In the event of a bail-in, the government and banks are likely to seek to impose deeper haircuts on creditors including depositors in order to bail-out and protect the failing banking system, writes Mark O’Byrne, of Irish gold brokers Goldcore,
He adds:
Deposit bail-in risks are slowly being realised in Ireland, after it emerged overnight that FBD, one of Ireland’s largest insurance companies, have been moving cash out of Irish bank deposits and into bonds.
Revelations regarding deposit bail-in risks came in the wake of warnings of a new property crash centred on the housing market in Ireland. The former deputy governor of the Central Bank warned in an op-ed in a leading international financial publication, Project Syndicate, that Ireland is at risk of another housing market crash.
Insurer FBD has moved over €150 million out of the Irish banking system and into corporate and sovereign bonds over the past year. The move was prompted by low returns offered by bank deposits and the risks that deposit bail-in rules could see deposits confiscated.
FBD chief executive Fiona Muldoon told the Irish Independent that the
“extremely low returns offered on term deposits by banks, coupled with fears that new bail-in rules introduced this year by the European Union could expose bank bondholders and depositors to bailing out a failed lender, meant it has shifted investments away from banks.”
The new deposit bail-in mechanism is designed to protect banks and is touted as a way to prevent taxpayers being liable for bailing out collapsed lenders. It is believed that it leaves bank bondholders and deposit customers with more than €100,000 on deposit at risk of footing the bill.
There is a belief that bail-ins only relate to “the wealthy” and “rich” depositors as they will be imposed on those with deposits greater than national deposit guarantees.
These deposit “guarantees” are generally the ‘big round’, arbitrary number of say €100,000, $250,000 and £75,000. These are not particularly large amounts and could amount to the entire life savings of a pensioner, a family or indeed it could be the entire capital of a small to medium size business enterprise.
An example of this is the UK where the deposit guarantee was arbitrarily, suddenly and with little fanfare quietly reduced from £100,000 to £75,000 just last year in July 2015.
Thus, it is important to note that the arbitrary round number in the various government deposit guarantees can be, and probably will be, reduced to a lower number – say the new round number of €50,000, £50,000 and $50,000 – depending on the severity of the next banking crash.
….FBD’s deposits with Irish banks were reduced from €451 million to €305 million in recent months. FBD made a €3.1m loss in the first half of the year….
The recent bank stress tests showed that Irish banks are the most vulnerable in the EU in the event of another financial crisis…
FIGHT!
Deposit Bail-in Warning In Ireland – Bail-in Risk In UK Very High (Mark O’Byrne, Goldcore)
Everyone has 100k deposits guaranteed and that is per institution. So if you have more than that, just lying around as I’m sure most of us have, it would be prudent not to leave it all in the one account as we never know what’s coming down the road.
LOL.
By whom is it guaranteed? The Irish State? Good luck with that.
If an Irish Bank collapsed what would that say about the Irish economy and consequently the Irish state?
Remember the state has no readies on hand to payout on this gtee so it would have to Borrower to fund it – the guarantee has to be paid out on within 20 days of a bank failing. With the economy in an obvious downward trajectory who in their right mind would lend $10bn – $20bn to the state to make good on this? Hint, the last time the Irish economy tanked no one was willing to lend to the Irish states other than the EU/IMF and given all the shill lefties oppose austerity would the govt agree a bailout?
don’t worry, baldy noonan is on top of this, his fundamentals are sound and his department are in complete control of their bief. Not like they couldn’t explain vast amounts of increases in tax returns for 2 quarters in a row, or how an income of hundreds of millions can only lead to a tax bill of €250/////
Lol.
Guy, who works for a company hawking an over-priced traditional safe-haven against cash, warns about about the danger of holding cash in the bank.
While I’m not exactly bullish on Irish banks, this needs a few disclaimers
Spot on Ronan.
When I see anything about AIB / BOI or Irish banking in general on here I don’t read it and go straight to the comments to try extract if there is any need to waste time with it.
Cheers for the head up.
well put
25 karat comment Ronan.
Guy who sells gold aims to get punters jittery over bank deposits (and property). What’s the answer? What will soothe my fears and make me safe as….err…houses? Why gold, of course.
Well balanced portfolio (including some gold if you like) for the win.
+1
-1
Is this is paid post for Goldcore?
Superb headline. Now to read the article.
Why aren’t the annual accounts/results of AIB & BoI prefaced with the disclaimer that “This institution bankrupted the country”
I doubt you’ve ever read the annual accounts of AIB or BofI
This is basically an ad, touting for the gold business.
Another property crash in the housing market? Please explain
Google ‘Noonan sells his own Euro shares to invest in gold’. The Indo ran the story.
Gold bugs always be buggin’…Goldcore have been spinning this exact same line for a few years now, even though banks have been getting safer and safer as regards deposits…
Eh.. No you’re wrong. Have a look at bank shares across the EU. They’re on their last legs. Deutche Bank is on the precipice with its share price heading into single digits from the high 50s 2 years ago. The ECB is directly buying its shares to keep it propped up above €10 on a daily basis. It also has a €54 trillion derivative exposure. I wouldn’t invest in Gold but I’d definitely buy some as insurance
and broadsheet complain about The Indo publishing press releases?
Glad i have that ford falcon in the shed…