# January 2011 Stats: Deposits Continue to Leave Irish Banks



## Lightning (1 Mar 2011)

The last 8 months have been a nightmare for the deposit wings of the 6/4 Irish deposit gathering sections in the Irish banks. 

A run started in 4 of the 6 Irish banks started in July 2010 (Anglo and INBS have been loosing deposits at an elevated 70%+ level over the last 3 years pre-'auction') and then got worse, and then got even worse, and then descended into a retail deposit flight in November 2010. December 2010, post IMF arrival,  saw deposits continue to fly out of the Irish banks at an alarming rate. 

So what happened in January 2011? NamaWineLake, as ever, has some great analysis here: http://namawinelake.wordpress.com/2...h-banks-still-ongoing-but-apparently-slowing/


Another 20,000,000,000 EUR in deposits was taken out of the 6 Irish banks in Janaury 2011.
It appears that deposits continue to flee at an elevated level and the January 2011 declines were above the average monthly decline for the previous 12 months, although slower than December 2010.
It is likely that the decline in deposits will be filled with emergency liquidity assistance from the CBI or extraordinary measures by the ECB.

How much longer can this continue? How much longer can the ECB/CBI prop up these deposit losses? With speculation regarding a looming Irish sovereign default increasing, do Irish banks risk a final terminal deposit flight?


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## Godfather (1 Mar 2011)

My God, I've shivers... 

Sorry I didn't realize that the situation was keeping dropping like that... Although I admit it I moved most of my savings abroad...


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## Paddyman (1 Mar 2011)

To where?
Is there any chance of an update advising depositors of where to put their money safely?
People are worried sick and don't want to end up penniless.


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## asdfg (1 Mar 2011)

yes ,like paddyman am worried sick ,is ulster bank safe?


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## oldnick (1 Mar 2011)

people are worried sick because people like you tell them that all the money is going out of the country because people are worried sick because people like you tell them that all the money is going out of the country because people are worried sick because....

...for goodness sake shut up already !


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## Guest105 (1 Mar 2011)

CiaranT said:
			
		

> Another 20,000,000,000 EUR in deposits was taken out of the 6 Irish banks in Janaury 2011.


 
This huge amount is not ordinary depositers cash is it??? Is it more likely to be belonging to businesses and foreign investors who seem to have completely lost confidence in the Irish banking system..


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## Marc (1 Mar 2011)

I agree with the post saying that the panic is being made worse by drawing attention to the flight of deposits. 

For a balanced assessment of the economics see here 
http://www.askaboutmoney.com/showthread.php?p=1116818#post1116818


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## marksa (1 Mar 2011)

Marc said:


> I agree with the post saying that the panic is being made worse by drawing attention to the flight of deposits.


 
Reminds me of Bertie and his talk about nay-sayers and gloom merchants on the property bubble. Soft landing my eye. One has to face reality and plan for the future, not stick the head in the sand.


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## Lightning (1 Mar 2011)

cashier said:


> This huge amount is not ordinary depositers cash is it??? Is it more likely to be belonging to businesses and foreign investors who seem to have completely lost confidence in the Irish banking system..



It is a mixture of retail deposits, corporate deposits and non resident deposits. The flight started with corporate deposits and then spread to non corporate deposits.



marksa said:


> Reminds me of Bertie and his talk about nay-sayers and gloom merchants on the property bubble. Soft landing my eye. One has to face reality and plan for the future, not stick the head in the sand.



Whilst I agree with Marc's point that telling people bad news can exasperate problems, people have a right to know what is happening with the deposit flight. People can then make their own mind up as to what to do with their deposits. There is no point in pretending that it is not happening.


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## Bobby1 (1 Mar 2011)

I agree with Marc... everyone is running around "panicking" about their money and rushing to pull it from irish banks...what basis is there for this? Has an irish bank failed? Do people not have confidence that the EU Bailout fund with 35bn ear-marked for banks isnt enough? The media have played the most dangerous part in the flight of deposits in my opinion with RTE by far the worst at over hyping everything. Why is everyone considering its a matter of when and not if the irish gov default on borrowings? Im i naive thinking we will come out of this without every single bank crumbling around us while the EU allows it?

im guessing its possible that the more funding that leaves banks the worse state they will find themselves in, and in the event they cant continue to rely on ECB funding they will be tapping the government for cash injections... which means more pressure on tax payers?


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## Marc (1 Mar 2011)

Here is the problem with drawing attention to a problem and then not explaining the issues. 

http://www.youtube.com/watch?v=qu2uJWSZkck

Let's imagine for a moment that there are two deposit options in Ireland 
Option 1 is Bank of Ireland 
Option 2 is Bank of UK

If I hear everyone is drawing their money out of Bank of Ireland and putting it in Bank of UK then naturally I might decide that I should also take my money out of Bank of Ireland too. After all that is what everyone else is doing and I don't want to lose out. 

So, I take the last Euro out of Bank of Ireland which now has no deposits at all.

Happy?

Well no, as it turns out and the reason is that I don't live in the UK. 

You see what happened at bank of UK is that it now has loads of deposits and no longer has to pay a high interest rate to attract deposits. After all it is now a safe bank with loads of our cash. 

