Open

Coming up

Don't miss

Replay


LATEST SHOWS

BUSINESS DAILY

The Tour de France, a PR machine

Read more

IN THE PAPERS

Coverage of the third plane crash in one week - from France, Algeria and Burkina Faso

Read more

IN THE PAPERS

Coverage of the plane crash that took 116 lives - almost half of them French

Read more

DEBATE

Gaza: A Truce At All Costs?

Read more

AFRICA NEWS

Central African Republic: Brazzaville ceasefire talks deliver fragile deal

Read more

FOCUS

Sluggish tourist season in Crimea

Read more

ENCORE!

Bartabas : Mixing Christ with Spanish music and dancing horses

Read more

IN THE PAPERS

Shifts in the propaganda war waged between Israelis and Palestinians

Read more

IN THE PAPERS

French MPs face quandary in pro-Palestinian rallies

Read more

  • Live: ‘No survivors’ from Algerian plane crash, says Hollande

    Read more

  • French families grieve for Algerian plane crash victims

    Read more

  • Protest against Gaza offensive turns deadly in West Bank

    Read more

  • Ukraine names acting PM after Yatseniuk's shock resignation

    Read more

  • Deadly strike on UN shelter in Gaza Strip

    Read more

  • Wreckage of Algeria plane found in Mali

    Read more

  • BNP to pay $80 million for defrauding Dept of Agriculture

    Read more

  • Pope meets Christian woman sentenced to death in Sudan

    Read more

  • Air Algérie crash: 'We should eliminate the missile hypothesis'

    Read more

  • Italy’s Nibali cruises to victory in 18th stage of Tour de France

    Read more

  • Iraqi parliament elects moderate Kurd as president

    Read more

  • US, European agencies lift travel restrictions to Tel Aviv

    Read more

  • No end to fighting until Israel ends Gaza blockade, Hamas says

    Read more

British savers seek refuge in Irish banks

Latest update : 2008-10-02

The Irish government has pledged full guarantees on all bank deposits, leading to a rush of funds from UK accounts across the Irish sea. Companies and individuals are unnerved by recent collapses of some of the biggest names in global banking.

Ireland's banks are suddenly flavour of the month among nervous British savers after the Irish government stepped out of line with its European neighbours and pledged a blanket guarantee on all deposits.

The Irish parliament on Thursday approved legislation that will guarantee 400 billion euros ($558 billion) worth of liabilities at Irish banks which is more than twice the country's annual gross domestic product.

Unnerved by the recent collapses of some of the biggest names in global banking, British depositors, and companies in particular, have begun transferring funds across the Irish Sea.

"The interest from the wholesale market has undoubtedly spiked and I think you could see some strong inflows from that market over the next quarter or two," said one senior industry source in Dublin.

International asset managers in particular are now more inclined to lodge funds with Irish banks for safe keeping.

"There are very strong, high-level inquiries from that market wanting to play again," the source said.

The Irish Times reported on Thursday that one Irish bank had received a single corporate deposit of 500 million euros ($697 million) following announcement of the guarantee.

Two other Irish banking sources said it would be wrong, however, to talk about a flood of transfers into Irish banks.

"Yes, money has come in across the board but I think it's pushing it a bit to talk about torrents of cash from the UK," said one.

While it may be some months before the full extent of the inflows becomes clear, Ireland's financial regulator has already acknowledged that they have "had a positive impact for the funding profiles of Irish banks".

There has also been enough movement of funds to spark complaints that Irish banks have been handed an unfair advantage.

Henri Guaino, one of French President Nicolas Sarkozy's closest advisers, specifically pointed to Ireland's guarantee system as a potential danger for banks in other countries.

"If all English depositors go to the Irish banks, you can imagine that the English will not be happy," he told Canal Plus Television.

Meanwhile the British Bankers' Association said the Irish move had distorted competition.

"While we support proposals aimed at re-reintroducing stability to the financial markets, we need fair play for financial institutions across Europe," it said in a statement.



NORTHERN ROCK BENEFITS

The Irish move has prompted calls for a coordinated European approach to underpinning financial stability in the region.

Ewald Nowotny, governor of the Austrian central bank and member of the European Central Bank's governing council, told Reuters in an interview that he wanted to see harmonisation of of deposit guarantees in the European Union.

"Coordination is for me the main priority," he said. "Measures like Ireland's have repercussions in other states."

Dutch Finance Minister Wouter Boss told parliament he too was lobbying for cooperation because varying deposit guarantees across Europe had created an "unequal playing field".

Irish banks are not the only ones to benefit from state backing, however.

Britain's own National Savings and Investments (NS&I), a state agency, said it had seen increased interest in its products.

"In the last few days, and certainly in the last couple of weeks, we have observed an increase in calls to our customer support centre," a spokeswoman for NS&I said.

Meanwhile mortgage lender Northern Rock, which was taken under state control by the British government in February after a run on the bank, said on Thursday that it had withdrawn several savings products because a surge in deposits had brought it close to breaching a cap on its market share.

Those banks who don't enjoy direct state backing but have a more traditional approach to banking than the big victims of the credit crisis may also be benefiting from investor nerves.

"We are seeing a relatively strong inflow of clients," Floris Deckers, Chief Executive of Dutch private bank Van Lanschot, told Reuters in an interview this week.

"At this moment I only hear that people want certainty. The big question is not 'return on your money' but 'return of your money'."

(Additional reporting by Steve Slater in London, Gilbert Kreijger in Amsterdam and Boris Groendahl in Vienna; Editing by Sharon Lindores)



 

Date created : 2008-10-02

COMMENT(S)