Money in bank and market crash

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BlackE

Registered User
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Hi all,

I'm just wondering what are the thoughts of the people with cash in the bank and downturn of the market today. Are we headed for a recession?
Is it a good time to pull money out of the bank and keep cash at home?

I literally only signed up for a few investment stocks 2 days ago and have lost €100 already. Obviously I wasn't closely watching the news on the stocks.

The bank (aib) only guarantees upto 100,000 if they liquidate, the remaining loss is for you to shoulder alone.

What is the general feel for people?
 
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Fortune:
Apparently that's what happened at the time of the great depression didn't it? The banks had no money to pay out.
I'm just asking what other people are thinking and any strategies to mitigate the losses.
 
If you're concerned about the risk of bank failure, a rational strategy is to divide your deposits between a number of banks.

This mitigates the risk of failure by spreading it, If you divide your cash between, say, four different banks, you only risk losing it all if all four banks fail.

Plus, the deposit guarantee scheme covers up to €100,000 per investor per credit institution. If you put €400,000 into a single credit institution and it fails, you only get €100,000 from the Deposit Guarantee Scheme. But if you put €100,000 into each of four different institutions, even if they all fail you will get back your €400,000.

This is certainly a better strategy than keeping large amounts of cash at home. Bank failures are rare; domestic burglary is common, as are house fires and other cash-destroying events. And I am reasonably certain that your home insurance policy will not cover you for large amounts of cash kept at home.
 
BlackE said:
I literally only signed up for a few investment stocks 2 days ago and have lost €100 already. Obviously I wasn't closely watching the news on the stocks.

The bank (aib) only guarantees upto 100,000 if they liquidate, the remaining loss is for you to shoulder alone.
Click to expand...

This post mentions buying "investment stocks", which I presume means shares.

Then the post mentions the €100,000 guarantee.


Be careful here, the €100,000 guarantee applies to deposits in financial institutions, not to holdings of other financial assets.
 
Just because we are in a stock market crash doesn't mean it's the same as 2008, the banks didn't go on mad lending sprees like the early 2000s, in fact heavy regulation has meant they needed to keep large reserves that they couldn't lend out. The banks are safe although the government revenues could be hit in next few years due to falls in corporation tax, the government's might be looking for the banks to take on more government debt in future possibly.
Struggling businesses will need government support or relief from taxes in order to survive aswell which will be costly so it's not really a banking problem this time
 
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Recession does not equal banking crisis. One of the big complaints you'll see about Irish banks is that their return on equity is among the lowest in the developed world. The reason for that being the very significant capital requirements set on them after the "late unpleasantness."

So our banks are regulated out the wazoo for the very specific purpose of avoiding a post 2008 type scenario.

Your deposits are then backstopped by the central bank and, fundamentally, the Euro system. Whatever about the US losing its sense of reason, the European Central Bank has done the "all it takes" thing before and is run by fundamentally sane people. If there was a contagion into the banking system from all this trade war stuff, I'd expect my €100,000 deposit per person per institution to be as safe as any money can be in this world.

If you have more than €100k per institution, it wouldn't be a terrible idea - at any time, really - to spread the deposits around.

Money in any sort of risk asset right now is another matter, for another thread.
 
Tom that is very a sophisticated response.

Thank you all for sharing your thoughts and advices.
 
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