Also the UK taxpayers are happy because they no longer have to bail out their banks since luckily we have done that for them. So they can pay less in taxes thanks to our deposits. 

Where does this leave bank of Ireland? 

Well this Bank is now flat broke because we all rushed to take out our money in order to "protect" it. 

We thought we could escape the risk. Unfortuately economists have an annoying habit of reminding us that everything has to add up. It isn't possible for anyone of us to gain at the expense of our neighbours. The risk that we all hold in Society is held by us all collectively. 

All that we have done is to transfer the risk from all of us as depositors to all of us as taxpayers. This risk is still present, but it has now been socialised. 

We now *all* have to pay more in taxes to support the banks that we were all in such a rush to take our money out of. 

Did we win? 

No, in practice all we have done is helped the taxpayers of another country to support their banks. 

That us why pointing out that everyone is taking out their money is a bad thing for everyone here in Ireland. 

This is a very simplified version of reality to make the point. In a run on a bank nobody wins watch it's a wonderful life for a visual reminder of this point.


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## Godfather (2 Mar 2011)

I moved some of my money back to Italy and some to Germany (probably safest economy in EU). For any information on moving money to Germany have a look at my post "Did anyone of you open an account with any of the biggest german banks".


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## Strathspey (2 Mar 2011)

The problem is trust, I don't trust that the Irish government has the resources to fulfil it's promise of guaranteeing my deposits. I don't trust that the Irish governmnet will not default.


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## Marc (2 Mar 2011)

Exactly, *it is all about trust*. It is a fractional banking system. It is built on trust.

However, the very action of some of us not trusting the system, pulling out our deposits is *causing* the risk that Ireland will default.

The thing that we fear, is realised by our actions.

We panic, we pull out our savings, the banks need more capital, the State can't raise funds in the markets, we go cap in hand to the ECB, more depositors panic, the bank's balance sheets weaken further, the State cannot meet it's obligations to guarantee the deposits. The State has to raise capital, so taxes increase.

Did any of us win? 

No, even if you were the first to pull your deposits out you didn't win. You now have to pay more in taxes. Our actions caused taxes to go up for all of us.

I covered this issue a year ago
[broken link removed]


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## Chris (2 Mar 2011)

Marc said:


> We now *all* have to pay more in taxes to support the banks that we were all in such a rush to take our money out of.
> 
> Did we win?
> 
> No, in practice all we have done is helped the taxpayers of another country to support their banks.


You are looking at two separate issues here and not differentiating between them:
1) Solvency of Irish banks
2) government bailout of banks
Irish banks are insolvent and should have long been declared bankrupt. The fact that their very life hangs around the neck of taxpayers does not mean that that noose cannot be undone.
The majority of my money is outside the country because Irish banks are insolvent and I do not agree with their government bailout.




Marc said:


> Exactly, *it is all about trust*. It is a fractional banking system. It is built on trust.


No, fractional reserve banking is built on fraud. No other industry is allowed to or able to operate in a permanent state of insolvency. The only reason banks do, is because of government protection.



Marc said:


> However, the very action of some of us not trusting the system, pulling out our deposits is *causing* the risk that Ireland wil default.
> 
> The thing that we fear, is realised by our actions.



People withdrawing their money from Irish banks is the symptom, not the problem. You cannot blame the symptom for the underlying disease, which is the fact that banks made too many loans and too risky loans (with the help of government and the central bank) that have led them to insolvency. Even without all the money leaving, Irish banks were and are, by and large, unable to become profitable again.


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## Paddyman (2 Mar 2011)

Those in the know tell the ordinary citizen not to panic or spread panic. Meanwhile they quietly move their savings out of the country. 
Hssh! Don't tell anyone!


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## alpine (2 Mar 2011)

But is moving Euro's from Irish banks to non resident Euro accounts in Belgium, Italy, Luxembourg or Germany going to guarantee your Euro’s are safer than having them in Ireland? My feeling is having money overseas (having moved some) is safer than having it in one of the Irish banks, but I still do not feel safe.....


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## beffers (3 Mar 2011)

It really is a worry. I am not ready to give up on Irish banks just yet, but I do have a back up Plan B ready to put into action should the warning signs become glaringly obvious. I don't think that they have just yet, but you never know. I have dual US/Irish citizenship and bank accounts, so I can move money around fairly easily. I have given up on getting a higher interest rate on monies in savings accounts if I leave the monies in the accounts for X periods time. I am ok with that, as you can not put a price on the peace of mind in knowing that I can get at the money in 5 minutes if need be.


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## Godfather (3 Mar 2011)

When AIB and BoI will be taken over by another big group of banks the situation will stabilize, or am I too simplistic?


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## Chris (3 Mar 2011)

Godfather said:


> When AIB and BoI will be taken over by another big group of banks the situation will stabilize, or am I too simplistic?



In simple terms I would agree, but it does all depend on the bank(s) that would take over the Irish banks. The problems of Irish banks cannot and should not be fixed by government.


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## Godfather (3 Mar 2011)

Chris, I agree... The government guarantee is upsetting the principle of fair competition between banks... Sad that even with the government guarantee the money keeps flooding away...


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