If you have €100,000 on deposit, you will get the maximum which is €20,000 - so you will lose €80,000. (It is argued that the government will have to step in to save depositors, but I would not rely on this.)

What we do know about the Irish Nationwide:
Moody's downgraded it by two notches during the week. Most Irish banks have been downgraded. 
There are only 4 directors which is very bad corporate governance. (It is a complete mystery why the Financial Regulator tolerates this.)
It is, in effect, run by one person, Michael Fingleton, which is a very serious issue of corporate governance as well. 
A large proportion of its lending is to around 40 property developers, all of whom would be facing problems themselves. 

I think Irish Nationwide is strong enough to withstand the difficulties, but as I say, there really is no need to take the risk for amounts in excess of €20,000. 


Brendan


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## z103 (7 Sep 2008)

Isn't this how bank runs start? - Irish Nationwide might very well be in a strong position, but if people get nervous, and start withdrawing funds, there could be problems ahead.
(Incidentally, I remember reading an article a few weeks ago that stated that their wasn't enough money in the compensation fund to cover 90%)


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## Guest106 (7 Sep 2008)

Interesting and informative.  I'll stay with N/Rock.
We shall watch the space with interest.


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## eileen alana (7 Sep 2008)

leghorn said:


> (Incidentally, I remember reading an article a few weeks ago that stated that their wasn't enough money in the compensation fund to cover 90%)


 

I read a similar article it's [broken link removed]


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## Sue Ellen (7 Sep 2008)

eileen alana said:


> I read a similar article it's [broken link removed]



Had a quick look at that article.  How long approx. would reimbursement take in such a situation for a company that did go out of business?


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## rmelly (7 Sep 2008)

> How long approx. would reimbursement take in such a situation for a company that did go out of business?


 
[broken link removed]



> The Central Bank & Financial Services Authority of Ireland (or liquidator, where one has been appointed) is expected to pay compensation to depositors within three months of a determination by the Central Bank & Financial Services Authority of Ireland that deposits are unavailable, or of a ruling by the court (subject to the terms and conditions set out in the Regulations).


 
The fact the fund is a fraction of what it would need to be could extend this?


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## Complainer (7 Sep 2008)

Maybe the rumours will scare some of the carpetbaggers into closing their accounts leaving a bigger slice of the cake for the rest of us?


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## rmelly (7 Sep 2008)

Complainer said:


> Maybe the rumours will scare some of the carpetbaggers into closing their accounts leaving a bigger slice of the cake for the rest of us?


 
But also reducing the value of the cake and it's slices.....?


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## Complainer (7 Sep 2008)

rmelly said:


> But also reducing the value of the cake and it's slices.....?



No. The value of the cake is based on the reserves, not the deposits.


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## rmelly (7 Sep 2008)

Complainer said:


> No. The value of the cake is based on the reserves, not the deposits.


 
Ultimately it would affect both deposits and reserves, ability to borrow, ability to lend etc. Customers deposits don't just sit there, without this money it reduces options and ultimately the value.


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## eileen alana (7 Sep 2008)

The Central Bank are the administrators of this Scheme but it is the government that sets the guarantee, don't they then have a legal obligation to come up with the funds to compensate savers in the unfortunate event of a bank collapse?.


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## coolhandluke (7 Sep 2008)

You can rest assured that everyone would get their max payment (in any eventuality i don't think there's any shorterm risk and i have funds there) one way or another because if they didn't there would be a flight of capital so fast out of the country there wouldn't be a bank left standing. 
As the british found to their cost,when these things go tits up you have to act fast.


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## z109 (7 Sep 2008)

Brendan, what are these reserves composed of? Gilts? Or gilt-edged? The breakdown is important, because, as we can see with the GSEs in America, a proportion of what is considered a strong reserve is not strong at all. TIA.

PS Also have money in INBS!


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## eileen alana (7 Sep 2008)

INBS have notice up on their website reassuring all members that the Societycontinues to be strong and profitable. 
[broken link removed]


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## Bessa (7 Sep 2008)

What else would you expect  them  to say. Moodys have not changed there rating of them. 80% loan base to property etc.  I withdrew funds straight away. I cannot afford to loose money, with them or any other institution, after all us JOE SOAPS will be the last to know what is going on.


