Should BOI customers be worried?

Amnesiac_ie

I come to this forum as somebody who is pretty ignorant about economics in general so please go easy on me!

As a Bank of Ireland customer with a current account and savings with the bank I'm starting to get worried about the sliding share price. I understand that as the second largest bank in the country it is unlikely the government would stand by and allow the bank to collapse but as a customer should I be worried or considering switiching my banking to another institution?

Explain your worry?

That you lose your deposit?
100% government guaranteed.

That your current account will be closed?
No chance.

That the bank will be taken over?
So what if it is,it won't affect your day to day banking.

I repeat what are your worries?

Frankie Lee

The only thing to worry about is increasing bank charges which seems inevitable for most banks.

cavedave

Black Briar

That you lose your deposit?
100% government guaranteed.

Not that the government is 100% guaranteed though. If something like Iceland happened our government would not have enough money to pay back all deposits. There is little reason to suppose that multiple Irish banks would face runs though. And being in the Euro means our currency is not insignificant the way the krona is.

A question that will be asked is "do I need to pay my mortgage to BOI if they go bust*". I'm pretty sure the answer is yes but there may be loopholes I dont know about.

*not that I'm claiming that BOI are going to go bust. And take everything I saw with a pinch of salt.

Hello?
Iceland are not in the EU and hadn't untill recently access to funding from the ECB.
Those with that access could in a liquidity crisis always have access to ample quantities of emergency cash.

This isn't after hours I'm starting to worry myself now...
Not about the banks but about the pervasiveness of absolute twaddle I'm reading in two threads on this forum.

It's up there with the earthquake/volcano threads I've seen on the weather board.

cavedave

Black Briar

Hello?
Iceland are not in the EU and hadn't untill recently access to funding from the ECB.
Those with that access could in a liquidity crisis always have access to ample quantities of emergency cash.

Agreed there are many reasons why Ireland is in a much better position then Iceland was. One of which Ive mentioned. There are parallels however. The large bank liabilities to GDP ratio being one.

If the ECB were so eager to help Ireland the government guarantee would not have been needed.

This isn't after hours I'm starting to worry myself now...
Not about the banks but about the pervasiveness of absolute twaddle I'm reading in two threads on this forum.

It's up there with the earthquake/volcano threads I've seen on the weather board.

If I have said a factually inaccurate statement please correct me.

Well it wasn't factual to speculate that Icelandic banking crisis could happen here with the same ramifications as we have access to the powerfull ECB.

That kind of thing I can say categorically could never happen here.

If the ECB were so eager to help Ireland the government guarantee would not have been needed.

They don't have to be eager,they just need to be asked

Amnesiac_ie

For those of us with little knowledge of economics, the falling share price and media coverage of the situation does cause worry. I've always stayed away from what I've thought as "risky" investment of my money. I've no problem admitting my ignorace of all things economic and given my ignorance I've relied on Bank of Ireland for a lot of financial advice about day to day banking and savings.

Now I see that the bank is in considerable difficulties. I understand that the government has guaranteed deposits way beyond the value of my investment but I can't help but feel some unease.

I'm sorry if this is too "low-brow" for this forum but it has been nice (and reassuring!) to get some independent advice that is better informed than "After Hours"!

Baird

cavedave wrote: »

Not that the government is 100% guaranteed though. If something like Iceland happened our government would not have enough money to pay back all deposits. There is little reason to suppose that multiple Irish banks would face runs though. And being in the Euro means our currency is not insignificant the way the krona is.

A question that will be asked is "do I need to pay my mortgage to BOI if they go bust*". I'm pretty sure the answer is yes but there may be loopholes I dont know about.

*not that I'm claiming that BOI are going to go bust. And take everything I saw with a pinch of salt.

cavedave wrote: »

Agreed there are many reasons why Ireland is in a much better position then Iceland was. One of which Ive mentioned. There are parallels however. The large bank liabilities to GDP ratio being one.

If the ECB were so eager to help Ireland the government guarantee would not have been needed.
If I have said a factually inaccurate statement please correct me.

