Banks report deposit surge as protection limit is raised
BANKS reported a surge in savers depositing their money with them yesterday after the weekend move by the Government to increase the amount covered by the deposit protection scheme to €100,000 per depositor.
Anglo Irish Bank decided to exploit the Government move by hiking its demand deposit rate from 5.3pc on the first €20,000, to 5.5pc on the first €100,000, effective from next Monday.
And National Irish Bank said it was in discussions with the Financial Regulator about joining the Irish deposit protection scheme.
NIB, which is owned by Danish bank Danske and regulated in Denmark, had the highest deposit protection scheme limit until Saturday. The Danish scheme covers a maximum of around €40,300.
In a statement, the bank said: "NIB has submitted an application to the Irish Financial Regulator to supplement the Danish customer protection scheme to a new maximum of €100,000 per customer."
A spokesman for the regulator said there was provision for a bank regulated in another EU country to join the protection scheme in its host country.
The change to the deposit protection scheme, announced by Finance Minister Brian Lenihan, prompted a surge yesterday in deposits back into banks from the likes of post offices, where there is a State guarantee.
Bank of Ireland, AIB and Anglo Irish all reported a large volume of deposit business yesterday.
AIB's Hugh O'Keeffe said people with smaller deposits had been putting money into An Post savings products last week, but there was evidence that money was returning to the bank yesterday.
Last week, large deposits -- €100,000 and amounts in excess of €1m -- had flowed into AIB from smaller banks and building societies as bigger banks were seen as being able to weather the credit crisis better, he said.
A spokesman for the Department of Finance said legislation would be passed soon to effect the €100,000 limit, but no details had been worked out on the funding of the scheme.
The current deposit scheme has a total fund of just €527m in it, from a levy of 0.2pc imposed on each eligible deposit.
This would cover just 5,300 deposits of €100,000 if it was called on, but the department spokesman insisted that it did not envisage a situation where the fund would be drawn down.
It was planned that the €110m in the League of Credit Unions' Savings Protection Scheme would be added to existing state protection fund.
A spokesman for the league admitted that credit unions would have to start funding the new state protection scheme.
It is understood credit unions were included in the protection scheme for fear there would be large-scale withdrawals of money from credit unions if they were not part of it.