UK savers start the rush to Irish banks
Posted by alfied on October 2, 2008
By Lorna Bourke |
The move by the Irish government to guarantee all retail deposits in major Irish banks is likely to precipitate a flood of money leaving UK bank accounts – as well as bank accounts elsewhere within the EU – as savers rush to protect their cash deposits
At the moment UK depositors are only protected up to £35,000 through the Financial Services Compensation Scheme, although this is soon to be raised to £50,000. Critics have said this is not good enough and that Gordon Brown and Mervyn King should protect UK retail depositors 100% as in Ireland.
Customers are already making enquiries at Irish banks covered by the scheme and the banks have confirmed that UK depositors using UK branches of Allied Irish Bank and Bank of Ireland are covered. However, it excludes the Irish arms of UK banks, such as Royal Bank of Scotland’s Ulster Bank, or the Irish operations of HBOS’s Bank of Scotland.
Banks covered by the guarantee are Allied Irish Bank, Bank of Ireland, Anglo Irish Bank, Irish Life and Permanent, Irish Nationwide Building Society and the Educational Building Society and, ‘such specific subsidiaries as may be approved by government following consultation with the central bank and the financial regulator.’
‘There is nothing to stop a UK resident from opening an account with an Irish Bank – it is not illegal,’ confirms Brian Capon of the British Bankers Association. Allied Irish Bank, which has £12 billion in UK deposit reports an increase in interest from new customers and said that its website had been swamped with inquiries. Savings accounts offered by the UK Post Office are covered by the guarantee because they are administered by the Bank of Ireland.
As UK depositors and others throughout the EU withdraw their funds to reinvest in Irish Banks, it seems likely that either all EU countries will have to guarantee 100% of retail deposits, or the EU Competition Commission will have to ban anticompetitive arrangements like that announced by the Irish Government on the grounds of illegal State aid.
Lord Lipsey, the chairman of the Financial Services Consumer Panel in the UK, said it was, ‘a national disgrace’ that UK depositors might be worse compensated than their Irish counterparts in the event of a bank failure.
UK banks and deposit taking institutions are already expressing concern at the amount of money flowing into Northern Rock accounts – the only UK financial institution apart from National Savings Bank, to enjoy a 100% guarantee of security from the government.
In These New Times 
Leave a comment