For crying out loud where on earth do people get this stuff from?
Let me say categorically say this, no country in the EU has enough money in
its government to cover all the lending their banks have given out.
As an example UBS the biggest bank in switzerland could wipe out the countrys GDP with a 16% fall in its asset base.
Thats how banks work, they leverage themselves.
Iceland will not happen in Ireland and to say it could is plain wrong.
We have the lowest debt/gdp ration in the EU, we are also a long way off
the levels some other countries are leverage to their banks, namely the UK, Switzerland, Germany, US etc etc

And yes you have to pay back your mortgage if a bank goes bust, its debts
will be nationlised or securitised and sold off.

Amnesiac_ie wrote: »

For those of us with little knowledge of economics, the falling share price and media coverage of the situation does cause worry. I've always stayed away from what I've thought as "risky" investment of my money. I've no problem admitting my ignorace of all things economic and given my ignorance I've relied on Bank of Ireland for a lot of financial advice about day to day banking and savings.

Now I see that the bank is in considerable difficulties. I understand that the government has guaranteed deposits way beyond the value of my investment but I can't help but feel some unease.

I'm sorry if this is too "low-brow" for this forum but it has been nice (and reassuring!) to get some independent advice that is better informed than "After Hours"!

Your question is definitely not too low-brow at all, its a question im sure a lot
of people are asking. Ill put it to you this way, if worst came to worst and
BOI got itself into serious trouble, it will be bailed out in some form. Your
deposit is government guaranteed which is probably the safest place it can
be in the current environment.
Only shareholders in banks and people looking for money have to be concerned at the moment.

cavedave

Baird

For crying out loud where on earth do people get this stuff from?

(1) a small country with (2) a large internationally exposed banking sector, (3) a currency that is not a global reserve currency and (4) limited fiscal capacity

As I said at least we dont have (3).

As a member of the euro area, it would have been much easier and cheaper for Iceland to defend itself against speculative attacks on its banks - provided the banks and its government were indeed solvent and perceived to be so.

This is a proviso that holds for Ireland also.

Baird

Let me say categorically say this, no country in the EU has enough money in
its government to cover all the lending their banks have given out.
As an example UBS the biggest bank in switzerland could wipe out the countrys GDP with a 16% fall in its asset base.
Thats how banks work, they leverage themselves.

It is also how banks don't work and drag their country down with them. Using Switzerland as a bastion of safety may be unwise.

The country of 7.5 million people houses SFr3.46trn of bank deposits, almost seven times its gross national product. That is less than Iceland, whose deposits are nine times GDP, but much higher than the UK where deposits are close to double GDP.

Ireland has a similar ratio as the uk

Baird

Iceland will not happen in Ireland and to say it could is plain wrong.

{citation needed}

Baird

And yes you have to pay back your mortgage if a bank goes bust, its debts
will be nationlised or securitised and sold off.

That is my understanding of what would happen. There may be some odd loophole I do not know of though.

kippy

Hmm.....
I'm a bit confused as to why the relatively low share price of Bank of Ireland and indeed other Irish banks would be of any Major concern to its customers.
(its investors yes but not its customers surely?)
While I would speculate that the banks which are displaying the lowest share prices are very exposed to commercial property loans, I would also speculate that they also have enough capital to continue to operate in the medium term at the very least. The most recent announcment from BoI of a drop in profits of 30 odd percent in the last quarter seems to be the main reason for loss of investment in its shares (lack of the dividend).

It is at this juncture that I would speculate even deeper to the reasoning behind all this talk of recapitalisation. The shareholders in the bank would of course be very very worried at the loss in value of their shares and also in the likelyhood of a takeover....I do think that anyone and I mean anyone who is advising the government on what to do next needs to declare their (vested) interests if any exist.

I could be completely wrong but I think we'll see how exposed these banks are early next year. At the moment though I dont see why customers should be worried about a low share price and I dont think the government should rush in to prop up banks which may not need it at all yet(especially when they are not asking for it)
Kippy