So our savings are next for the chop!

professore

http://www.telegraph.co.uk/finance/financialcrisis/9952979/Cyprus-bail-out-savers-will-be-raided-to-save-euro-in-future-crises-says-eurozone-chief.html

This just keeps getting worse. The EU head honchos really don't know what they are doing.

hmmm

professore wrote: »

http://www.telegraph.co.uk/finance/financialcrisis/9952979/Cyprus-bail-out-savers-will-be-raided-to-save-euro-in-future-crises-says-eurozone-chief.html

This just keeps getting worse. The EU head honchos really don't know what they are doing.

If a bank gets into trouble, who would you like to pay for saving it? There usually isn't enough money available by wiping out bondholders and shareholders, so someone else has to pick up the rest of the tab.

Personally I think it is mostly right that the taxpayer picks up the tab*, upto a point (say, a 250k deposit guarantee). But you can't have it both ways - you can't say "taxpayers shouldn't pay for a collapsed bank" and then on the other hand say "our deposits must be kept 100% secure".

* Because "ordinary" depositors cannot be expected to be financially sophisticated enough to appraise the riskiness of a bank - so it is right that governments regulate the deposit taking banks on behalf of society, and it is right that government takes the hit if they get the regulation wrong.

Cookie_Monster

hmmm wrote: »

* Because "ordinary" depositors cannot be expected to be financially sophisticated enough to appraise the riskiness of a bank - so it is right that governments regulate the deposit taking banks on behalf of society, and it is right that government takes the hit if they get the regulation wrong.

why not? People should be reasonably aware of the macro economic climate and the general performance of banks and business they interact with.
There seems to be no issue telling someone to research the car they buy, or TV or a suitable pair runners, why should picking a bank be any different?
Granted it won't stop the **** hitting the fan all the time but if the vast majority of people were just a bit more aware things like this might not happen so big, so quick and so often.

NIMAN

The vast, vast majority of the public will not need to worry about having their savings tax'd if its starts at €100k, as most don't have those types of savings.

Uriel.

Cookie_Monster wrote: »

why not? People should be reasonably aware of the macro economic climate and the general performance of banks and business they interact with.
There seems to be no issue telling someone to research the car they buy, or TV or a suitable pair runners, why should picking a bank be any different?
Granted it won't stop the **** hitting the fan all the time but if the vast majority of people were just a bit more aware things like this might not happen so big, so quick and so often.

You have more faith in humanity then I do for sure.

I think to not have some form of bank guarantee would ultimately be disastrous in the short term at least. We'd go back to being close to 100% cash society and while some people might like that idea, it's a greatly inefficient system. There is also the danger of "no savings for a rainy day" spreading across society.

Perhaps in 30 yrs If people had more awareness, raised through experiencing things lile bank crashes etc it might be different

Also banks and government don't make it easy or cheap for you to spread your "wealth" around in terms of multiple institutions/systems

20Cent

Cookie_Monster wrote: »

why not? People should be reasonably aware of the macro economic climate and the general performance of banks and business they interact with.
There seems to be no issue telling someone to research the car they buy, or TV or a suitable pair runners, why should picking a bank be any different?
Granted it won't stop the **** hitting the fan all the time but if the vast majority of people were just a bit more aware things like this might not happen so big, so quick and so often.

Most information about banks is not publicly available in order for people to make a decision like that. Anglo's bed and breakfast deal arrangement for example.

books4sale

NIMAN wrote: »

The vast, vast majority of the public will not need to worry about having their savings tax'd if its starts at €100k, as most don't have those types of savings.

The vast majority? Wouldn't be so sure about that now.

You'd be surprised what people have stashed away for the rainy day or are building for retirement.

It been said many times, don't put all your eggs in one basket! This advise speaks volumes more than ever.

amacca

20Cent wrote: »

Most information about banks is not publicly available in order for people to make a decision like that. Anglo's bed and breakfast deal arrangement for example.

This more than anything would concern me when trying to select a "safe" bank

hmmm

books4sale wrote: »

The vast majority? Wouldn't be so sure about that now.

