How relevant is the 100k guarantee

The logical conclusion from fears of a banking collapse would be to hold zero cash and to squirrel gold away under one’s pillow.

We all have to start somewhere, and my own view is that cash is safe with the likes of Bank of Ireland or AIB.

If individual depositors are being burned by the Irish banks, we’ve bigger problems, e.g. an alien invasion, Europe has been nuked by the Chinese, etc.

i.e. It could happen, but it’s not going to. And I do sometimes think when people talk about gold as a hedge against the end of civilisation, how much good will it be when the death gangs are marauding the streets? Will it be possible to use one’s gold EFT as a weapon to bash the barbarians over the head?
 
Gordon Gekko said:
The logical conclusion from fears of a banking collapse would be to hold zero cash and to squirrel gold away under one’s pillow.

We all have to start somewhere, and my own view is that cash is safe with the likes of Bank of Ireland or AIB.

If individual depositors are being burned by the Irish banks, we’ve bigger problems, e.g. an alien invasion, Europe has been nuked by the Chinese, etc.

i.e. It could happen, but it’s not going to. And I do sometimes think when people talk about gold as a hedge against the end of civilisation, how much good will it be when the death gangs are marauding the streets? Will it be possible to use one’s gold EFT as a weapon to bash the barbarians over the head?
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The concern is evidently more, not with Irish banks, but investing in online brokers or banks such as Raisin/Lightyear where the only communication we have with those holding/managing our funds, is sending an e-mail and hoping they'll reply.

The latest comments on and issues being experienced with raisin.ie, highlight the concerns that arises when this situation comes into effect.

i.e. worry, outrage, etc.
 
BrokeBroker said:
The concern is evidently more, not with Irish banks, but investing in online brokers or banks such as Raisin/Lightyear where the only communication we have with those holding/managing our funds, is sending an e-mail and hoping they'll reply.

The latest comments on and issues being experienced with raisin.ie, highlight the concerns that arises when this situation comes into effect.

i.e. worry, outrage, etc.
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Agreed. After trialing bunq, I think it's only a matter of time before people lose a lot of money with these challenger firms. I'm much safer with AIB
 
BrokeBroker said:
Talk of "deposit guarantee schemes" applying to the state, not being covered by the ECB...... are leaving a less that comprehensively informed potential investor such as myself, on the fence.
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I did start to feel a bit sorry for anyone with a genuine question yesterday.

You need to have a basic understanding of how banks are funded to understand the DGS and whether there is risk.

If a bank gets into trouble, there is an order in which things get wiped out and/or converted to ordinary shares.

1. Existing capital 'common equity' (share capital retained earnings)
2. AT1 bonds
3. Tier 2 bonds
4. Deposits in excess of DGS
5. Covered deposits

The regulators have set minimum CET1 (1+2) and CET2 (1+2+3) ratios for all the banks, based on the risk of their assets. The bigger the bank, the more the regulators are breathing down their necks.

If things start to go bad, AT1 bonds get 'bailed in' to become shares. Then the tier 2, etc, until the bank has enough capital again. There would have to be a catastrophic event, with the regulators back turned for a long time before a DGS would be invoked for a large bank. You're talking about a complete bank failure.

In the case of an Irish 'pillar' bank, in my opinion you're looking at an entire country economic collapse before covered deposits are at risk.

If the DGS does get invoked, each country has legislation around their scheme. Yes, the schemes only hold cash of c. 1% of covered deposits, but they can also do an 'asset grab' of the assets of the bank and use the funds to pay out. They can also borrow money from the markets, and impose levies on the remaining banks.

The DGS has been used 5 times in Ireland, for Credit Unions.

Personally, I sleep easy at night putting my money on deposit with AIB or BOI.
Life is too short to be worried about giving my money to a sub prime lender or car finance operation I've never heard of somewhere in Europe.
 
RedOnion said:
I did start to feel a bit sorry for anyone with a genuine question yesterday.

You need to have a basic understanding of how banks are funded to understand the DGS and whether there is risk.

If a bank gets into trouble, there is an order in which things get wiped out and/or converted to ordinary shares.

