Bank customers less anxious after state’s intervention
The sector was hurting from massive stock market losses on Monday and bank customers were starting to get concerned.
“I was worried on Monday but not today. Things will always level themselves out anyway,” said one Bank of Ireland customer.
It was business as usual at the country’s banks yesterday with some customers voicing concern and others glad the Government stepped in when it did.
On his way into Ulster Bank, Werner Pretorous who is originally from South Africa said he was concerned and is considering taking his money out of the bank and putting it under the mattress.
“I’m even thinking about moving to Australia where the economy is a lot better,” he said.
Another customer took a swipe at the Government saying: “They are quick to protect the banks but what about protecting all the firms closing down where all the jobs are being lost?”
Most AIB customers seemed upbeat with one saying that it seems the “government is going to bail the banks out now”.
A student with €7,000 savings at Anglo Irish Bank said he considered taking his money out of the bank on Monday and switching it to Bank of Ireland because he was “familiar” with the latter.
“But the Government said the money is protected so I I’ll just leave it there now as it’ll probably be safe,” he said.
Permanent tsb customers were also hopeful as one welcomed the intervention and another said though concerned they will leave their cash in.
At Halifax one customer was more concerned with the downturn. “It doesn’t matter these days — anything going in comes out again straight away.”
HOURS after the US House of Representatives rejected a $700 billion (€485bn) financial rescue package to buy troubled assets from financial companies, the Government stepped in with plans to guarantee Irish banks’ deposits and debts for two years to calm investor concern.
Q. Is my money safe?
A. Judging by the positive reaction of the stock markets yesterday and the welcoming of the move by analysts, the short answer is yes.
The deal means the State will guarantee all debts and deposits of banks and building societies.
The guarantee of about €400bn will last for two years and covers liabilities at AIB, Bank of Ireland, Anglo Irish Bank, Irish Life and Permanent, Irish Nationwide Building Society and the EBS.
The deal acts like an insurance policy, where financial institutions will be charged for State cover.
This move is in addition to the recent guarantee for deposits of up to €100,000. Money held at banks not mentioned above will be guaranteed under this scheme.
Q. Will my pension be affected?
A. The short answer is no.
Q. Are there any risks to the plan?
A. Yes. The plan carries risks, as the potential €400bn in liabilities is about 10 times the country’s national debt and two times Gross Domestic Product.
Q. What banks are not covered?
A. The scheme does not apply to the liabilities of Ulster Bank, National Irish Bank or Rabobank, which are all supported by large overseas parent banks. However deposits of up to €100,000 in Ulster Bank, First Active and IIB, have already been guaranteed by the Government.
Deposits at National Irish Bank owned by Denmark’s Danske Bank and Ulster Bank owned by RBS is guaranteed for up to €100,000. Rabobank comes under the Dutch scheme which guarantees €38,000.
Q. What banks are covered by the guarantee?
A. The two-year safeguard applies to AIB, Bank of Ireland, Anglo Irish Bank, Irish Life and Permanent, Irish Nationwide Building Society and the EBS.
The guarantee also covers all money borrowed by Irish banks from other financial institutions.
Foreign subsidiaries of Irish-owned banks are also covered by the plan.
Q. I have money in the Credit Union, is that safe?
A. Credit Unions still have the €100,000 savings guarantee and also have the backing of their own €110m fund. A statement released by the League of Credit Unions said they did not have to be included in the government announcement as credit unions do not borrow money from the wholesale market but use deposits that they have available to them from their savers.
Q. What about my money at the post office?
A. Savings at the post office are state-guaranteed while money held at Postbank, the joint venture between An Post and Fortis, is covered by the €100,000 state deposit protection scheme. Postbank is not a credit bank.
Q. What are the experts saying?
A. Analysts were quick to welcome the Government plan.
Deirdre Ryan of Goodbody stockbrokers said the move to safeguard all deposits is a sorely needed boost to confidence in the Irish financial system and the economy overall.
Bloxham Stockbrokers called the announcement “an extraordinarily positive move for the domestic banking sector”. It said it removes the critical risks to funding brought on by the credit squeeze.
“By effectively underwriting the Irish bank balance sheet, the system now stands as the safest in Europe and possibly the world at the moment,” it said.
Scott Rankin of Davy Research said the government initiative represents the State “taking out its bazooka”.
Q. So will everything be ok from now on?
A. No. Goodbody Stockbrokers said the openness of the Irish economy means it will continue to bear the brunt of international headwinds and until these appease somewhat, the rollercoaster ride is unlikely to end.
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