You'd be surprised what people have stashed away for the rainy day or are building for retirement.

It been said many times, don't put all your eggs in one basket! This advise speaks volumes more than ever.

Exactly. 100k is not "rich", at least not since the 70s - there's lots of middle class people who have retired who might have that sort of cash, and they're not living lavish lifestyles - try and eke out 100k for 20 years.

Or what about people who temporarily have 100k+ in their accounts e.g. someone who has just sold their house.

hmmm

amacca wrote: »

This more than anything would concern me when trying to select a "safe" bank

Risk managers in banks can barely keep up with the activities of their own banks, let along joe punter looking in from outside. And why should joe punter have to spend large chunks of their time studying international finance and the banking system - banks are a basic requirement of modern society and so should be regulated.

I think it's a basic function of a financial regulator that they regulate any financial institution that offers services to the general, non-specialised public. The limits on that regulation should also be specified e.g. deposit guarantees.

BTW I don't think that basic regulation should stop at banks. It should also be there to prevent things like Priory Hall, because housing is again a basic requirement of modern society and joe punter cannot be expected to understand the intricacies of modern building methods.

Wibbs

hmmm wrote: »

Or what about people who temporarily have 100k+ in their accounts e.g. someone who has just sold their house.

Would this also apply to business accounts, because even small business could easily have that in their accounts.

NIMAN

books4sale wrote: »

The vast majority? Wouldn't be so sure about that now.

You'd be surprised what people have stashed away for the rainy day or are building for retirement.

It been said many times, don't put all your eggs in one basket! This advise speaks volumes more than ever.

Well if you listen to the opposition politicians, especially the independents and UL, practically every person in this country is struggling to feed themselves.

What about the countless surveys telling us how many people have no disposable income after bills are paid. We last heard something like 1.7 million people have less than €50 (or was it €100) left after bills are paid.

I'm guessing these folks would not have to worry about having their savings taxed.

Plus, aren't these very same politicians telling us its time to 'tax the rich'? I would say that all these and their supporters would say that anyone who has €100,000+ in savings is rich.

Zulu

Wibbs wrote: »

Would this also apply to business accounts, because even small business could easily have that in their accounts.

Interesting point Wibbs. I take it that the cut would be tax exempt?

FamousSeamus

Well people do want the rich to be taxed and having 100k in the bank would be considered rich (I'm fair sure SF and independents would agree but I'm not 100%).

Am I right in thinking that the EU never wanted savings under 100k to be taxed and that was the local government decision?

Cavehill Red

hmmm wrote: »

If a bank gets into trouble, who would you like to pay for saving it? There usually isn't enough money available by wiping out bondholders and shareholders, so someone else has to pick up the rest of the tab.

Personally I think it is mostly right that the taxpayer picks up the tab*, upto a point (say, a 250k deposit guarantee). But you can't have it both ways - you can't say "taxpayers shouldn't pay for a collapsed bank" and then on the other hand say "our deposits must be kept 100% secure".

* Because "ordinary" depositors cannot be expected to be financially sophisticated enough to appraise the riskiness of a bank - so it is right that governments regulate the deposit taking banks on behalf of society, and it is right that government takes the hit if they get the regulation wrong.

Revolutionary thought here - but what about holding bank officials personally liable too?
I don't mean tellers - I mean directors of the board, CEO, CFO, etc. Let's face it, there's little sympathy these days for someone who did something generally perceived as being of low risk - ie buying a house for market price with a mortgage. The attitude tends to be - your bad luck, you did the deal, suck it up and pay your debts. They are considered to be held responsible for their own poor financial decision.
Well, where's the moral hazard for top bankers? How come they get to stay in their mansions, living it up on vast pensions and pay-offs while mug taxpayers and depositors get hosed for their poor decision making?

