What would happen if a bank collapsed?

tommy21

I've it on heresay in accounting circles that a main national bank is close to complete collapse (though it is arguable how long it has been so!)If so, what happens to deposits in the bank? What happens if your employer pays employees via this bank? :eek:

edit: hypothetically of course.

Ciaran500

Spreading rumours like this causes banks to collapse.

average_runner

Not sure where you been for the last 2 years but the government backs the savings to a certain value

tommy21

average_runner wrote: »

Not sure where you been for the last 2 years but the government backs the savings to a certain value

I know, to a €100,000 right for the lay person? Sorry I should have been a bit clearer. I suppose I meant what would happen broadly - what mechanisms would go into action?

tommy21

Ciaran500 wrote: »

Spreading rumours like this causes banks to collapse.

I take your point, but in fairness have not named the bank in question.

average_runner

And in fairness there is only 2 main national banks and one of them is owned by the goverment!!


Rumours dont help and especiallydont help people that work there

r3nu4l

The question should really be rephrased as 'What would happen if one of our major banks was allowed to collapse?'. further questions such as 'What mechanisms would be used to limit fallout?' and 'Would this trigger the collapse of other institutions in Ireland or abroad?' would also help.

Keep it hypothetical

th3 s1aught3r

tommy21 wrote: »

I've it on heresay in accounting circles that a main national bank is close to complete collapse (though it is arguable how long it has been so!)If so, what happens to deposits in the bank? What happens if your employer pays employees via this bank? :eek:

I would imagine the employer would be prudent to withdraw their funds from the bank, if they were sure about the rumours
I know there is a guanantee but how good it is is another question, seeing as the country is broke and all

dilallio

This is probably a stupid question.

Does the Bank Guarantee guarantee money in a Current Account or is it Savings Accounts only. Wondering if in the event of a collapse, could the banks / government use this as a loophole to avoid paying back money lodged in Current Accounts.

tommy21

average_runner wrote: »

And in fairness there is only 2 main national banks and one of them is owned by the goverment!!


Rumours dont help and especiallydont help people that work there

Fair point but what about the people who have savings in them? Who depend on them? Its not like we have any concrete (honest) sources of truth from many other outlets.

tommy21

r3nu4l wrote: »

The question should really be rephrased as 'What would happen if one of our major banks was allowed to collapse?'. further questions such as 'What mechanisms would be used to limit fallout?' and 'Would this trigger the collapse of other institutions in Ireland or abroad?' would also help.

Keep it hypothetical

True, amend title/orig post if you want, should have kept this hypothetical.

Scofflaw

tommy21 wrote:

True, amend title/orig post if you want, should have kept this hypothetical.

Have done so - I presume the rumour is based on the spike in ECB overnight borrowing, which does have several other more likely explanations.

moderately,
Scofflaw

Tea drinker

Ciaran500 wrote: »

Spreading rumours like this causes banks to collapse.

too late!
The Minister for Finance has secured High Court orders permitting the immediate transfer of some €12.2 billion deposits from Anglo Irish Bank and Irish Nationwide Building Society in the latest stage of a process aimed at achieving the orderly and speedy winding down of both institutions.
http://www.irishtimes.com/newspaper/breaking/2011/0224/breaking47.html

Scofflaw

Tea drinker wrote: »

too late!
The Minister for Finance has secured High Court orders permitting the immediate transfer of some €12.2 billion deposits from Anglo Irish Bank and Irish Nationwide Building Society in the latest stage of a process aimed at achieving the orderly and speedy winding down of both institutions.
http://www.irishtimes.com/newspaper/breaking/2011/0224/breaking47.html

Not exactly a collapse, though.

What happens if your employer pays employees via this bank?

Then they need to make alternative arrangements PDQ.

cordially,
Scofflaw

Saadyst

If a thread on the boards Irish Economy forum could cause a bank collapse... or be the final straw...

Tipp Man

Ah the good old deposit guarantee

A guarantee from a government that is flat out broke to meet deposits of the citizens.

It seems like this is a recurring question at the moment but where would the government get the money needed (80-100 billion i believe) to give all the deposits back??

More than likely the citizens would get a government IOU which wouldn't be worth the paper it'd be written on

bcmf

Would I be right in saying that ,HYPOTHETICALLY of course, if an Irish bank were to fail the consequences in relation to the Euro could be near fatal?
Hence maybe why the EU would prop up a 'working' bank regardless of the cost.

Scofflaw

bcmf wrote: »

Would I be right in saying that ,HYPOTHETICALLY of course, if an Irish bank were to fail the consequences in relation to the Euro could be near fatal?
Hence maybe why the EU would prop up a 'working' bank regardless of the cost.

Yes and no. Directly, the effects aren't too bad for the EU - even though the Irish banks owe the ECB a lot of money, the banks do have assets (and after that, they have government guarantees). The issue is more that if a bank is seen to be allowed to fail, having been propped up by an EU government, then that casts doubt on the long-term survival of every other bank in Europe that's currently being propped up by a government - and that's a lot of banks.

That's why, at this stage, the ECB would prefer to see no failures of government-backed banks. A wind-down, on the other hand, should be fine.

cordially,
Scofflaw