Saturday 20 July 2019

Savers told not to panic over state bailout speculation

Central Bank says guarantee is enshrined in EU law

No need to worry: the Department of Finance insisted there was no risk to deposits. Photo: Getty Images
No need to worry: the Department of Finance insisted there was no risk to deposits. Photo: Getty Images

Charlie Weston Personal Finance Editor

SAVERS were told not to panic last night. The Central Bank, economists and financial advisers all insisted that depositors' savings would be safe if the country was forced to sign up for an international bailout.

Central Bank officials stress-ed that the State's €100,000 guarantee for depositors has since become part of European law, which means the guarantee is now underpinned by the European Union.

"The €100,000 guarantee amount is now set out in European law, so that is a standard to which all European savers can get assurance of their cover," the Central Bank said.

Worried savers with money in banks, building societies, the post office and credit unions have been contacting this newspaper over the past few days, concerned about the safety of their funds and whether their money might be seized following a bailout.


Speculation has been mounting for days that Ireland would be forced to tap a fund put together by the European Union and the International Monetary Fund (IMF).

But experts stressed that the idea of a bailout would be to bring stability to the financial system, which would include ensuring savers did not lose out.

The Central Bank said: "Deposits in Irish banks, building societies and credit unions of up to €100,000 per person are covered by the Deposit Guarantee Scheme and, in addition, all deposits in participating Irish banks are covered under the Extended Liabilities Guarantee (the government guarantee) until June 2011."

The Department of Finance insisted there was no risk to deposits. "The Government's priority throughout the banking crisis has been to safeguard deposits and this is a priority which is shared by governments across Europe and the European Commission," it added.

Financial adviser John Lowe, also known as the Money Doctor, said any attempt to rob people of their savings as part of a bailout was highly unlikely as it would lead to anarchy and a total breakdown of society here.

"Whoever comes in, whether it is the IMF or the EU, will honour the guarantee for deposits put in place by the State. People should not panic," he said.

Economist Austin Hughes acknowledged that there was huge uncertainty for consumers at the moment, particularly those with savings.

But he stressed that as long as the economy and the financial services sector existed in this country, the rights of savers would have to be protected.

"It is highly improbable we will see any losses for savers," the KBC Bank economist said.

The head of RaboDirect, a Dutch bank with a AAA credit rating, said his bank had seen a surge in deposits.

Roel van Veggel said it was highly speculative and unlikely that savers would lose out through Ireland being forced to exit the euro currency union.

Savers with amounts greater than €100,000 in six Irish banks (AIB, Anglo Irish Bank, Bank of Ireland/ICS, EBS, Irish Life and Permanent and Irish Nationwide) are covered by the Eligible Liabilities Guarantee.

This scheme has been extended until next June and guarantees fixed-term deposits, ie money that the saver agreed to lock away for a fixed amount of time, for example, six months or three years.

However, the term deposit account must be with an institution that is participating in the ELG scheme.

The deposit must have been placed with the institution after it joined the scheme, but before June 2011.

Irish Independent

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