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What if we didn't have DGS in Ireland ?

  • 18-10-2020 12:50pm
    #1
    drogon.
    Registered Users Posts: 725 ✭✭✭


    I have a random question and wonder what will happen in this situation, if there wasn't a deposit guarantee scheme by the Irish government.

    Say I have €20,000 in savings with Bank X and also have a mortgage with Bank X for €150,000. Bank X goes under and they no longer have my savings. Assuming they can sell off my mortgage to another company, but I would I owe the new bank or company €130,000 or €150,000 ? Will they take into account that I had €20,000 with them and lost it.

    Just a curious question.


Comments

  • #2
    Henry Ford III
    Moderators, Business & Finance Moderators Posts: 17,752 Mod ✭✭✭✭Henry Ford III


    In the absence of DGS you'd owe the full €150k


  • #3
    JTMan
    Registered Users, Registered Users 2 Posts: 5,542 ✭✭✭JTMan


    Firstly, the first 100k is protected by the DGS per person per institution.

    If you have more than 100k, and do not qualify for the special exceptions, then you become a creditor to the bank to the value in excess of 100k and join a list of creditors that the liquidator will need to deal with.

    Liabilities such as mortgages and overdrafts are not set off against deposits when calculating DGS compensation. However, the liquidator, where entitled to do so, may set off loans against deposits.

    Hence, the liquidator can, in some circumstances, offset the deposit excess over 100k against your loan and then see the remainder of the loan.

    It makes sense because you are in effect both a creditor and debtor to the liquidator so netting should occur.


  • #4
    drogon.
    Registered Users Posts: 725 ✭✭✭drogon.


    JTMan wrote: »
    Firstly, the first 100k is protected by the DGS per person per institution.

    If you have more than 100k, and do not qualify for the special exceptions, then you become a creditor to the bank to the value in excess of 100k and join a list of creditors that the liquidator will need to deal with.

    Liabilities such as mortgages and overdrafts are not set off against deposits when calculating DGS compensation. However, the liquidator, where entitled to do so, may set off loans against deposits.

    Hence, the liquidator can, in some circumstances, offset the deposit excess over 100k against your loan and then see the remainder of the loan.

    It makes sense because you are in effect both a creditor and debtor to the liquidator so netting should occur.

    I know we have DSG protection, but I was just thinking more about how the process would work if we didn't have it. As a depositor in the bank, one will be at the bottom of the creditors list to be paid out. So basically the pot will be fairly empty by the time it comes to getting your money back after every else is payed off.

    Me and the other OH was having the conversation few days back and just realised one would most likely lose out if you find yourself in that circumstance.


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