What are your thoughts, on how a default, will affect our hard earned deposits ?

T

TomPetty

Registered User
Messages
52
Hi Folks,
With the general consensus out there being, that default is eventually inevitable,
What are your thoughts on how this will affect our hard earned deposits in :

1. Irish Banks
2. Other banks resident here in Ireland ie Nationwide UK / Investec / NIB etc....

Will it be just bond holders that will get "burned" on will the average depositer also feel the pain ?

:confused:

Regards and Thanks.
 
My thoughts on the level's of risk:

1) The greatest risk is with all An Post/NTMA savings products. These are invested directly in the national debt. If/when we default/restructure our debt, the greatest risk of 'haircuts' will be to savers in these products.

2) I would see the second greatest risk with banks that would unquestionably collapse without Irish state support. Namely, Anglo, INBS and AIB.

I would see much lower levels of risk with foreign banks based in Ireland such as KBC, Investec etc.

Having said all this, a sovereign debt restructure might be managed in such a way as not to impact retail savers who are invested in the national debt. It also might not, the risk is not zero.
 
It seems that by law the NTMA is forbidden to favour one set of lenders over another. So An Post deposits face the same risk as foreign lenders to the NTMA. Source of this info is the NTMA itself.
 
is not a simple as our savings in irish banks are as safe as the savings in a german bank. Because our central bank as well as the german's bank is the european central bank?
As for default how can we be let default if there are funds available in the euro zone I know we'll be strecthed to the limit but when it comes to a default by ireland will destroy the euro (credibilty, contagion)ie it cant happen Euro people would eventually have to print more yoyos if it came to it.

If it did come to it and the saving bonds/certs took a hit eg 50c in the € are you still owed the difference payable in the future?
 
dockingtrade said:
If it did come to it and the saving bonds/certs took a hit eg 50c in the € are you still owed the difference payable in the future?
Click to expand...

Debt restructuring does what it says on the tin. You take a haircut and you lose a portion of your investment. The Economist magazine said they think the restructure could be up to 70% if it happens.
 
dockingtrade said:
As for default how can we be let default if there are funds available in the euro zone I know we'll be strecthed to the limit but when it comes to a default by ireland will destroy the euro (credibilty, contagion)ie it cant happen Euro people would eventually have to print more yoyos if it came to it.
Click to expand...
And printing more money, i.e. creating inflation, has the exact same result as defaulting, i.e. your creditors do not get the same out as they paid in. I believe this is the road that pretty much all central banks are heading down, as governments will keep denying that they are in financial difficulty.

CiaranT said:
Debt restructuring does what it says on the tin. You take a haircut and you lose a portion of your investment. The Economist magazine said they think the restructure could be up to 70% if it happens.
Click to expand...

I assume you mean paying out 30c on the €? That would be about the same as Russia and Argentina restructured and probably not too far off the mark.
 
When, not if, we default, all of the Irish banks will have to declare that they are insolvent and will have to default on their deposit holders.

The amount of liquidity provided by the Central Bank of Ireland is totally unsustainable, when it is realised as a loss then the whole Irish banking system will collapse.
 
Brian_R said:
When, not if, we default, all of the Irish banks will have to declare that they are insolvent and will have to default on their deposit holders.

The amount of liquidity provided by the Central Bank of Ireland is totally unsustainable, when it is realised as a loss then the whole Irish banking system will collapse.
Click to expand...


So what is your advice with the above in mind ?
 
Brian_R said:
When, not if, we default, all of the Irish banks will have to declare that they are insolvent and will have to default on their deposit holders.

The amount of liquidity provided by the Central Bank of Ireland is totally unsustainable, when it is realised as a loss then the whole Irish banking system will collapse.
Click to expand...

I agree with the when not if statement. But the system need not collapse if it is liquidated in an orderly fashion. Iceland's banking system did not collapse after the referendum on bailing out banks.
 
Chris said:
I assume you mean paying out 30c on the €? That would be about the same as Russia and Argentina restructured and probably not too far off the mark.
Click to expand...

30c was the figure in the Economist, they probably took it from historical precedents.

TomPetty said:
So what is your advice with the above in mind ?
Click to expand...

If you agree with Brian, then the only advise is to offshore your deposits.
 
CiaranT said:
If you agree with Brian, then the only advise is to offshore your deposits.
Click to expand...


Thanks Ciaran - If I Offshore my deposits, do I need to pay 41% or there abouts, on any interest I earn abroad, or just the prevailing Dirt rate ?
 
Brian_R said:
When, not if, we default, all of the Irish banks will have to declare that they are insolvent and will have to default on their deposit holders.

The amount of liquidity provided by the Central Bank of Ireland is totally unsustainable, when it is realised as a loss then the whole Irish banking system will collapse.
Click to expand...

In the above scenario would deposits in non Irish banks within Ireland be safe.
 
CiaranT said:
They would be safer. Offshore deposits would be a lot safer.
Click to expand...

Grateful if you could explain what would make it safer to have deposits offshore rather than in non Irish banks within Ireland in such a situation? Many thanks.
 
Happy Girl said:
Grateful if you could explain what would make it safer to have deposits offshore rather than in non Irish banks within Ireland in such a situation? Many thanks.
Click to expand...

if things got bad enough , the goverment could freeze accounts registered in this state , regardless of whether this bank was foreign owned , that is a doomsday scenario however

a more likely scenario ( although still unlikely ) is in the event of ireland withdrawing from the euro , all savings held in this state would adopt the value of our new currency
 
farmerette said:
if things got bad enough , the goverment could freeze accounts registered in this state , regardless of whether this bank was foreign owned , that is a doomsday scenario however

a more likely scenario ( although still unlikely ) is in the event of ireland withdrawing from the euro , all savings held in this state would adopt the value of our new currency
Click to expand...

I understand what you are saying farmerette but in the situation where (a) Irish banks were to default on depositors or
(b) The government were to default & all depositers were forced to pay 30c from each euro on deposit to the govt.

Surely neither (a) nor (b) above should impact on any account held in a non Irish bank within the State. I understand the possibility of the account being frozen but I cannot see how the money could be "taken". My understanding that the only disadvantage of holding an account with a non Irish bank in Ireland over an offshore account would only count in the event of Ireland leaving the euro & all saving within the State (either Irish or non Irish banks) being converted to the "Punt Nua".
 
You must log in or register to reply here.
Back
Top