Technically that’s not correct.All Raisin accounts are covered by state guarantees from EU governments up to 100000 euro.
The Central Bank is a state body so it is indeed a state guarantee.Our DGS is administered by the Central Bank but that doesn’t mean that it represents a State guarantee.
From memory it’s from 0.5% to 2% of covered deposits depending on the member state. Is this “very small”? In any case DGSs have the power to borrow if necessary to make good on commitments and can levy the banking sector afterwards to pay for it.The amount of each DGS fund represents a very small percentage of the covered deposits in that Member State.
Technically that’s not correct.
Each EU Member State has a deposit guarantee scheme that is funded by covered institutions in that Member State.
The amount of each DGS fund represents a very small percentage of the covered deposits in that Member State.
Our DGS is administered by the Central Bank but that doesn’t mean that it represents a State guarantee.
Exactly. And combined with the inevitable State backstop, it's as good as you will get, barring a complete EU crash that we all hope won't happen again.The Central Bank is a state body so it is indeed a state guarantee.
From memory it’s from 0.5% to 2% of covered deposits depending on the member state. Is this “very small”? In any case DGSs have the power to borrow if necessary to make good on commitments and can levy the banking sector afterwards to pay for it.
My point is that all EU DGSs are as good as each other and retail investors <€100k shouldn’t be worrying.
Sorry but that is not correct.ou referred to the DGS Fund, as if it is a finite Fund, ignoring completely the fact that EU legislation mandates Deposit Guarantee Schemes to have recourse to alternative funding to meet their obligations. In the case of Ireland, that alternative funding, (after potentially trying to hit the other banks for a few bob), is indeed the Irish State, subject to the Irish Central Bank ponying up first in the insterests of financial stability and being paid back by the Irish State.
If there was already a State guarantee in place, why would the State backdrop be "inevitable"?combined with the inevitable State backstop
Nope.The Central Bank is a state body so it is indeed a state guarantee.
Correct.In any case DGSs have the power to borrow if necessary to make good on commitments and can levy the banking sector afterwards to pay for it.
The funds come from the banks by law based on the deposit base of the bank.The Central Bank administers the scheme but the funds come from the banks.
Sorry but that post makes zero sense.The funds come from the banks by law based on the deposit base of the bank.
A state body (Central Bank) administers the scheme.
There is recourse to borrowing and ex-post levy on banks if there is a shortfall, again by law.
It is not vaguely akin to private insurance.
It is a state guarantee.
I previously stated that you were ignoring the fact that Deposit Guarantee Schemes have to have recourse to alternative funding to meet their obligations. While you say the "State can of course lend money to a DGS but is under no obligation to do so", it is still the fact that the Government is indeed on the hook in prescribed circumstances, as I outlined earlier.Sorry but that is not correct.
A fundamental principle of the DGS framework is that they are funded by member banks, not taxpayers.
If a DGS has insufficient reserves to meet its obligations, then it can borrow to meet those obligations, with the member banks making ex-post contributions to discharge those loans.
The State can of course lend money to a DGS but is under no obligation to do so.
If there was already a State guarantee in place, why would the State backdrop be "inevitable"?
There are plenty of schemes where the State does indeed expressly guarantee third party obligations.
The DGS is not one of them.
I haven’t ignored anything.I previously stated that you were ignoring the fact that Deposit Guarantee Schemes have to have recourse to alternative funding to meet their obligations.
Eh, no. There is no State guarantee.So you accept now that there is a State Guarantee related to the deposit guarantee yes?
What would have to be different for (in your view) an EU scheme under the DGSD to constitute a state guarantee?Again, the DGS does not constitute a State guarantee.
The State would have to expressly guarantee covered deposits at covered institutions.What would have to be different for (in your view) an EU scheme under the DGSD to constitute a state guarantee?
The only difference here is the provision that the Central Bank has to elect to fund the deposit guarantee first, if there is a significant shortfall. Then the State has accepted that it has a guarantee in place with the Central Bank to pay it back.The State would have to expressly guarantee covered deposits at covered institutions.
We actually introduced a two-year State guarantee of bank deposits back in 2008.
So unlimited recourse to Exchequer funds, right?The State would have to expressly guarantee covered deposits at covered institutions.
A guarantee doesn’t have to be unlimited, it could be capped.So unlimited recourse to Exchequer funds, right?
I didn’t say that the DGS is too limited or that the Fund is very small.So unlimited recourse to Exchequer funds, right?
And your point is that the DGS is too limited in this regard as:
a) Fund is “very small”
b) borrowing from Exchequer or other sources to make up potential shortfall is not a given but merely a possibility
I hope I’ve summarised your argument correctly.
So:A guarantee doesn’t have to be unlimited, it could be capped.
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