Scortho

Cavehill Red wrote: »

Revolutionary thought here - but what about holding bank officials personally liable too?
I don't mean tellers - I mean directors of the board, CEO, CFO, etc. Let's face it, there's little sympathy these days for someone who did something generally perceived as being of low risk - ie buying a house for market price with a mortgage. The attitude tends to be - your bad luck, you did the deal, suck it up and pay your debts. They are considered to be held responsible for their own poor financial decision.
Well, where's the moral hazard for top bankers? How come they get to stay in their mansions, living it up on vast pensions and pay-offs while mug taxpayers and depositors get hosed for their poor decision making?

You could and probably should. I think we should adopt similar white collar crime laws as that of America. However it won't get anyone there money back. You could make seanie liable for the billions pumped into Anglo, but he doesnt have a cent.
If it was America however at least he'd serve time.

On the bank deposits the government should guarantee deposits up to 100,000 and all deposits of businesses on an opt in basis.
Make depositors pay the government an extra 5% dirt tax for the privilege of insuring their deposits up to that amount. If you don't want to pay the extra tax you don't have too, you just take the risk that you could lose your deposit. It shouldnt be up to tax payers to cover any of this. Likewise each individual should be responsible enough to decide whether they want to take out a deposit protection insurance or not.

Out of curiosity does anyone know how much the gov charges the bAnks for the new deposit guarantee scheme that's coming into place?

ardmacha

It is rather strange that the present policy is largely driven by the "prudent" Germans and is having the effect of penalising those who save money (depositors) to the benefit of those who borrow money.

Cavehill Red

Scortho wrote: »

You could and probably should. I think we should adopt similar white collar crime laws as that of America. However it won't get anyone there money back. You could make seanie liable for the billions pumped into Anglo, but he doesnt have a cent.
If it was America however at least he'd serve time.

Seanie may well be the only one to go to prison at this rate.
But how is he allowed to maintain assets (even in the wife's name) that he enjoys the use of? How come he still golfs at Druid's Glen? Poor old Nick Leeson still has to pay a chunk of every penny he earns to the creditors of Barings. What is the rationale that differentiates him driving one bank bust and those who drove the banks bust here?

Grandpa Hassan

hmmm wrote: »

Exactly. 100k is not "rich", at least not since the 70s - there's lots of middle class people who have retired who might have that sort of cash, and they're not living lavish lifestyles - try and eke out 100k for 20 years.

Or what about people who temporarily have 100k+ in their accounts e.g. someone who has just sold their house.

We have seen that the desposit guarantee scheme is not worth the paper that it is written on, and if push comes to shove it can be torn up. I do not think any government be able to pass a bill taxing all savers, even small ones, but that said I think assuming anything below €100k is safe is completely naive - smaller savers might be hit with a lower tax that is imposed for amounts more than €100k, but I do not think smaller savings are untouchable. Those that claim otherwise are probably those that said, after our pensions were raided, that it could never happen to savings.

I will personally be ensuring that my balance with any one bank does not go above €50k.

FamousSeamus

I will personally be ensuring that my balance with any one bank does not go above €50k.

Well since I was young I was told never have all your money in one bank I have barely enough for one but that's not the point :P). I agree with your statement but I suppose if I was earning a high wage it'd be difficult to keep that money spread out!!

Anyone with any cop on should have diversified their savings into other banks if they saw their own giving out 40 year mortgages with 100% loans and interest only loans to property speculators.

It is Darwinian. Personal responsibility. Don`t bank with someone who is literally throwing your savings away at a property bubble. If you get burned at least society will have learned something.

Lumping the burden on all, including the next generation and those without savings, requires money to be taken from people and given to those who have more money than them. It also means nobody learns that putting your money in a bad bank is a bad move.

Those with 100k in savings whether it is life savings, a pension or they make so much that this is their usual balance need to be responsible for their savings and it is up to them to be savvy with their money. Giving it to banks who throw it away at apartments in the west of Ireland is stupid.

