British banks cry foul over cash migration
The Irish Government has unintentionally ended up giving a guarantee to the savings of British soldiers. Photo: SHAH MARAI/AFP/Getty Images
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BRITISH banks continued to cry foul yesterday amid claims they have suffered an outflow of millions of pounds of deposits to state-protected Irish banks.
The British Bankers' Association said it was to deliver a letter to the Government complaining about the legislation extending state-backed guarantees for all deposits held in Irish banks.
In a statement, the association said the move had distorted competition and put banks in other jurisdictions, especially in Northern Ireland, at a competitive disadvantage.
The move by Finance Minister Brian Lenihan has also angered his British counterpart.
Chancellor of the Exchequer Alistair Darling rang Mr Lenihan twice this week complaining that the scheme "was a problem for the UK", sources in London said.
But the British Bankers' Association denied that there was a stampede of British savers switching to Irish accounts.
And Irish banks played down reports they had benefited from an exodus of British savers.
But the UK post office admitted it had seen a rise in business for accounts it operates jointly with Bank of Ireland.
The British post office, which has 16,000 branches, offers special deals to members of the British army.
This means that the Irish Government has unintentionally ended up giving a guarantee to the savings of British soldiers.
British savers can also take advantage of the Irish guarantee by opening an account with one of the many Irish banks with branches in Britain or with Bristol & West, which is also covered because it is a subsidiary of Bank of Ireland.
Savers
AIB has 31 branches in Britain, with another 52 in Northern Ireland.
Yesterday, personal finance experts in the UK advised savers to place their money with Anglo Irish Bank in Britain, which is paying 6.4pc on its demand-deposit accounts.
Irish banks said there had not been a dramatic rise in new customers from Britain, although some had seen a modest increase in business.
All were reluctant to disclose specific figures.
A spokesman for Anglo said there was no evidence of a "huge migration" of customers, adding: "We haven't seen any evidence of that across the banking sector here."
Prompted by the state guarantee, EU competition regulators said they were obliged to investigate whether the insurance plan gave Irish banks an unfair edge over foreign banks doing business in Ireland.
Meanwhile, two more banks have said they want to be part of the Government's bank guarantee scheme.
Bank of Scotland (Ireland), which owns the Halifax branches in Ireland, said it had formally applied to the Government, while National Irish Bank said it intended to apply.
NIB is owned by Denmark's Danske Bank.
- Charlie Weston Personal Finance Editor
