Current financial crisis...should we bail out?

Richard Dower

With regards to the current turmoil in the banking sector, AIB dropped 7% today on there share price. How much of a danger is there of banks collapsing in Ireland?, does anyone really think our crappy government would step in to save AIB if they went to the wall?

Should we clean out our bank accounts now to be safe?

thefinalstage

Richard Dower wrote: »

With regards to the current turmoil in the banking sector, AIB dropped 7% today on there share price. How much of a danger is there of banks collapsing in Ireland?, does anyone really think our crappy government would step in to save AIB if they went to the wall?

Should we clean out our bank accounts now to be safe?

No. Do not do that. That would kill the banks.

mike65

Don't panic your money is safe - the big Irish clearing banks have vast profits (AIB 2 billion last year) and do not have anything like the kind of exposure (as a % of buisness) that Northern Rock and some US banks have to bad-mortage debt.

Mike.

chump

mike65 wrote: »

Don't panic your money is safe - the big Irish clearing banks have vast profits (AIB 2 billion last year) and do not have anything like the kind of exposure (as a % of buisness) that Northern Rock and some US banks have to bad-mortage debt.

Mike.

i think cash is king here

what good are profits if they were invested in what is now regarded as junk?

what happens if other banks refuse to lend them money as they aren't convinced they are liquid enough to repay the money?

personal opinion; we won't see any major consumer irish banks go to the wall, if it comes to it they'll be rescued without doubt, by a combination of government and/or larger UK/EU/US banks

Gillo

Richard Dower wrote: »

Should we clean out our bank accounts now to be safe?

It's scare mongering like that which cause's the problem. I know it's a different set-up but thats what caused the major problems in Northern Rock at the end.

board om

Richard Dower wrote: »

With regards to the current turmoil in the banking sector, AIB dropped 7% today on there share price. How much of a danger is there of banks collapsing in Ireland?, does anyone really think our crappy government would step in to save AIB if they went to the wall?

Should we clean out our bank accounts now to be safe?

i always wondered how situations like northern rock got so bad so quickly. like what frame of mind people must be in to go and take all their money out and not realise that in doing that they are actually causing the damage. but this is the first time i have seen it from the very begining.

in other words it is completely unnecessary over the top thoughts and comments like the above that start those kinds of problems.

leeroybrown

As the previous poster says the suggestion is just scaremongering. I can see more hits in share price and reduced profits but in this case it's non-guaranteed investments, pension funds and interest rates that are going to take a hammering. I couldn't even guess the potential effect on the government's coffers due to defined benefit pension funds. That's not fun but I'd suggest that it would take a hell of a lot more to damage mature banks that are properly founded on more than just some fickle hedge funds or high-risk capital.

But for the OP's choice of 'worried looking' smileys I'd have reported the post.

Richard Dower

Gillo wrote: »

It's scare mongering like that which cause's the problem. I know it's a different set-up but thats what caused the major problems in Northern Rock at the end.

Tell that to the employees of Bear Stearns who lost everything!

Richard Dower

leeroybrown wrote: »

As the previous poster says the suggestion is just scaremongering. I can see more hits in share price and reduced profits but in this case it's non-guaranteed investments, pension funds and interest rates that are going to take a hammering. I couldn't even guess the potential effect on the government's coffers due to defined benefit pension funds. That's not fun but I'd suggest that it would take a hell of a lot more to damage mature banks that are properly founded on more than just some fickle hedge funds or high-risk capital.

But for the OP's choice of 'worried looking' smileys I'd have reported the post.

Why?...it's a legitimate posting and voicing my legit concerns about the current climate, i'm watching Bloomberg and CNBC for the latest info to see if things get really bad and start to effect things here....it's headline news, RTE are covering it at the top of there bulletins.

You seem to be suggesting my posting in scare mongering or taking the pee...which i'm not

leeroybrown

Richard Dower wrote: »

Tell that to the employees of Bear Stearns who lost everything!

Has anyone lost 'everything' yet? Yes the bank is in a mess and people will undoubtedly lose jobs but JP Morgan Chase (backed by the Fed) intervened and it's still a solvent bank.

Richard Dower wrote: »

Why?

Even if it's a genuine query there's more than a hint of melodrama in the post.

ixoy

Northern Rock, from what I recall, had a lot of its own capital locked up in much more spurious investments. Other banks, such as AIB, generally have spread their capital and interests over a much wider portfolio than Northern Rock so are better protected against any credit crisis.