Scortho

Cavehill Red wrote: »

Seanie may well be the only one to go to prison at this rate.
But how is he allowed to maintain assets (even in the wife's name) that he enjoys the use of? How come he still golfs at Druid's Glen? Poor old Nick Leeson still has to pay a chunk of every penny he earns to the creditors of Barings. What is the rationale that differentiates him driving one bank bust and those who drove the banks bust here?

His wife isn't bankrupt and has an equal share to the assets. While his creditors have a 50% share on his house, it's kinda difficult to sell on half a house etc. just because your bankrupt, it doesn't mean that your spouse can't pay a golf subscription for you or your holidays in the sun.
Nick lesson brought down a U.K bank where there are stronger laws and sentences for white collar crime.
In the uk you can go to jail if your wife takes your penalty points. In Ireland a TD can say he's on "dail business" and get them wiped

Bob_Latchford

are state savings over 100k outside the deposit guarantee scheme?

G Power

Uriel. wrote: »

Perhaps in 30 yrs If people had more awareness, raised through experiencing things lile bank crashes etc it might be different

sure we have plenty of generations going around today who've experienced this crisis many times over

Icepick

20Cent wrote: »

Most information about banks is not publicly available in order for people to make a decision like that. Anglo's bed and breakfast deal arrangement for example.

True, but it goes both ways. If enough people cared, this info would be available, because banks could not be run they way they are now.

nice_guy80

where is money now safe?

diversifying money holdings costs money - brokers fees, bank charges etc

When people say diversify, do they mean spread savings across a number of banks or do they mean get their savings out of cash. If the latter, as mentioned above, you have fee's, taxes etc to pay which are another minefield.

Cookie_Monster

Scortho wrote: »

His wife isn't bankrupt and has an equal share to the assets. While his creditors have a 50% share on his house, it's kinda difficult to sell on half a house etc. just because your bankrupt, it doesn't mean that your spouse can't pay a golf subscription for you or your holidays in the sun.
Nick lesson brought down a U.K bank where there are stronger laws and sentences for white collar crime.
In the uk you can go to jail if your wife takes your penalty points. In Ireland a TD can say he's on "dail business" and get them wiped

Ah but you can share credits, get more too for being married, why are the losses not shared also?
Especially when it's obviously the case that assets were transferred to avoid tax or repossession, what are the chances she actually paid the fair market value to 'own' such assets from him?

T-K-O

If we are getting the 'Cyprus Treatment' can we burn the bond holders?

PRAF

In theory I have a lot of sympathy for those who presumably have already paid taxes on their income and who are now going to lose a % of anything they have in excess of 100k.

However, isn't it better to 'burn' rich depositors rather than 'poor' taxpayers. Also, shouldn't large investors (IMO anyone with 100k in the bank is a large investor) try to keep a diversified portfolio rather than lumping everything into the one asset.

Scofflaw

20Cent wrote: »

Most information about banks is not publicly available in order for people to make a decision like that. Anglo's bed and breakfast deal arrangement for example.

Have to agree with Icepick here:

Icepick wrote:

True, but it goes both ways. If enough people cared, this info would be available, because banks could not be run they way they are now.

If the mass of people using a bank have no fundamental reason for being interested in how the bank is run because they expect the government to pick up the tab if the bank falls over, then you're removing a huge source of pressure for banks to be better run and more transparent. But if people are concerned that their bank might fail, a bank that can offer transparency to show it's well-run has a large competitive advantage.

On balance, I don't think it's a good idea either that people in general assume that the government will bail their bank out, or that governments assume the rest of the eurozone will bail their banks out if they can't. There's obvious moral hazard in both.

It's interesting to see what happens, though, when someone at Dijsselbloem's level says something like this. The reaction of the financial press was to search very hard for evidence of "market turmoil" caused by his remarks, while other sources which have been against saving banks have turned on a sixpence to condemn the terrible acts of financial aggression against the Cypriot people.

cordially,
Scofflaw

Scofflaw

Grandpa Hassan wrote: »

We have seen that the desposit guarantee scheme is not worth the paper that it is written on, and if push comes to shove it can be torn up. I do not think any government be able to pass a bill taxing all savers, even small ones, but that said I think assuming anything below €100k is safe is completely naive - smaller savers might be hit with a lower tax that is imposed for amounts more than €100k, but I do not think smaller savings are untouchable. Those that claim otherwise are probably those that said, after our pensions were raided, that it could never happen to savings.

