Irish banks paying highest interest rates on Isle of Man
Anglo and Nationwide having to give rates nearing 3pc as depositors become increasingly concerned over solvency
Published 17/02/2011 | 05:00
Irish banks, particularly Anglo Irish and Irish Nationwide, have been forced to pay the highest interest rates on the Isle of Man as Irish banks desperately try to hold on to deposits.
The latest survey of off-shore banking options on Anglo's Isle of Man operation show the bank offering 2.9pc for on-demand accounts, while Nationwide UK was the next most-competitive at 2.4pc, with Irish Nationwide at 2.35pc.
All the main Irish banks have operations on the Isle of Man, including AIB and Bank of Ireland, although Irish Life & Permanent (IL&P) closed down its operations there in 2010.
The other banks at their most competitive on the Isle of Man are also institutions who have received government support, like UK lender Lloyds TSB. The rates are monitored by Moneyfacts.co.uk, a price comparison website.
Irish banks have been finding it difficult to attract deposits on the Isle of Man, as UK savers, a large presence in that market, have grown increasingly concerned about the solvency of Irish banks.
In reality, smaller deposits on the island are safe as they are covered under the Isle of Man compensation scheme.
Offshore deposits can be held in a number of jurisdictions by Irish people, including the Isle of Man, Jersey and Guernsey.
There are different types of products available, ranging from instant access, to notice, to income and fixed-term deposits and they can be taken out in various currencies.
Interest earned on off-shore savings accounts must be declared to the Revenue Commissioners.
Deposits collected on the Isle of Man partly funded the boom years in Ireland as the Irish banks needed to expand beyond the limited domestic deposit base.
Several surveys by KPMG during the boom showed Irish Nationwide and Anglo Irish to be among the fastest-growing banks on the island, sometimes growing their assets there in one year by more than 100pc.
IL&P started operations on the Isle of Man in 1993 and employed 14 full-time people on the island, but it announced a closure plan last May.
Its move was part of a broader restructuring and concentration of activities on the Irish market, the lender said at the time.
"In common with all the Irish banks, we're dealing with significant challenges in our home market and we've taken this step as part of our efforts to consolidate and concentrate resources on that core market,'' the company said in a statement.
Anglo and Irish Nationwide deposits generally will be transferred to other institutions within weeks, with an auction expected to happen this week or next.
The deposits will be transferred on the basis of existing terms and conditions, both lenders have made clear. Depositors will also continue to have full access to their funds during and after the auction process.