BOI to remove €4bn of UK deposits from guarantee scheme
Published 29/02/2012 | 05:00
BANK of Ireland is removing as much as €4bn of its UK deposits from the government guarantee scheme, in a development that could save the bank as much as €40m of fees to the State.
The move, which comes after BOI recently vowed to "prudently dis-engage" from the guarantee was revealed in a note on the National Treasury Management Agency's website which confirmed BOI UK's deposits wouldn't be covered after March 30.
The UK offshoot had about €19bn of retail deposits at the end of the year, plus about €4bn of corporate deposits.
The vast majority of the bank's retail deposits are covered by a separate UK guarantee scheme, which applies to funds of up to £85,000 (€100,000). In a note to clients, stockbrokers Davy estimated that some €4bn of UK deposits were covered by the scheme, including about €1bn of retail deposits held through the bank's joint venture with the UK post office.
"This implies an ultimate saving of €40m a year," Davy said, adding that it would "take time for the full benefit to flow through" since fixed-term deposits would continue to be covered until they mature.
"Nonetheless, extracting itself from the ELG (guarantee scheme) remains a crucial element of the bank's strategy for rebuilding profitability," the note stressed.
"Withdrawing it from the UK deposits in the first instance is a positive step."
A spokesman for the bank yesterday said that BOI had written to all affected customers and the reaction had been "very positive" and stressed that 99pc of its UK Post Office deposits would remain covered by the UK guarantee scheme.
"The change brings BOI UK's deposit protection in line with its peer competitor banks in the UK," he added.
In its note, Davy said BOI has also "started to negotiate with corporate-deposit customers on an individual basis" with a view to removing their deposits from the guarantee scheme.
BOI had an average of €44bn of funds covered by the guarantee for 2011, triggering payments to the State of €449m.
When the bank announced its full-year results last week, chief executive Richie Boucher stressed the need to "prudently disengage" from that guarantee so the bank could improve its profit margins and return to a more normal business environment.