I will personally be ensuring that my balance with any one bank does not go above €50k.

A lot of people seem to be confused about the "deposit guarantee scheme". It's not a blanket guarantee that €100k of your money (per bank) is safe under every conceivable circumstance. It's a specific scheme that means that if your bank goes bust and is unable to repay you out of its assets, the government will make up the difference.

Short of a constitutional amendment, there is no possible way of your deposit being protected from government levies or taxes.

Finally, people are often under the impression that when you put money into a bank, the bank has your money and therefore owes it back to you. Legally, this is not the case. Instead, you have paid the bank a sum of money to offer you a credit facility of the same size as that sum.

cordially,
Scofflaw

PRAF

Scofflaw wrote: »

A lot of people seem to be confused about the "deposit guarantee scheme". It's not a blanket guarantee that €100k of your money (per bank) is safe under every conceivable circumstance. It's a specific scheme that means that if your bank goes bust and is unable to repay you out of its assets, the government will make up the difference.

Short of a constitutional amendment, there is no possible way of your deposit being protected from government levies or taxes.

Finally, people are often under the impression that when you put money into a bank, the bank has your money and therefore owes it back to you. Legally, this is not the case. Instead, you have paid the bank a sum of money to offer you a credit facility of the same size as that sum.

cordially,
Scofflaw

The entire financial system is based on trust. Concepts such as deposits covered under guarantee being safe are important regardless of the legalities of the situation. The troubling thing about the Cyprus debacle was that ordinary depositors under guarantee were potentially going to be hit. That would potentially have been disasterous for the entire eurozone financial system. I'm glad that move was reversed and that some form of common sense prevailed. Per my earlier post, I have some (but not a lot of) sympathy for those who will lose some of their >100k deposits

amacca

Scofflaw wrote: »

Finally, people are often under the impression that when you put money into a bank, the bank has your money and therefore owes it back to you. Legally, this is not the case. Instead, you have paid the bank a sum of money to offer you a credit facility of the same size as that sum.

I find the above quite chilling and admit to ignorance when it comes to that point

so legally when you withdraw your deposit the bank is merely lending your own money back to you?

once you give it to them, they actually own it....so thats how they go about re-investing it and offering credit to other customers on the strength of it

We spend 14 or so years learning Irish without a choice when it seems resources would be better diverted to teaching people the basics of how to manage money, fractional reserve banking, simple reverse rental yield calculations, how banks do mortgage lending (basic things like historical lending averages such as 3.5 times your income for 10-20 years) i.e how to spot a bubble.

This could easily go under civics instead of the business studies subjects in secondary and separate from maths in primary.

PRAF

amacca wrote: »

I find the above quite chilling and admit to ignorance when it comes to that point

so legally when you withdraw your deposit the bank is merely lending your own money back to you?

once you give it to them, they actually own it....so thats how they go about re-investing it and offering credit to other customers on the strength of it

No need for any panic here. I'm sure Scofflaw didn't intend to cause a potential run on the banks!!!

If you deposit €100 in the Bank, the following happens:

Your perspective: you hand over the €100. You get access to whatever banking services come with your account, you get interest on it, the bank keeps your money safe (subject to certain guarantees, e.g. <100k guaranteed by the state), etc. The bank is then contractually obliged to repay you according to the terms of the account agreement

The banks perspective: they now have an asset of €100 which they are free to lend to others and earn interest on. However, they also have a liability (to you) of €100.

Scofflaw

PRAF wrote: »

No need for any panic here. I'm sure Scofflaw didn't intend to cause a potential run on the banks!!!