1. Existing capital 'common equity' (share capital retained earnings)
2. AT1 bonds
3. Tier 2 bonds
4. Deposits in excess of DGS
5. Covered deposits

The regulators have set minimum CET1 (1+2) and CET2 (1+2+3) ratios for all the banks, based on the risk of their assets. The bigger the bank, the more the regulators are breathing down their necks.

If things start to go bad, AT1 bonds get 'bailed in' to become shares. Then the tier 2, etc, until the bank has enough capital again. There would have to be a catastrophic event, with the regulators back turned for a long time before a DGS would be invoked for a large bank. You're talking about a complete bank failure.

In the case of an Irish 'pillar' bank, in my opinion you're looking at an entire country economic collapse before covered deposits are at risk.

If the DGS does get invoked, each country has legislation around their scheme. Yes, the schemes only hold cash of c. 1% of covered deposits, but they can also do an 'asset grab' of the assets of the bank and use the funds to pay out. They can also borrow money from the markets, and impose levies on the remaining banks.

The DGS has been used 5 times in Ireland, for Credit Unions.

Personally, I sleep easy at night putting my money on deposit with AIB or BOI.
Life is too short to be worried about giving my money to a sub prime lender or car finance operation I've never heard of somewhere in Europe.
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I'm sure you understand concerns in relation to the DGS are aimed more so online platforms like Lightyear/Raisin.

Most of us are secure with our funds in Irish banks, even Irish institutions.

It's the supposed "protection" being offered by the online platforms with much more attractive interest rates.

Your breakdown of how the DGS scheme works is great, but the "protection" being offered by "Lightyear", by example, doesn't actually specify "DGS".
It just says you're "protected" up to 20 thousand.

.......

As for the Raisin brokerage (which is the most attractive interest option at present), I think they're using state banks, not "sub prime lenders" and "finance operations" - but they're still not local brick-and-mortar institutions the majority of us don't understand the infer points of what they claim on "DGS" really entails.

So based on your claims, you personally don't use nor really advocate for these high interest rates, online only deposit schemes/options?
 
NoRegretsCoyote said:
Why?

All deposits under €100k are guaranteed by the DGS in the relevant EU member state. In the event of insolvency/resolution depositors in one member state cannot be privileged over another.
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I think many of us (or I for one), are simply not well enough informed on the actual specifics of the DGS;

It's implemented by the European Central Bank?

Or the state where the bank is located? (Italy, being Raisins highest interest rate bank location at the moment).

Some kind of European banking regulator?

And if so, exactly why are there events happing like Raisin.ie being inaccessible currently?

If a national bank when into dark-mode here in Ireland for hours or days at time, I don't think account holders would be chill - and at least in that instance we'd have recourse cause they're local and have to answer to our own national governing bodies.
 
BrokeBroker said:
I'm sure you understand concerns in relation to the DGS are aimed more so online platforms like Lightyear/Raisin.

Most of us are secure with our funds in Irish banks, even Irish institutions.

It's the supposed "protection" being offered by the online platforms with much more attractive interest rates.

Your breakdown of how the DGS scheme works is great, but the "protection" being offered by "Lightyear", by example, doesn't actually specify "DGS".
It just says you're "protected" up to 20 thousand.

.......

As for the Raisin brokerage (which is the most attractive interest option at present), I think they're using state banks, not "sub prime lenders" and "finance operations" - but they're still not local brick-and-mortar institutions the majority of us don't understand the infer points of what they claim on "DGS" really entails.

So based on your claims, you personally don't use nor really advocate for these high interest rates, online only deposit schemes/options?
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There are 2 different types of schemes. One for banks - DGS schemes which are covered by a common directive across the EU. This would apply to Raisin.

Secondly there are scheme's across Europe that exist for investment funds. There would appear to be less uniform. Lightyear's relevant scheme is Estonia. They cover the first 20k in full. Whereas the Irish equivalent covers 90% capped at 20k.


Compensation Limits

Compensation Limits
www.investorcompensation.ie www.investorcompensation.ie
 
NoRegretsCoyote said:
Why?