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## Bessa (7 Sep 2008)

Oh Reuters have retracted their statement [ was it on a technicality ] but Moodys rating still stands. Which i think is far more important.


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## z109 (7 Sep 2008)

Bessa said:


> Oh Reuters have retracted their statement [ was it on a technicality ] but Moodys rating still stands. Which i think is far more important.


See above, Bessa, the story was false. The source Reuter's were quoting either knows much more than it is possible to verify or were making it up to weaken INBS to gain financially. At this point I believe the latter, whatever one thinks about the longer term viability of INBS as an independent entity.


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## Popemoi111 (8 Sep 2008)

I agree. This story is completely false - see --> [broken link removed].

I can't even access the reuters story anymore because they have completely deleted it for obvious reasons.


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## Inge (8 Sep 2008)

I've some money in a Fixed Account in Irish Nationwide and I'm getting a bit nervous. Reading through the Terms & Conditions, I can't make no head nor tail out of the way they would calculate the penalty if I withdraw my money before time. A x B% x C ?????? Can anybody explain, please?


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## moneyminder (8 Sep 2008)

Its explained below that in the brochure?

A: Amount withdrawn
B: different between prevailing market rate of interest on the account and the rate on the account
C: Number of months remaining in the term


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## Inge (8 Sep 2008)

Thanks for replying, but what is "prevailing market rate"? Is it the ECB? If the penalty is A _times _B% _times_ C months it must mean that I will have to pay _more_ in penalty thatn I have in the account - or is it only me being bad at maths......???


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## Complainer (8 Sep 2008)

rmelly said:


> Ultimately it would affect both deposits and reserves, ability to borrow, ability to lend etc. Customers deposits don't just sit there, without this money it reduces options and ultimately the value.


Ultimately, withdrawals would indeed have an indirect impact on the value of the organisation. However, the reduction in the number of qualifying members would have a direct and immediate affect.


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## moneyminder (9 Sep 2008)

Inge said:


> Thanks for replying, but what is "prevailing market rate"? Is it the ECB? If the penalty is A _times _B% _times_ C months it must mean that I will have to pay _more_ in penalty thatn I have in the account - or is it only me being bad at maths......???


 
You're right it is a bit vague!

I'm _guessing_ its the difference between the current rate offered to a new customer today and the rate you have.  You'll just have to call them to ask what the penalty would be.

For eg. you have €20,000 in a 1 year account that was opened when the rate was 5.2% in say, January. The rate is now 5.6%. That's 0.4% difference. 
You are taking out the 20k now so its 20,000 x 0.4% X 4 (months remaining). Result €320
The interest you would have got (if you had let it in there for the term) nett of DIRT was €832. Your nett interest will be €832-€320=€512

Do let us know if this turns out to be right!!!!


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## Inge (9 Sep 2008)

Thanks Moneyminder! Rang the bank today. Your calculation is absolutely spot on. Less loss than I thought, but I'm NOT taking the money out. Hope that it will show to be the right move...


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## Ollie12 (9 Sep 2008)

Brendan -

Are you sure that a share account in a building society is covered by the government guarantee scheme ??   Could it be technically seen as an equity a/c as opposed to a deposit a/c ?

Thanks


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## eileen alana (9 Sep 2008)

Ollie12 said:


> Brendan -
> 
> Are you sure that a share account in a building society is covered by the government guarantee scheme ?? Could it be technically seen as an equity a/c as opposed to a deposit a/c ?
> 
> Thanks


 
The Financial Regulators website gives a list of what deposits are not eligible for cover under the Scheme.  See [broken link removed]


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## Brendan Burgess (10 Sep 2008)

Folks - this thread is about the Irish Nationwide.

Please do not take it off topic by discussing other banks.

Brendan


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## bigbadostric (10 Sep 2008)

*Irish Nationwide debt rating cut by Fitch*

*External »*


Irish Nationwide Building Society
Fitch
Bloomberg
_The Irish Times take no responsibility for the content
or availability of other websites_

Irish Nationwide Building Society's senior debt ratings have been cut Fitch Ratings, the because of its exposure to the deteriorating property market.
It is the second agency in a week to downgrade the lender. 