If you deposit €100 in the Bank, the following happens:

Your perspective: you hand over the €100. You get access to whatever banking services come with your account, you get interest on it, the bank keeps your money safe (subject to certain guarantees, e.g. <100k guaranteed by the state), etc. The bank is then contractually obliged to repay you according to the terms of the account agreement

The banks perspective: they now have an asset of €100 which they are free to lend to others and earn interest on. However, they also have a liability (to you) of €100.

Sorry - didn't intend to frighten anyone! But, again, the above is perhaps too soothing - if you make a €100 cash deposit at the bank, you are literally giving up your legal title to the cash, which becomes a legal asset of the bank. You are lending the bank €100, and they are contracting to repay you.

Just like a bondholder, a depositor is a lender to the bank in return for interest, and should really be doing due diligence that reflects the extent of their lending to the bank. That small depositors (as opposed to the very wealthy and organisations) will not necessarily have the resources to do this effectively is what is recognised in the various deposit protection schemes and the rafts of legislation that surround banks.

cordially,
Scofflaw

KyussBishop

Scofflaw wrote: »

If the mass of people using a bank have no fundamental reason for being interested in how the bank is run because they expect the government to pick up the tab if the bank falls over, then you're removing a huge source of pressure for banks to be better run and more transparent. But if people are concerned that their bank might fail, a bank that can offer transparency to show it's well-run has a large competitive advantage.

This isn't true though, because a bank can be more profitable and thus more competitive in the short-term, by utilizing highly risky practices and concealing that information; that's a simple Greshams Dynamic, 'bad' business practice drives out good business practice.

If banks are to disclose this information, it needs to be regulated and made mandatory, because otherwise they can simply conceal information with no consequence, or they can provide misleading/false information (which, absent regulations, may not be illegal; hell, even illegality didn't stop other banks providing false information with things such as LIBOR).

It's not practically possible for the people to regulate the banks, that needs to be done by government (and certainly the people haven't, underscoring the need for government to).

Scofflaw wrote: »

On balance, I don't think it's a good idea either that people in general assume that the government will bail their bank out, or that governments assume the rest of the eurozone will bail their banks out if they can't. There's obvious moral hazard in both.

The moral hazard though, is having a system where the banks are so unregulated that they can become such a dangerous systemic risk in the first place; it's up to government to make sure the banks don't need a bailout, and up to banks to follow the law/regulations, not up to the depositors to police the bank.

Moral hazard is always a very selectively applied principle, and in a lot of discussion about the economic crisis, I notice it is usually applied in various forms, to imply the blame falls on the citizenry, for the profligacy/fraud of those in banking/finance, and the regulatory/oversight failures of government.

The EU as a whole is responsible for putting in place such a dangerous and incomplete system, which allows a crisis like this to happen without a proper way to manage it, and the EU as a whole needs to be responsible for rectifying that as well; this bigger-picture view often gets lost or ignored entirely, in discussing the crisis.

This doesn't mean bail-outs are the correct path, it just means using moral hazard as an argument against them, is blind to the much bigger failures (with broadly shared responsibility across the EU), and the bigger picture in general, that lead to the need for these bailouts in the first place.

maninasia

blindjustice wrote: »

We spend 14 or so years learning Irish without a choice when it seems resources would be better diverted to teaching people the basics of how to manage money, fractional reserve banking, simple reverse rental yield calculations, how banks do mortgage lending (basic things like historical lending averages such as 3.5 times your income for 10-20 years) i.e how to spot a bubble.

This could easily go under civics instead of the business studies subjects in secondary and separate from maths in primary.

Countries like Singapore has financial awareness courses on their books. The problem goes deeper than what you say here.

Teaching of religion and the lack of politics and society type courses, all designed to produce a certain type of citizen.

When the bank guarantee happened there was very little furore because the population , the media and much of elite simply didn't understand what was going on. They never even questioned how Ireland could back up such a comprehensive guarantee.

A lot of people got a very expensive lesson in finance including government ministers.

KyussBishop

Scofflaw wrote: »

A lot of people seem to be confused about the "deposit guarantee scheme". It's not a blanket guarantee that €100k of your money (per bank) is safe under every conceivable circumstance. It's a specific scheme that means that if your bank goes bust and is unable to repay you out of its assets, the government will make up the difference.

