# Irish Bank solvency?



## Autotroph (5 Mar 2008)

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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## ClubMan (5 Mar 2008)

Check out the credit/financial ratings of the various institutions based or operating in _Ireland_.


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## efm (5 Mar 2008)

Also check the requirements of the Capital Adequacy Act / Regulations which govern financial institutions


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## marksa (5 Mar 2008)

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!


 
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


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## Brendan Burgess (8 Mar 2008)

This is a very important topic, so I have deleted the off-topic responses

Brendan


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## skrooge (8 Mar 2008)

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


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## stir crazy (8 Mar 2008)

ClubMan said:


> Check out the credit/financial ratings of the various institutions based or operating in _Ireland_.



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 ?


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## OverseasCafe (14 Mar 2008)

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.


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## ingalway (16 Mar 2008)

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....


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## mercman (16 Mar 2008)

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 ??


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## phoenix (16 Mar 2008)

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


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## skrooge (17 Mar 2008)

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.


 
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/...-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.


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## dewdrop (17 Mar 2008)

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.


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## sapmanie (17 Mar 2008)

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?


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## phoenix (17 Mar 2008)

[broken link removed]

Have a look at point 4


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## TSThomas (17 Mar 2008)

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.


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## Slim (17 Mar 2008)

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


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## mercman (17 Mar 2008)

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


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## threeticks (17 Mar 2008)

Slim said:


> 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 steps Slim?


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## threeticks (17 Mar 2008)

From the central banks website

[broken link removed]



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


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## Lulu123 (17 Mar 2008)

ingalway, am in the same predicament as yourself. Have our cash with one of the newer UK banks to come to Ireland and like you am now feeling a bit nervous as we are renting and are hoping to buy this year or early next year. Really dont think our money is safe anywhere so might have to split it up and put 20k in different banks.  Going to be a lot of hassle but easier on our heads than losing our hard earned cash!    Anyone think I am being over cautious ?


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## camlin90 (17 Mar 2008)

It will be interesting to see what unfolds tomorrow.
If people hold their heads then in the short term I don't see any reason to hit the panic button. I don't think any of the deposit-taking Irish banks were messing with the junk Bear Stearns was in to. 
The below article reassured me somewhat - note figures are from March 2007 but things are unlikely to have changed massively.

However if confidence is gone and there is a whiff of a run, it becomes every man for himself, and things could get dangerous.
You would hope the Central Bank would step in and issue reassurance, but they're hardly the most pro-active organisation from what I can see.
(By reassurance I mean deposit guarantees!)

In the short to medium term I am also going to split up my deposits so that there is no more than 22222.22 in any Irish bank (you get 90% of monies up to that), or 40000 in the case of Rabo.

http://www.independent.ie/business/irish/tsb-most-exposed-in-credit-crux-1081400.html


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## TSThomas (17 Mar 2008)

mercman said:


> What kind of steps can Joe Public take ?...


As I suggested, there's already fully state guaranteed alternatives out there. 

I don't think a Central Bank statement is worth anything to Joe Public - consider all the re-assurances issued re: Northern Rock last year... they might as well have had the Iraqi Information Minister giving them.


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## Slim (17 Mar 2008)

threeticks said:


> what steps Slim?


 
A la Lulu & JohnJ. Spread the risk a bit.


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## Lulu123 (17 Mar 2008)

Yeah think I am going to get started on that tomorrow first thing.  If we had ÈUR40k in a UK bank am i right in saying that would be pretty much ok seeing as the UK ones guarantee up to £35k


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## messyleo (17 Mar 2008)

In fairness, if you think that the Central Bank would not step in if one of the main irish banks (AIB, BOI) were to go bankrupt, I imagine you are being overly pessimstic imho.


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## twofor1 (17 Mar 2008)

Open to correction but my understanding is a lot of non Irish banks offer greater protection,

N/R currently (but not indefinitely) offer 100% protection, but generally I think the English protection scheme is higher than the Irish so the likes of N/R or Halifax would be a good option. 