The cut in Nationwide long-term issuer default rating to BBB+ from A- “reflects Fitch's continuing concerns about the uncertain outlook for commercial and residential property lending in Ireland and the UK,” the ratings company said in a statement. 

Irish Nationwide's ratings were cut by Moody's on September 4th. 

Irish house prices are declining and unemployment rising as the economy faces its first recession in more than two decades. 

House prices fell 9.4 per cent in July from a year earlier.
*Bloomberg* 
© 2008 irishtimes.com


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## Sunny (10 Sep 2008)

Fitch now have them at BBB+ so it was a one notch downgrade. Short-term, they are still F2


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## firsttimebuy (15 Sep 2008)

http://www.tribune.ie/article/2008/sep/14/irish-nationwide-suffers-massive-bond-sell-off/

I am getting very nervous, have money in Irish Nationwide thinking of taking it out.


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## ClubMan (15 Sep 2008)

If you are nervous then just keep €20K or less with any bank regulated by _IFSRA _and part of the _Irish _deposit protection scheme and stick some or all of the rest in _Northern Rock _for 5% and a 100% guarantee courtesy of the _UK _government.


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## Brendan Burgess (15 Sep 2008)

> Within two days, downward pressure on the bond's price had boosted yields 27% as spreads topped 1,000 basis points, far higher than other Irish financials. The five-year fixed-rate bond was issued in June 2007 with just a 63-point spread.


 
The content of the article is interesting and useful but it seems to me to be much more dramatic in its language than is justified by what has happened in reality.

I first thought that the yields were 27% - there are actually 10% (1,000 basis points) 



> far higher than other Irish financials.


 
Does anyone know how much higher is "far higher"? 

Did yields generally rise last week or was it just that of the Irish Nationwide? 


Brendan


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## Mrs Mac (15 Sep 2008)

I've a 100K in INBS and it is coming out tomorrow when the notice period is up.

I am diversifying the funds as I am not totally comfortable with it being deposited in one place.

€20K into Anglo at 6%
€40K into NIB at 5.3%
€25K left with INBS in a Freedom account should they ever demutualise
The balance will go into an AIB online 7 account

I just can't justify leaving the money in one place in light of the current banking climate.


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## thomasmc01 (15 Sep 2008)

have a brother working in the INBS and the anger in relation to the press speculation is real with them, they are solid and they know it but the Reuters report and numerous misinformed comments on tv and radio is fuelling the 'no smoke without fire' ethos, dj on galway bay fm made a throw away dumb comment today not realising the worry that it would cause which could result in serious problems for the INBS, their staff and investors when there should be none


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## Rita (17 Sep 2008)

Hard to know what to believe really, was reading about substantial INBS repayments due mid 2009 in the Indo last wk, could this present a problem? I know the media fans the flames but I'm not all set to believe reassurance from Fingleton either.  As I can only leave the 20K in there for another 2 yrs max I'm wondering if its worth risking it, can't see them coming within an ass's roar of demutualisation in the next yr or two and I'm wondering now would I be better off with a Northern Rock risk free account, any thoughts?


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## trader69 (17 Sep 2008)

My brother opened a new 6% fixed term account with INBS this week for a six months period, If he withdrew 30k what penalties  would occur.


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## GeneralZod (17 Sep 2008)

Quote from the [broken link removed]



> 10. Withdrawals or closures prior to the account maturity date may result in a
> penalty equal to the cost to the Society of replacing the amount withdrawn. This
> penalty will be calculated using the following formula: A x B % x C
> A - is the amount withdrawn.
> ...



So it's the cost to them of giving you the money back before the normal term.


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## markwfitz (21 Sep 2008)

The new limit is 100,000EUR so members can go back into the 6% term deposit.
INBS was one of the strongest BS out there & it is a pity that if the CB orders a transaction that the withdrawals were partially to blame.
However clearly the downgrading was in the pipeline. 
Any more than 100,000k could be divided up with NIB as a Danish owned entity, N Rock as a Sovereign entity & AN Post - Postbank standing out with parents standing behind them being rated
Danske Bank currently are Aa1 Moody’s; AA- Standard & Poor’s and AA- Fitch.
N Rock : UK-AAA & Rabo AAA & An Post - Ireland& Fortis.
Of course all Irish entities up to 100,000 also stand out
MF


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