# Hard currency deposits abroad at high interest rates



## alwaysonit (18 Jun 2014)

Surprisingly couldn't find anything on this as I thought it would be a popular move in the current climate.
Has anyone deposited abroad or have any deposit advice on it?

I've been looking into it over the past couple of months and the following options look solid:

Mongolia: Erelbank. There is deposit insurance up to the first 8k EUR or thereabouts. 7.2% on 1 year USD term deposit and is easy enough to open an account without having to visit there.

Georgia: Bank of Georgia. No deposit insurance, 4.5% for a 1 year EUR term deposit. Possible to open account online, but minimum initial deposit is $100k.

Azerbaijan: International bank of Azerbaijan, just over 28k EUR deposit insurance per person per institution. 9.8% on 1 year USD term deposit, 5.8% if it is held in EUR. So far have not found a bank that does not require me to visit the country to open an account.

Be interesting to see what peoples views are on this as, currency risks aside, all products seem to outperform anything in CiaranT's excellent Best Buy threads for domestic products.


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## the-madman (18 Jun 2014)

Non Euro countries set their own interest rates to attract investors into their currencies. Therefor you may get high interest rates there. 

This may sound interesting but there are risks. 
1) even when "investing" / saving abroad you are liable here to pay the dirt on the return. thats 41% gone of the "profit". Depending of the countries and any kind of tax regulation / exempts / contracts or non existing tax contracts between and Ireland you may be still liable to any local country taxes at source before you still have to apply irish DIRT. Read up before investing.

2) The local insurances may not be worth the ink on the paper and possible apply only to local residents not to foreign investors. So if it goes south the money is a write off or you may have to fight for it legally in those countries and then you can write it off. ;-)

I did some research a while ago (before the crisis) on Ukraine banks which had 9% interest rates and realised it wasn't worth it at the end of the day.


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## Jim2007 (18 Jun 2014)

alwaysonit said:


> Be interesting to see what peoples views are on this as, currency risks aside, all products seem to outperform anything in CiaranT's excellent Best Buy threads for domestic products.



My opinion:  You might want to spend a bit more time leaning about risk...


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## Lightning (18 Jun 2014)

Globally, USD retail deposit rates rarely exceed 1.5%.  

Globally, EUR retail deposit rates rarely exceed 2.5%. (Domestic promotional regular saver products an exception). 

If you are being offered 9.8% for USD and 4.5% for EUR, the differential to normal rates may represent the risk premium. It also might represent liquidity issues in the banks concerned. It also might simply be a desperate need for foreign cash by the banks concerned.  

Be careful. Complete careful due diligence on the banks / countries concerned.


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## alwaysonit (18 Jun 2014)

Thanks for the replies, personally I think the benefit outweights the risk, especially where there is a deposit protection scheme in place.

Would be nice to hear from somebody who has had experience with this and could reassure me / talk me out of it.


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## dub_nerd (19 Jun 2014)

I recently looked into foreign deposits in local currencies, not USD. Looked at Turkey but volatility of the lira put me off. I also looked at New Zealand which has 5 to 7% deposit rates, and some secure looking banks including Rabo operating there. NZ also has a taxation agreement with Ireland so you can avoid getting hit twice for tax. My (possibly wrong) understanding is that you pay income tax, not DIRT, on non-EU deposits. That would be an advantage to me since I have an unused tax free allowance. However, I contacted Rabo and they wouldn't take deposits without a New Zealand address and I presumed the same would apply with other banks. I'd still be interested in a moderately secure looking arrangement if I could find one and would be willing to take FX risk. Mongolia, Georgia and Azerbaijan wouldn't be on my list of countries though.


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## Sunny (19 Jun 2014)

alwaysonit said:


> Thanks for the replies, personally I think the benefit outweights the risk, especially where there is a deposit protection scheme in place.
> 
> Would be nice to hear from somebody who has had experience with this and could reassure me / talk me out of it.


 
Be VERY VERY VERY careful. None of the Countries you mentioned have access to the ECB or the FED to obtain EUR and USD liquidity lines. Does the Deposit Protection Scheme in these countries explicity state that the scheme will protect foriegn currency deposits or just local currency equivalent deposits? Even if the Deposit Protection Scheme does say that they will guarantee your USD or EUR deposit, are they going to be a position to honour it? Will they be able to get their hands on the foreign currency needed.

You seem to looking at this soley in the terms of currency risk. However, there is huge bank risk and huge Sovereign risk as well. When you say that you think the benefit outweighs the risk, I would be interested to know how you are coming to the conclusion. How are you pricing the risk?


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## elcato (19 Jun 2014)

Mongolia, Georgia and Azerbaijan ? I wouldn't go there on holidays and take out a tenner from my wallet ! Does the websites show a guy spinning a nickel and winking at you ?


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## Time (19 Jun 2014)

Bulgarian Leva. 3.75% return there on one year deposits.


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## Gerry Canning (19 Jun 2014)

Alwaysonit.

You put in say k100@7% .

You get 7,000 minus taxes per annum.
You end up with say nett 4,000 per annum.

So you are thinking of betting that it will take 25 years of risking your own funds on unknown countries and banks , just to get again to  your k100.

If you can afford to risk/lose your own money for such a paltry return , fire ahead.
I am with elcato.


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## alwaysonit (26 Jun 2014)

I haven't been an Irish tax resident for the past few years, so I don't have to pay DIRT on my foreign interest earned.

I have looked into deposit insurance and in Mongolia "bearer saving certificates or other bearer financial instruments" are excluded from the insurance programme. Does a fixed term deposit account paying interest to myself fall under this? 

In Azerbaijan, insurance is only available for deposits that pay up to the state mandated rate. The website about the insurance is terrible, but I think this rate is 10%.

In relation to doing my due diligence, is there a thread anywhere that gives the steps I should be going through? If not can somebody advise me what key things I should research in each case?


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## Jim2007 (26 Jun 2014)

My contribution: S&P ratings as follows:



Rating|Country
AAA|Germany, UK
AA+
AA
AA-
A+
A
A-|Ireland
BBB+
BBB|Spain
BBB-|Azerbaijan
BB+
BB|Portugal
BB-|Mongolia
B+
B
B-|Greece

Once you leave the 'A's you are no longer in investment grade countries...


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## alwaysonit (27 Jun 2014)

Does anyone know if a fixed term deposit account is a "bearer financial instrument" as per my last post?


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## TheJackal (27 Jun 2014)

This area seems ripe for a European Court of Justice case.

Why can't an EU citizen open a bank account in any other EU country regardless of where he/she lives?

They are currently restricting your right to banking markets in other countries.

Of course money laundering concerns will arise, but could be overcome


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## Setanta12 (27 Jun 2014)

I assume those countries are so eager for investment, there's no WHT issues on the paid interest ?  If there is, you're likely to be taxed in both countries as they seem to be a little of the beaten track as regards tax treaties are concerned.


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## Sunny (27 Jun 2014)

alwaysonit said:


> Does anyone know if a fixed term deposit account is a "bearer financial instrument" as per my last post?


 
No it's not.


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