Short of a constitutional amendment, there is no possible way of your deposit being protected from government levies or taxes.

Finally, people are often under the impression that when you put money into a bank, the bank has your money and therefore owes it back to you. Legally, this is not the case. Instead, you have paid the bank a sum of money to offer you a credit facility of the same size as that sum.

cordially,
Scofflaw

As I said on another thread, part of the point of the guarantee scheme was to give confidence in deposits to prevent capital flight and bank runs, and it is this spirit of the guarantee which has obviously been undermined, by just calling the extraction of money a 'tax' instead.
This has made the guarantee completely worthless, because you just need to put in place a tax, the moment before you liquidate the bank.

I don't see the logic in ignoring the spirit of laws like that, because you can probably find a by-the-letter loophole to undermine or get around critical aspects of almost any law; it's kind of a post-hoc justification for undermining the principle of a law, and saying it's ok.

PRAF

Scofflaw wrote: »

Sorry - didn't intend to frighten anyone! But, again, the above is perhaps too soothing - if you make a €100 cash deposit at the bank, you are literally giving up your legal title to the cash, which becomes a legal asset of the bank. You are lending the bank €100, and they are contracting to repay you.

Yes you are giving up legal title to the cash. But equally you are getting legal protection in terms of a legally binding contract which gives you access on demand to the money you have put on deposit.

Has there ever been an example in Europe where ordinary depositors were 'burned'? I can't think of any. I think the guarantee for deposits <€100k should be sacrosanct. The fact that the Troika allowed that trust to be shaken in the Cyprus crisis is a little worrying. However, I wont be rushing down to my bank to demand my money back. There is no such thing as a risk free world. You could take out all your money, shove it under your mattress, and have your house robbed or burned down.

Maybe we should all be a bit more like Charlie McCreevey, 'if I have it, I spend it' ;)

number66

Bitcoins are starting to look worthwhile. Seems our banks are not safe so maybe it's time for somthing new.

Icepick

PRAF wrote: »

Yes you are giving up legal title to the cash. But equally you are getting legal protection in terms of a legally binding contract which gives you access on demand to the money you have put on deposit.

Has there ever been an example in Europe where ordinary depositors were 'burned'?

Most recently - Iceland.

nowanathiest

The EU head honch's know exactly what they are doing and so do the American ones, the UK one's etc etc...........and it's not rocket science. Almost all major western economies are bankrupt, including the UK........they have only been kept afloat to date by quantative easing (printing money again and again and again), banks are not capitalised, they are currently a ponzi scheme and when the next cold wind blows through the financial world, the domino's will start to fall and governments everywhere will do whatever is necessary to keep cash in situ.

Emergency Plans were drawn up in UK 2 years ago to address the Euro collapse, when it eventually happens. They will immediately impose bank controls on electronic transfers. Limit cash machine withdrawals, seal the borders so they will not be over run by economic refugees from euro countries, and yes that includes Ireland. This is not fiction, it was openly discussed by the conservative government.

Mr.Micro

The irony of all this and taking depositors money, is that it only further erodes peoples trust and confidence in the banks. What is a bank without its sold base of depositors, either private individuals or businesses? ...... nothing. So now we have a situation where depositors may/will be penalized in the future. It has not happened here yet, but its a good possibility for the future IMO. People will now be wary about putting any bug sums in the banks.

Talk about the financial experts in the EU/IMF shooting the very recovery of the banks in the foot, let alone killing off the very base of all the banks core ie. the depositors. Its an absolute mess. What will be the point of saving in a bank to have it taken from you? None.

hmmm

Mr.Micro wrote: »

What will be the point of saving in a bank to have it taken from you? None.

It's not about "saving" a bank, it's about paying for it when it has to close.

I don't have many objections to the proposal that depositors should have to pay. I think the limits should be higher, and I wish the policy would be decided and made clear, but in general it is a fine proposal that shifts the risk from taxpayers to big depositors.