Rabo guarantee 100% of the first €20K, and 90% of the next €20K and clearly state this is doubled for joint A/c’s so a couple  with a joint A/c is protected up to €76K .

Nib’s protection comes under the Danish scheme which I think is €40K per A/c.

So there are safer options available here.


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## Lulu123 (17 Mar 2008)

So one question in relation to state guaranteed alternatives. Say tomorrow I withdraw my cash from Halifax and put it in the post office, its a crappy return but is it 100% guaranteed by the state?


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## camlin90 (17 Mar 2008)

> So one question in relation to state guaranteed alternatives. Say tomorrow I withdraw my cash from Halifax and put it in the post office, its a crappy return but is it 100% guaranteed by the state?


 
Yes. For instance, the 30 day notice Deposit Account Plus pays a gross rate of a whopping 3%, but is state guaranteed.
Just steer clear of the Fortis/Postbank stuff.

The more I read, the more I think we need someone in this country to take a lead for once. Increasing the Deposit Protection Scheme to 100% of 50K per institution would calm nerves. 
Maybe others feel it would draw attention to the problems... but if the conversations going on here are also going on in the real world, it might be a bit late for that.
I'm of the view that if everyone sat tight there are no impending liquidity crises in the Irish banking system... but if a stampede starts, however irrational it may be, unfortunately there's not much you can do but join in. 

Cowen should get his @ss back from Malaysia this minute and get his eye on the ball for the next few days.


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## Raskolnikov (18 Mar 2008)

I admit, I got spooked by the Anglo yesterday. Went into my branch and withdrew all the balance over €20k just awhile ago. Noticed there were a few others queuing at the door. 

It's all well and good urging people not to panic, but when your life savings are on the line, you have to do something.


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## Radwanska (18 Mar 2008)

i was in dublin, didnt read the terms and conditions of my account. now i have to wait 7 days before i can get my money. if i ever get my money back where is the safest place to put it? under the matress?


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## Lulu123 (18 Mar 2008)

Went into my bank today and withdrew the cash, should be in my other account by tonight! Then its off to the Post Office tomorrow....3% return is better than losing everything we have.


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## Slim (18 Mar 2008)

Lulu123 said:


> Went into my bank today and withdrew the cash,


 
Were there many in the branch? Queues?


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## Happy Girl (18 Mar 2008)

I was on to Anglo Irish Bank this morning. I have decided to close my regular saver account with them. Over 25k in it and am  just a bit rattled by it all. Maybe a bit drastic but my gut instinct says get it out before the queues start!!!!!!!!  Will start studying the "best buys" to see where best to put it.


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## MugsGame (18 Mar 2008)

I have an Anglo regular saver with a large balance and have no qualms about continuing to pay into it.



> Over 25k in it



The account only lasts for 2 years, with max payment of €1000 per month. Surely your account was closing soon anyway? Or had it already converted into a standard deposit account, with a lower interest rate?


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## Happy Girl (18 Mar 2008)

No not finished until November. Joint account so we saving 2k per month (reducing it here and there temporarily at financial pressing times e.g. Xmas). I myself just feel there is something intangible there should things go bad. No door to knock on as such (me not living in Dublin or Cork) and as previously happened with N Rock internet access unavailable should these times occur. I am overly cautious by nature and I guess this is just reflected in my decision.


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## Feeder (18 Mar 2008)

MugsGame said:


> I have an Anglo regular saver with a large balance and have no qualms about continuing to pay into it.


 
Same here...I really don't think Anglo is the same boat as Bear Sterns/Northern Rock (different lending profile).


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## Jethro Tull (18 Mar 2008)

in a situation like this surely silence will only add fuel to any panic brewing. If there are no problems with the solvency and/or liquidity of Irish banks could either the commercial banks themselves or the central make make some kind of public statement (or am I being naive expecting either to)?


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## docker (18 Mar 2008)

Hey, I think if an individual bank makes a statement re their solvency to reassure savers, investors...it will have the opposit affect...and could cause a run on the bank! If my bank were to start making these statements thats when I'd start to worry!


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## Brendan Burgess (18 Mar 2008)

All discussion is now in this thread

Brendan


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