# Depositors funds over €100k at risk - move to equities?



## Grizzly (14 May 2013)

With Michael Noonan discussing with the EU that depositors funds over €100k could be used to bail out banks at risk, is it wise to transfer a larger portion of our funds in to equities?

I have noticed a spike in some of my investments lately. Even the dog shares are showing an upturn. I have a chunk invested in U.K. equities. I get some satisfaction that these are held in Sterling. My dividends are paid in Sterling. If the Euro goes belly up I have some Sterling available.  

With poor returns on deposits, DIRT and PRSI I am sorely tempted to break my rule of spreading the risk about?


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## LDFerguson (14 May 2013)

It is certainly true that the after-tax returns on cash deposits are getting to a point, or in some cases have already reached a point where they are below inflation.  With the recent ECB interest rate cut not yet really filtering down to deposit rates, things aren't likely to get better for deposits any time soon.  

Remember that any move to seek a higher return comes with an automatic increase in risk.  So while you may be seeking a greater return, you have to accept that it will come with more risks.  The risk that your value may go down temporarily.  The risk that it may go down permanently.  The risk that it may not provide a return greater than deposits after all.  In my view, the best way to spread such risk is by diversifying into uncorrelated areas as much as is practical.  

As an aside, the Irish Deposit Guarantee Scheme provides a guarantee of €100,000 per institution, so you could have €100,000 with AIB and €100,000 with Bank of Ireland and be covered in full.


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## shipibo (16 May 2013)

LD,

    Is the state guarantee worth the paper its written on though ... if AIB needed more funding, could the state bail it out?

     This is a question, not a statement, as from previous posts, I know you know your stuff ....

     My thoughts are the EU will not have anymore bailouts, the Slovenia and Cyprus examples are the basis for my assertions ...

     Also, how would the bail ins work, Ulster Bank, UK Nationwide, et al have British parent companies, could they be affected?


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## LDFerguson (16 May 2013)

I'd imagine that you're absolutely right - the Irish State wouldn't have the funds to bail out a large-scale meltdown of one of the pillar banks like AIB or Bank of Ireland.  

That said, the EU seems to have established a bit of a precedent in Cyprus by protecting the deposits under €100,000, so I would hope that similar would happen here.  

But your speculation is as good as mine as we're all in uncharted territory if it ever happened.


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## Dr.Debt (16 May 2013)

I think the Cyprus precedent is a significant one. It seems to me that Cyprus was used as a test case to guage the markets reaction to the "bail-in" of a European bank. It seems that it all passed off without too much incident.

Its very hard to rule out a similar bail-in in the Irish context given that 
the pillar banks here are in a precarious situation. To my mind its hard to see how certain banks will resolve their loan books without seeking further 
re-capitalization.

It appears that the dogs in the street know that you shouldn't keep more than 100K in an Irish bank so its hard to see who will get caught if a bail-in comes to pass.


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## LDFerguson (16 May 2013)

Dr.Debt said:


> It appears that the dogs in the street know that you shouldn't keep more than 100K in an Irish bank so its hard to see who will get caught if a bail-in comes to pass.


 
That's a very interesting point.  If the numbers keeping their deposits at below €100,000 are in the vast majority, then that €100,000 limit becomes meaningless as the amount to be raised by haircutting the few above it wouldn't achieve anything.  So, presumably, they'd have to lower the €100,000 limit to include more people in the haircut.


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## shipibo (17 May 2013)

German perspective on the banking situation ...

http://translate.google.com/transla...zt-masterplan-um-enteignung-der-sparer-kommt/

Cannot see other option than bail in, as bank debts may be more than states can afford, the bank guarantee is only feasible if monies are there to compensate ALL borrowers under 100K ...


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## Lightning (18 May 2013)

Dr.Debt said:


> It appears that the dogs in the street know that you shouldn't keep more than 100K in an Irish bank so its hard to see who will get caught if a bail-in comes to pass.



Does the dog in the street really know this? There are currently 155 billion EUR in deposits in the Irish banking system. [broken link removed] of which are deposits over 100,000 EUR. That is a lot of uninsured deposits to burn before we move down the new proposed pecking order.


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## IsleOfMan (18 May 2013)

I have a few quid in equities that have a good dividend yield. Investing in companies that have a good spread of businesses that are consumer orientated such as water, food, electricity and such like is something to consider. I am aware that many people might have included the banks in the above and as a safe haven and are now regretting their decision. I spend about 20 minutes per day looking at the "news" "discussions" "financial data" on the companies that I have invested in. It keeps me in the loop, sort of.
Having said that, the majority of my savings are in Savings Bonds, Certificates etc. I feel slightly more secure with having the money there than in the banks. I don't know why I feel like this because I shouldn't feel any more secure.  I also notice that I am keeping a larger sum of money in my current account. Interest rates are very poor and with DIRT plus the rest so leaving it in my current account suggests that it is not going to be attacked as if on deposit.


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## Laramie (5 Jun 2013)

With the latest slashing of the An Post savings bond and certificate interest rates it would be worthwhile finding out the dividend yield of various shares.


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## kateball (8 Jun 2013)

*Risk Reward of State Savings*

Interesting that the Government has cut the 3 year savings bond to 4%  - What sort of risk reward is this? 

When the  maximum upside is just  a bit more than 1% pa - and we dont really know the downside when we see what has happened in Cyprus.

I wonder is it wise to put any money into Savings Bonds at these rates? I dont think equities is the place to substitute Savings Bonds - that might be too big a  jump = but there must be some investments in between worth considering with a  better risk reward than deposits or Savings Bonds.


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## IsleOfMan (15 Jun 2013)

http://www.morningstar.co.uk/uk/news/109057/4-tips-for-finding-a-sustainable-dividend.aspx

An interesting article here on dividend yields.

http://www.morningstar.co.uk/uk/news/109005/watch-out-for-these-signs-of-a-dividend-in-danger.aspx


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## Jim2007 (15 Jun 2013)

kateball said:


> Interesting that the Government has cut the 3 year savings bond to 4%  - What sort of risk reward is this?



Given that a 10 year Bund yields about 1.6%....


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## shipibo (6 Dec 2013)

Mark O,Byrne from GoldCore reported Michael Noonan commenting on bail ins this week in Dublin

[broken link removed]



Interesting article below on the subject ...



Looking for opinions on the status of banks in Ireland ....


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