Open

Coming up

Don't miss

Replay


LATEST SHOWS

THE WORLD THIS WEEK

The World This Week - 22 August 2014 (part 2)

Read more

THE WORLD THIS WEEK

The World This Week - 22 August 2014

Read more

FRANCE IN FOCUS

FRANCE IN FOCUS

Read more

FOCUS

Lifting the veil over China's air pollution

Read more

ENCORE!

Tango Takeover in Paris

Read more

WEB NEWS

Calls for ISIS media blackout after execution of James Foley

Read more

IN THE PAPERS

'Steely resolve of reporters exploited by pared-down employers'

Read more

BUSINESS DAILY

US judge calls Argentina bond swap offer illegal

Read more

IN THE PAPERS

Cécile Duflot ruffles some feathers

Read more

  • US demands Russia withdraw aid convoy from Ukraine

    Read more

  • Besieged by problems, Hollande faces unhappy return from summer holidays

    Read more

  • Fed Chair says US job market still hampered by Great Recession

    Read more

  • August 22, 1914: The bloodiest day in French military history

    Read more

  • Central African Republic announces coalition cabinet

    Read more

  • Iraqi Sunnis quit govt talks after mosque massacre

    Read more

  • Hamas publicly executes "informers"

    Read more

  • French firebrand leftist to quit party presidency, but not politics

    Read more

  • Fear of Ebola sky-high among Air France workers

    Read more

  • US says Islamic State threat 'beyond anything we've seen'

    Read more

  • Malaysia mourns as remains of MH17 victims arrive home

    Read more

  • Turkish Foreign Minister Davutoglu set to be Erdogan's new PM

    Read more

  • Hollande is ‘nobody’s president’ says former French minister

    Read more

  • Europe launches navigation satellites to rival GPS

    Read more

  • Interactive: Relive the Liberation of Paris in WWII

    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)