Deposits in UK banks and your cover in an Irish default

tommy21

Sorry to ask a question that's been put across by many in various different ways - I am still unsure of the answer and would appreciate your insight.

I have a sum of money I wish to deposit - its either going to RaboDirect or Nationwide UK (Ireland) - the money will be deposited from within Ireland. If an Irish default was to occur, and the state deposit protection scheme collapsed, would my deposit still be covered by Rabo's Dutch protection policy or Nationwide UK (IReland) UK proteciton policy? Or would the fact that it was done from within Ireland mean my deposit might be devalued back to punts (if we left euro) or raided by the Irish state? Purely hypothetical and not trying to instill fear in people, just want to know safest option.

BuffyBot

From rabodirect.ie

Rabobank is a member of (a) the Dutch Deposit Guarantee System and (b) the Dutch Investor Compensation Scheme, implemented by the Financial Supervision Act 2007 and related decrees. Broadly speaking, the Dutch Deposit Guarantee System deals with money - deposits in current and savings accounts - while the Dutch Investor Compensation Scheme is about securities held on your behalf by Rabobank. The Deposit Guarantee System and the Investor Protection Scheme will only become applicable if Rabobank enters into bankruptcy proceedings. However, Rabobank is a triple-A rated bank and consistently maintains these ratings. This is the highest level of creditworthiness that a bank can have. RaboDirect is the brand name of the internet bank that is part of Rabobank's Dublin branch. Accordingly RaboDirect has full triple-A status.

From Nationwideuk.ie

Lodgements made with Nationwide UK (Ireland) are covered by the UK’s Financial Services Compensation Scheme (FSCS). Payments under the FSCS are limited to a maximum of £85,000 per individual investor’s total deposits (or £170,000 if a joint account). Most investors are covered, including individuals and small firms. Although most shares and deposits in UK building societies are denominated in sterling, deposits in euro denomination are also covered. Euro accounts will be compensated in sterling based on a euro to sterling conversion rate determined when the compensation scheme is invoked and payment will be made within seven days of the date that the scheme is invoked. Individual customers are restricted to one maximum amount of £85,000 across an organisation.

So they're covered by their respective schemes. However, your deposits are still in Euro. As such they would have to convert the amounts into whatever currency you think their might be should the time come, (which it will not) in order to keep doing business - and should they keep it in Euro, you would still have to exchange that anyway in order to spend any of your money..

tommy21

Thanks for that, understand it better now.

Bertie Bassett

If there is an Irish default, how likely is it that Ireland would break away from the Euro and set up its own currency?

fred252

Bertie Bassett wrote: »

If there is an Irish default, how likely is it that Ireland would break away from the Euro and set up its own currency?

unlikely but possible. realistically we need a currency devaluation.

wildefalcon

Another concern would be if in the event of a default whether Irish Resident Deposits in non Irish institutions would be seized by the non Irish Institutions Government.

I dimly recall something about the UK Government seizing the deposits of Iceland resident account holders in UK institutions using the terror legislation.

If I were you I'd have the money in an overseas Institution, with a matching overseas address.

I'm moving my money to the UK, and will be using a UK address. It isn't a lot of money, but it's mine and I worked bloody hard to earn it, I'll be damned if I'm going to chance it, or worse still, rely on the Irish State to look after it.

Solair

It's highly unlikely that we could leave the Euro even if we wanted to as our debts are denominated in Euro and we now owe most of the money to the ECB via emergency loans.

So, they're in as deep as we are.

Basically it's too late to leave. However, I still think the Eurozone and ECB will have to come up with a proper solution to the entire debt crisis. Spain's going to tip into the same position as Ireland within a few months. Portugal's already there and it's quite likely that Belgium, Italy and even Austria may follow too.

All this talk of 'contagion' is really utter nonsense. The Euro system has basically failed and needs to be urgently modified to deal with this huge debt crisis.

The only way I can see out of it will be a devaluation of the Euro itself as there is just way too much debt in the system in general to be paid down at current levels.

Ireland's crisis is only the very spectacular tip of the iceberg.

I also suspect that Japan's yet to send a global financial shock wave across the markets in a few months. It had a debt:GDP ratio of close to 225% before the tsunami. That could easily hit 325% if they have to borrow, which they undoubtedly will, to rebuild.
There has also been enormous damage to infrastructure in Japan, particularly power generation, which will take months/years to get rebuilt properly that's impacting on Japanese manufacturing output. Then, throw in the world's worst nuclear disaster since Chernobyl occuring within a stones throw of one of the largest financial centres in the world and you've a recipe for a mess.

Then add the instability in various parts of the Middle East and North Africa, rising fuel prices etc etc..

I don't think 2011 is going to be a 'steady as she goes' year for the Euro, Ireland or anyone else.

wildefalcon

Bertie Bassett wrote: »

If there is an Irish default, how likely is it that Ireland would break away from the Euro and set up its own currency?

Unless inflation in the Euro zone goes mad (making all our loans feel smaller) the chance of default is very high, in my view (for what it's worth).

Our total debt, including mortgages, personal loans, as well as the fancy bank stuff, is over a trillion Euro.

If you were to spread it evenly each Irish resident would owe 100 times as much as the same US citizen.

We can't afford it. Simple as that, so the only way out is to default/renegotiate/restructure.

Changing currency is the smartest way of doing this - we can then devalue the currency, which makes our exports cheaper, our loans (which we'd convert to our currency) much less.

Of course, our savings would also be chopped - unless overseas in a different currency and address.

Solair

If Ireland does 'default' it will be called 'restructuring' and I don't honestly see the ECB allowing a situation to occur where bank deposits would be touched. Remember, we aren't really a stand-alone country anymore in regards to our fiscal / banking system. The ECB is our central bank, even if it's playing hardball at the moment it still has to ultimately ensure the stability of the Euro system which includes preventing states from self-destruction.

We're primarily in an ECB/European Commission rescue plan, the IMF is only a small part of it and arguably should probably not be there at all if the Eurozone is to be taken seriously as a quasi-federal bloc.

To me the fact that Eurozone basically called in the IMF just says that the EU is either immature, incompetent or that the Euro is a fiscal failure already.

I mean, it's a bit like the Fed / US Federal Govt. insisting that Nevada calls in the IMF for a % of its loans.

I don't see the ECB / European Commission showing that they're remotely capable of cleaning up what is effectively their own mess. The Irish, Spanish, Portuguese, Greek, as well as the Belgian, Austrian and what will ultimately be the German, French and other debt crisis were brought about largely by lack of adequate regulation and a politically driven crude attempt at merging banking systems without proper controls being put in place to prevent massive distortions.