Irish Nationwide and deposit guarantees

C

Chris

Registered User
Messages
1,323

I actually think that there should be no deposit guarantee at all. This would force banks to act more prudently, as potential depositors would look for banks with highest reserves to meet deposits. As a depositor you would have the choice of higher interest for lower reserves (i.e. higher risk) or lower/no interest for high/100% reserves and low risk.
Between deposit gurantees, intervening in bank runs and bailouts, banks have no real threat of actual insolvency/bankruptcy, which is a major moral hazard. No amount of new regulations will change that, and banks will go straight back to their old games.
 

I see your point but I do not believe that the view is defunct. People need to take more responsibility, especially for their own financial matters. As I stated above, if people wanted absolute safety of deposit, they would choose a bank that holds 100% reserves. Currently there are no such banks (not that I'm aware of), as people do not have to worry about the safety of their bank.
Don't want to stray too much off topic here, but want to reiterate that the curent financial mess is merely a symptom of the desease that is the global monetary system. Regulations and guarantees are not doing anything about the desease.
 
Here's the way Irish Nationwide did business for many years.

Customer: Hi, I'm looking for a loan, Joe Blogss told me to give you a call.

INBS Person: Drop over and we'll discuss it. Don't forget the envelope. (Told £500 was standard fee)

Customer arrives, quick chat, hands over envelope, loan approval arrives next day.



Not a myth - that's how I bought my first home!
 
kaplan said:
Brendan, you once said that the limit of 90% max €20k was sufficient - do you still hold this contrarian view?

K
Click to expand...
You want a contrarian view, try this. The first 20K of a Building Society account should be regarded as equity and therefore fair game, the balance should be regarded as funding and treated the same as any other bank deposit.

My argument? Like me, I suspect the vast majority of small account holders in INBS in September 08 were carpetbaggers. Thought I was sure for a 10K windfall at some stage for my share in the "equity" of the society. Well the society went belly up and so too should my little carpetbag just like my AIB shares. Now anybody who had more than 20K in an account was clearly more than just a carpetbeggar.
 
Duke of Marmalade said:
You want a contrarian view, try this. The first 20K of a Building Society account should be regarded as equity and therefore fair game, the balance should be regarded as funding and treated the same as any other bank deposit.
Click to expand...
You can't make a change like this retrospectively.

On a separate issue, I'm a bit confused by this quote from the Directors Report;

On 3rd February 2010, the Society and its Isle of Man subsidiary, Irish Nationwide (IOM) Ltd,, became participating institutions in the Credit Institutions (Eligible Liabilities Guarantee) Scheme 2009
Click to expand...
Was INBS not covered by this scheme long before Feb 2010? Why would the State be taking the additional liabilities for IOM transactions, which by definition, relate to non-residents?
 
@ Duke: I suggest you read the building society and deposit guarantee legislation along with EC banking directives - I think you will find building society deposits and share accounts are not considered as "equity". Your view is plainly wrong.

Carpetbaggers and dominant managers are know to have colluded to convert mutual capital for their personal benefit. Vocal supporters of demutualisation unwittingly play into the hands of dominant managers and their boards. INBS is a classic example of this phenomena.

There's a good example of carpetbagging thinking : Wonder if Brendan would care to comment on his active online promotion of demutualisation which dosen't appear to have considered the risks being run by INBS?

"Could the Irish Nationwide be broken up instead of being sold?
At the end of 2006, the break-up value of the Irish Nationwide according to the accounts was €1.2b. That is if they collected all the loans outstanding and repaid all the borrowers, they would have €1.2b left over. This year, they are rumoured to have made another .3b in after tax profits, so the break-up value is €1.5b. The bidders are offering around €1.1b.

So here is a suggestion.

Convert it immediately into a plc without seeking a quotation. The share account holders would then have shares which they could sell on a grey market or pass on.

Then start winding it down. Stop making new loans. The bulk of the loans are short term property development plays. Collect these in as they mature. Don't replace the staff. Most will leave anyway as soon as they get their shares for better paid jobs elsewhere.

The company will have lots of cash which it can use to pay out special dividiends. Eventually, it will sell its mortgage book which is quite small anyway.

That way the share account holders would get €1.5b rather than the rumoured €1.1b which is currently on offer.

Brendan (01/01/2008)


Kaplan
 
Kaplan, I was being provocative. Of course, a share deposit is not technically equity. But on the moral scale those, including myself, who where in for a quick and easy buck deserved to get toasted when they were proved wrong.
 

That's exactly the point, the public should have zreo confidence in the banking system. What kind of shaky business system is built on government protecting companies that are permanently insolvent. There is not a single bank operating under the fractional reserve system that would withstand a bank run without government intervention.
Banks messed up, they should be out of business and replaced by new banks.
 
You must log in or register to reply here.
Menu
Log in
Register