RTE: DSB Collapse & The Dutch Deposit Guarantee Scheme

The surprising collapse of DSB bank today has shed some interesting light on how the Dutch deposit guarantee works.

As per the Financial Regulator website, in Ireland, Rabo falls under the Dutch deposit scheme.

There are some interesting points in this RTE Business article on the DSB collapse, about how the Dutch deposit guarantee works.

1) Debts are offset against deposits

Though deposits are guaranteed up to €100,000, the central bank's website says they are also offset against debts. A customer who has both savings and a mortgage with the bank, in other words, will have their savings credited against the mortgage balance and will not be able to get cash back.

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2) There is a 3 month wait for compensation

customers will have to wait up to three months to get their money back via the state's deposit guarantee scheme.

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3) ATM access is frozen after 3 days.

Customers of the bank are no longer able to access their money except by ATM withdrawal, which will only be available until midnight on Wednesday.

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One other interesting quote ...

DSB competitors are likely to feel the pain too, as the deposit guarantees are funded partly by other Dutch banks

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Nothing any different here from what is likely in Ireland. No?

All the deposit schemes are organised under the aegis of the EU/ECB, I believe.

Over 90 banks have collapsed in the USA so far in 2009. The procedures and processes are consistent, clear and well tested.

There have been a small number of EU banking collapses. The process have been different, inconsistent and have shown different national intricacies and different government responses to deposit holders.

I don't think the Dutch example is necessarily what would happen in Ireland and nor is a replication of what happened in other EEA countries. E.g. Northern Rock or Bradford and Bingley where savers kept 100% of their deposits.

The most obvious difference is the greater deposit protection currently offered under the Irish guarantee over the Dutch guarantee.

Fungus, that is only until next September or until the new deposit guarantee bill is enacted (is my understanding). The new deposit guarantee will be 100k, according to the draft bill. I would suggest to anyone renewing fixed term deposits that they split their deposits into sub-100k chunks or open joint accounts where appropriate.

fungus said:

I don't think the Dutch example is necessarily what would happen in Ireland and nor is a replication of what happened in other EEA countries. E.g. Northern Rock or Bradford and Bingley where savers kept 100% of their deposits.

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Northern Rock and Bradford and Bingley didn't go bankrupt, they were nationalised with the effect of the UK treasury guaranteeing all deposits, and no need for the UK deposit guarantee scheme to kick in. DSB bank has been taken under the control of the Dutch Central Bank, whether it will be allowed to go bust or be nationalised is not certain yet.
I would imagine that the points you highlighted in your original post are common practice, and they seem fair to me.

I have a copy of BOI rules on deposit protection pre the 100k increase. Apart from ours initially being banded up to 20k there is not much difference. However I don't see the ATMs staying up for 3 days, they would crash under the load/run-out of money in the first few hours.

BTW Section 8 of BOIs document states "Setting-Off of debts - In normal circumstances debts owed to the institution by the depositor will be deducted from the aggregate deposit balance to be made to the depositor."

In other words it is safer to keep the to age-old rule of not having your savings and mortgage/loans in the same bank.