There's also some protection against your finances if a bank goes under for accounts here - I think if your account collapsed in the bank, the government would, upon stepping in, cover you for what you've lost minus ten per cent (up to a maximum return of €20k). Thus if you're being particularly paranoid, the maximum you'd store with one bank is €22,222 (i.e -10% = €20k). You'd spread the rest among other institutions. Don't think there's a need for this at all, but it might be worth further investigating if you're that concerned.

dudara

Moved to Banking & Pensions etc

dudara

LouOB

Back in the 80's the government bailed out AIB when oil prices and interest rates were through roof - 80% i was told
If banks were to go bust whole of Ireland would

You have been watching too many US reports on CNN and CNBC
Watch RTE news - sure its all grand

BuffyBot

I wouldn't head for any lifeboats just yet..

board om

ixoy wrote: »

Northern Rock, from what I recall, had a lot of its own capital locked up in much more spurious investments. Other banks, such as AIB, generally have spread their capital and interests over a much wider portfolio than Northern Rock so are better protected against any credit crisis.

There's also some protection against your finances if a bank goes under for accounts here - I think if your account collapsed in the bank, the government would, upon stepping in, cover you for what you've lost minus ten per cent (up to a maximum return of €20k). Thus if you're being particularly paranoid, the maximum you'd store with one bank is €22,222 (i.e -10% = €20k). You'd spread the rest among other institutions. Don't think there's a need for this at all, but it might be worth further investigating if you're that concerned.

thats right. if i remember correctly that was one of the main differences between banks and building societys. banks are insured by the government so if they go bust with your money you are covered. when building societys go bust you can lose everything.

i could be wrong. i could also be over simplfying things. but either way to my knowledge the banks are covered against this.

tHE vAGGABOND

I think some folks should go and watch Its a Wonderful Life

Henry Ford III

LouOB wrote: »

Back in the 80's the government bailed out AIB....

Because of losses incurred in the I.C.I. debacle (general insurance). We are still paying for his btw in the government insurance levy.

They grew however and the Rusnack/Allfirst w/o was handled without too much pain.

mvpr

Have AIB lowered their profit forecasts for 2008?
Despite what was happening worldwide last year, they still made €2.5bn ie - they aint closing down anytime soon.

Pretty much the same applies for BOI.

Anglo on the other hand...

TBH, I think its a good time to take a punt on either BOI or AIB shares. Gut feeling - nothing more...

LuckyCharms

Both Boi and Aib are up over 10 % on the back of the Fed .75% rate cut.That is quite a significant jump but it's only a desperate effort to try and stem a full blown recession so i think it is safe to say it is gonna get worse before it gets better unless you got in before the cut was announced.

Looking on the brightside, good time for a holiday in the states

parsi

Henry Ford III wrote: »

Because of losses incurred in the I.C.I. debacle (general insurance). We are still paying for his btw in the government insurance levy..

Funny really isn't it ? AIB bought ICI which was a pig in a poke. AIB ran to Charlie and he bailed them out. WE are still paying for it but AIB is making monstrous profits...

Same with Northern Rock - they made the bucks over the years and then the UK tax payer has to bail them out. Strange how capitalism suddenly runs home and asks mammy for a handout when they foul up but refuse to pay mammy a few bob during the good times.

is_that_so

Gillo wrote: »

It's scare mongering like that which cause's the problem. I know it's a different set-up but thats what caused the major problems in Northern Rock at the end.

Richard Dower wrote: »

Tell that to the employees of Bear Stearns who lost everything!

Northern Rock tended to get their funds in the open market so when the credit crunch came they ran into problems, which in turn led their customers starting a run. It was also very badly-handled.

Bear Stearns on the other hand was an investment bank and got too greedy by taking on too much investment associated with the US sub-prime market.

Share prices do not equal liquidity problems. Vodafone are still below the level they were when they bought Eircell. Oracle, the 2nd largest software company are at 50% of what they were four years ago. Neither have been wilting flowers in profit terms as a result.

As for Irish banks, well as posted they've had record profits. They are also legally required to have a high level of reserves (60% AFAIK -but I am open to correction here). The Irish stock market also has a high financial weighting so any financial hits end up being magnified.
Even if some of them do end up in "difficulty" there'll be a bigger one out them to hoover them up as in the case of Bear Stearns.

So bail out if you wish but there's only so much a mattress can hold. :rolleyes:
Financial systems will right themselves in due course, but don't confuse the greed and fear of stock markets with the health of financial systems.