All deposits under €100k are guaranteed by the DGS in the relevant EU member state. In the event of insolvency/resolution depositors in one member state cannot be privileged over another.
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Because how can you be sure that the thing is actually a bank and is actually covered?

We hear people saying all the time that Dildo.com is offering 3% on deposits and that it’s backed by the government of Transylvania.

Caveat emptor.
 
BrokeBroker said:
I think they're using state banks, not "sub prime lenders" and "finance operations" - but they're still not local brick-and-mortar institutions the majority of us don't understand the infer points of what they claim on "DGS" really entails.
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Most of the banks are small institutions, about 10% the size of AIB or BOI. They are niche players who need funding and have to pay full price for it.

BrokeBroker said:
So based on your claims, you personally don't use nor really advocate for these high interest rates, online only deposit schemes/options?
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Personally, the amount of money I would be putting on deposit doesn't justify chasing rates. But someone with larger sums its absolutely worth shopping around.
For me, if I get an extra 1% on 10k deposit, after DIRT it's only 66 euro a year in my pocket. I'm happy to leave that on the table.
 
RedOnion said:
Personally, the amount of money I would be putting on deposit doesn't justify chasing rates. But someone with larger sums its absolutely worth shopping around.
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100%. I don’t think most people should have €500k long-term on deposit but there are people who do and for them the differences in retail rates within Europe can be well into four figures after DIRT.

Gordon Gekko said:
Because how can you be sure that the thing is actually a bank and is actually covered?
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Because there are minimum standards for licensed entities in the EU and DGSs in every member state. I’m not going to speculate on the riskiness of the business models but blanket statements based on an entity’s country of residence are a bit extreme. And if you are tired of watching paint dry you can look up DGS levels on the EBA website.
 
NoRegretsCoyote said:
Because there are minimum standards for licensed entities in the EU and DGSs in every member state.
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It's not always that straightforward, and uf i had 500k I'd be researching carefully. Yes, Raisin only work with covered institutions, but if you start looking around yourself it gets complicated.

Take a simple example. We're in Ireland, so most people know what An Post is. What the man on the street would struggle with is distinguishing between their money in a post office savings book, vs a credit balance on their current account with An Post Money. The first is guaranteed by the State. The latter is not even covered by DGS.
Now take that example to a foreign country you don't know as well, operating in a foreign language.

NoRegretsCoyote said:
I don’t think most people should have €500k long-term on deposit but there are people who do and for them the differences in retail rates within Europe can be well into four figures after DIRT.
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My half bar would be in Irish government bonds.
 
RedOnion said:
It's not always that straightforward, and uf i had 500k I'd be researching carefully. Yes, Raisin only work with covered institutions, but if you start looking around yourself it gets complicated.

Take a simple example. We're in Ireland, so most people know what An Post is. What the man on the street would struggle with is distinguishing between their money in a post office savings book, vs a credit balance on their current account with An Post Money. The first is guaranteed by the State. The latter is not even covered by DGS.
Now take that example to a foreign country you don't know as well, operating in a foreign language.


My half bar would be in Irish government bonds.
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You mean state savings ?
 
coolaboola12 said:
You mean state savings ?
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No, I certainly don't.

Irish Government Bonds for the retail punter

Probably covered elsewhere, in which case would a kind mod please delete. 0% Treasury 2031 is currently priced at 80.67. Am I correct that a retail punter would get get the 10.33 redemption gain free of CGT> If so this certainly beats any State Savings though I accept not quite as guaranteed as...
www.askaboutmoney.com
 
Gordon Gekko said:
Because how can you be sure that the thing is actually a bank and is actually covered?

We hear people saying all the time that Dildo.com is offering 3% on deposits and that it’s backed by the government of Transylvania.

Caveat emptor.
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Each country DGS maintains list of members, you can find Advanzia at this site (provided by Lux DGS)

Recherche entités

edesk.apps.cssf.lu edesk.apps.cssf.lu

ps I went to dildo.com as you mentioned for further information on their great deposit rates. Deleting it from my history now :)
 
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