The US has a very similar scheme. If a bank fails, the bondholders are wiped out, and after that the depositors.

Before the last month, badly run banks could raise deposits at the same cost as well run banks (maybe even cheaper), because depositors believed there was an implicit government guarantee. That has now changed - interesting times ahead.

If you have a big lump of cash and you want to protect it, you can no longer piggyback on the taxpayer. You'll either have to be careful what you do with it, or pay for advice.

Icepick

Mr.Micro wrote: »

People will now be wary about putting any bug sums in the banks.

good

amacca

Icepick wrote: »

good

not good imo

(at least in the short term - depending on just how wary these depositors get)

Mr.Micro

hmmm wrote: »

It's not about "saving" a bank, it's about paying for it when it has to close.

I don't have many objections to the proposal that depositors should have to pay. I think the limits should be higher, and I wish the policy would be decided and made clear, but in general it is a fine proposal that shifts the risk from taxpayers to big depositors.

The US has a very similar scheme. If a bank fails, the bondholders are wiped out, and after that the depositors.

Before the last month, badly run banks could raise deposits at the same cost as well run banks (maybe even cheaper), because depositors believed there was an implicit government guarantee. That has now changed - interesting times ahead.

If you have a big lump of cash and you want to protect it, you can no longer piggyback on the taxpayer. You'll either have to be careful what you do with it, or pay for advice.

How can banks exist without depositors? Its the whole principle of banking? I see myself as quite pragmatic and I would not now be depositor in a bank if I had a big sum. Interest is so low that it would earn more under the mattress. Where the banks will find the money in future will not be easy then. The same mess will happen all over again in the future.

Scofflaw

Mr.Micro wrote: »

How can banks exist without depositors? Its the whole principle of banking? I see myself as quite pragmatic and I would not now be depositor in a bank if I had a big sum. Interest is so low that it would earn more under the mattress. Where the banks will find the money in future will not be easy then. The same mess will happen all over again in the future.

It's hard to see how it would lead to "the same mess" as this one, since a major cause of this one is the growth in bank balance sheets, where several of those countries that have required bailouts have required them because they encouraged their banks to grow to unsustainable multiples of their GDP, making them both too big to fail and too big to save. Slowing that growth would seem, if anything, to delay a repeat of the mess.

Similarly, the concerns people would have about putting their deposits in a bank that might fail might well also be a good thing, since it would give a market advantage to well run banks that were also very transparent - and transparent, well-run banks are surely a good thing? Didn't much of our mess result from badly run and opaque banks? Perhaps the mass of people will now take an interest in the activities of the financial regulator - or at least consumer organisations will do so on their behalf.

Obviously this move generates concerns for citizens - but are concerned citizens not the start of every reform? The complacency of the Tiger years has been expensively shown to be a false complacency - why is there such a rush to return to it?

cordially,
Scofflaw

KyussBishop

The problem is, there is far too much money to be made by keeping the banks opaque, and then having them pump up bubbles (such as property bubbles) with excess credit again, once the crisis has subsided (probably a decade or more away for the full effects of it to subside); enormous amounts of money have been made in doing this, so I don't think consumers are going to have much capability of pushing reform there (we certainly haven't seen any thus far, and I have absolutely zero faith a proper widescale investigation and prosecutions will be undertaken).

There is every indication that the same mess will happen again in the future really, because there is zero reform, and even now there's still an effort to keep property prices propped up; when the prices bottom out, investors will flood the market with cash in hand to snap up property, and they are going to want to see the property-bubble-mill rolling again to get a return on their investments, and they have more access to political power (i.e. money) than the wider population.

If we start seeing investigations and people actually going to jail, I'd have more hope of seeing reform, but right now there is none.

Also worth mentioning, that our countries position as a lax-regulation financial hub, goes hand-in-hand with lax regulation in our national banks as well; that is a huge financial lobby group that will be dead-set against any kind of regulatory reform, who again have far more political clout than the people.