What currency are our bank deposits in?

[Persius]

In general, are bank accounts in Ireland denominated in Euro, or in the national currency of Ireland (which currently happens to be the Euro)?

This question camt to mind when thinking about all the stuff written about the possibility of an economic crash or property price crash in Ireland. I don't wish to get into a debate about the likleyhood of an economic crash or whatever, but rather just consider one possible consequence - Irish withdrawl from the Euro.

Despite some talk to the contrary, I believe it is legally technically possible for Ireland to withdraw from the Euro at any time and re-introduce a national currency. I guess another option would be to join a sterling monetary union with the UK, or peg the new national currency to the US dollar. However for the sake of arguement, lets assume that Ireland decides to withdraw from the Euro and introduces a new free-floating currency called the Punt.

So what would happen to any money you had on deposit in the bank - either with the likes of Northern Rock or Rabo Direct, or with your local house bank like AIB or BoI? Would these accounts also automatically be converted to the Punt, as the legal tender of Ireland? Or would they remain in Euro as the currency in which they were opened?

Anyone look at the T&Cs for Rabo Direct or Northern Rock when opening accounts there? Or have an idea what their house bank T&Cs are?

 

[KalEl]

On the day of the Euro changeover deposits converted at a set rate-.787564 I think?
Something like that would happen

 

[montano]

I don't know for sure. But I would guess that it would depend on the way the government handled it. Statute law can change terms in contracts, for example. As far as I know, at the time of the euro changeover, legislation was passed that included the requirement that euros replace punts, even in existing contracts. If you and I agreed a contract in 1997 to pay me in punts in 2007, you can't now pull out punts in fulfilment of the contract. The law has substituted in euros, so you must pay in euros, even though we hadn't even conceived the concept at the time we made our agreement.

I'd classify the risk of loss due to such an event as one that is difficult to helpfully guard/insure against. In a list of things to take into account when investing that includes charges, diversification and attitude to risk, I personally would rank worrying about the particular point you make quite low. It could well have a big impact if it happens, but I don't think there is a lot you can do about it in advance.

 

[Persius]

Thanks montano. Intersting point re statute law and contracts. Bearing that in mind with the corollory question "what currency are debts in?", I guess mortgages and other debts would be converted to the national currency, assuming a similar approach to Euro withdrawl was taken. Wonder what all the Wall street investors who've allegedly been sold all the Irish mortgages (as securitisations or whatever they call it in technical jargon) would think about that.

As regards the comment

...It could well have a big impact if it happens, but I don't think there is a lot you can do about it in advance.

you could open a euro bank account in another country of the eurozone. If you thought there was a risk of Ireland leaving the Euro, and the newly introduced Punt subsequently devaluing, then it might be worth moving funds in advance to, say, a German or Dutch bank. This assumes that the Euro itself doesn't disappear, just that Ireland withdraws from it.

Which of course is why I mentioned Rabo Direct in my previous post. I'd be cusious as to their exact standing on this. Are the accounts governed by Irish or Dutch law? Would they offer a "guaranteed Euro" account based in the Netherlands?