Irish Depositors beware - Pat Kenny Show

The Ghoul said:

Worry and fear can result in irrationality. During one of the first Eurogeddon crises I was really bad and thought I was going to lose a lot of money. I was pretty close to withdrawing over 65k out of one of my accounts and buying a new BMW 530d with it, even test drove the car and was thinking of options and colours. The idea was that if the money was going to disappear into thin air I might as well treat myself to something nice with it before that happened. Thankfully I did not spalsh out as in the cold light of day the stupidity of this idea was apparent.

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Strange, but I am going to go down this route. However it will not be the BMW or something as frivolous. After a lifetime of being careful and somewhat frugal I am now going to have the Celtic Tiger moment that I didn't have when others were having theirs.
Bring on the decking, the new kitchen, the holidays, change of car, the daily Cappuccino with muffin, the restaurant visits, etc

I suppose there'll be some making a beeline for Friedrich Strasse, Berlin, with their cash.

The latest on Cyprus from Reuters via CNBC:
"A senior Cypriot official said Nicosia had agreed with its lenders on a 20 percent levy over and above 100,000 euros at the island's largest lender, Bank of Cyprus <BOC.CY>, and four percent on deposits above the same level at other troubled banks."

http://www.cnbc.com/id/100585070

Ciaran Lynch on Pat Kenny Show

I have to agree that listening to that interview with Ciaran Lynch on the Pat Kenny show was frightening. Its even more scary when you are a financial retard like myself.
Can anyone tell me is there any action a depositor can take to protect his or life savings?. I have my life savings 300K with Rabo Bank as I regard security more important than interest, but if the Irish government decided to take a similar action to the Cypriot government, security is not an issue. Also would state savings or gold be subject to such a raid? Any advice would be greatly appreciated.

Regards Worried

It seems now that deposits up to 100 thousand euro are safe in Cyprus - and probably in the rest of the Eurozone. According to Michael Noonan they are definitely safe in Ireland. The NCA advise those with more than that amount to spread it around other financial institutions.

I presume though there is nothing to stop the government deciding that it is 100k per person that is exempt from any new levy they might like to bring in to bail out the country. I don't think the guarantee means an awful lot if that situation arises.

Hi, What about An post Savings certs (have all savings of 120k there) ? Would this be the same as bank deposits ? If same applied as Cyprus - should I split this up ? Have a great rate as I got these about 6 months ago.

Please advise.
Thanks

Ciaran Lynch on Pat Kenny Show

I have to agree that listening to that interview with Ciaran Lynch on the Pat Kenny show was frightening. Its even more scary when you are a financial retard like myself.
Can anyone tell me is there any action a depositor can do to protect his or life savings?. I have my life savings 300K with Rabo Bank as I regard security more important than interest, but if the Irish government decided to take a similar action to the Cypriot government, security is not an issue. Also would state savings or gold be subject to such a raid? Any advice would be greatly appreciated.

Regards Worried

Hi Pastorius,
For full disclosure; we are a firm of financial advisers with a high level of banking experience. We have been advising clients on this area of deposit security for the last 2 years. The developments in Cyprus in our view are a worrying precedent. Whilst the situation in Ireland is probably best described as stabilising, there is real political and economic instability in Italy and other E.U. states. Therefore in our view it is unwise to ignore the risks of a re-flare up in the Euro crisis.
There are a range of options open to both individuals and companies to protect their deposits. The options range from foreign deposit accounts, Govt. Bonds in strong core Euro countries, Insurance wrapped investment products, which would have avoided the losses imposed on Cypriot bank accounts, real assest such as Gold property etc. It is a complex area and we can not provide the level of detail in this forum which you would require to make an informed decision.
We charge a fixed fee for working with a client to advise them of the risks and their options to protect against those risks. There are other well qualified advisers out there ( many of whom post on this site) who will be able to give well informed and independent advice. Our recommendation is to contact several advisers see what the cost for the service is and their experience or credentials in this area. They will help you understand the risks and your options and even if you decide to do nothing then at least you are making an informed decision. I think the events in Cyprus means that the responsibility is now on all of us to do our research/due diligence rather than relying on blanket guarantees. The fee or costs should be considered a small investment in securing your savings and financial security. Regards Vincent

kdoc said:

It seems now that deposits up to 100 thousand euro are safe in Cyprus - and probably in the rest of the Eurozone. According to Michael Noonan they are definitely safe in Ireland. The NCA advise those with more than that amount to spread it around other financial institutions.

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Kdoc - deposits in the Eurozone are safe up to the level that is dictated by Europe (not Michael Noonan) at which a haircut gives them the required amount they need (5.7B in Cyprus). They are making it up as they go along but actually dipping their fingers into depositors savings is a step I didn't think they would take.

We do not have a deposit insurance scheme in Europe so the guarantee is worthless. Do your due diligence based on that premise and do not believe what the politicians are telling you.

Out of interest has anyone considered the use of money market products as an alternative to deposits?

A couple of advantages I see:
- It is not a deposit
- Since it is not a deposit, but a certificate of some type held by the bank on your behalf it does not form part of the assets on break up
- They are "near money", so they are easy to liquidate

A couple of disadvantages:
- no depositor guarantee
- a little more risky than a deposit

I've no idea about the tax situation...

Jim we looked at money market funds as an alternative but there as you suggest a couple of drawbacks i.e

• Very low money market rates mean almost negligible returns before costs
• In an a worst case scenario if depositors and senior bond holders are up for being hit, then there is a clear risk that interbank deposits may also be up for grab. If a money market fund used interbank deposits then this may open a potential of capital loss albeit in an extreme scenario.

We would consider using an insurance wrapper (life company) using a mix of corporate bond and absolute return funds and importantly with daily liquidity i.e you can get your cash back if needed, a reasonable alternative. Clearly there is some element of investment risk in both the corporate bond and absolute return elements, this may improve or dis-improve investment returns, but this is in our view a reasonable proposal to get deposit beating returns, keep liquidity and stay as best we can away bank deposits which if events in Cyprus were to be repeated may be open to a Govt grab. Tax for the above is straightforward exit tax.