So our savings are next for the chop!

professore

http://www.telegraph.co.uk/finance/financialcrisis/9952979/Cyprus-bail-out-savers-will-be-raided-to-save-euro-in-future-crises-says-eurozone-chief.html

This just keeps getting worse. The EU head honchos really don't know what they are doing.

hmmm

professore wrote: »

http://www.telegraph.co.uk/finance/financialcrisis/9952979/Cyprus-bail-out-savers-will-be-raided-to-save-euro-in-future-crises-says-eurozone-chief.html

This just keeps getting worse. The EU head honchos really don't know what they are doing.

If a bank gets into trouble, who would you like to pay for saving it? There usually isn't enough money available by wiping out bondholders and shareholders, so someone else has to pick up the rest of the tab.

Personally I think it is mostly right that the taxpayer picks up the tab*, upto a point (say, a 250k deposit guarantee). But you can't have it both ways - you can't say "taxpayers shouldn't pay for a collapsed bank" and then on the other hand say "our deposits must be kept 100% secure".

* Because "ordinary" depositors cannot be expected to be financially sophisticated enough to appraise the riskiness of a bank - so it is right that governments regulate the deposit taking banks on behalf of society, and it is right that government takes the hit if they get the regulation wrong.

Cookie_Monster

hmmm wrote: »

* Because "ordinary" depositors cannot be expected to be financially sophisticated enough to appraise the riskiness of a bank - so it is right that governments regulate the deposit taking banks on behalf of society, and it is right that government takes the hit if they get the regulation wrong.

why not? People should be reasonably aware of the macro economic climate and the general performance of banks and business they interact with.
There seems to be no issue telling someone to research the car they buy, or TV or a suitable pair runners, why should picking a bank be any different?
Granted it won't stop the **** hitting the fan all the time but if the vast majority of people were just a bit more aware things like this might not happen so big, so quick and so often.

NIMAN

The vast, vast majority of the public will not need to worry about having their savings tax'd if its starts at €100k, as most don't have those types of savings.

Uriel.

Cookie_Monster wrote: »

why not? People should be reasonably aware of the macro economic climate and the general performance of banks and business they interact with.
There seems to be no issue telling someone to research the car they buy, or TV or a suitable pair runners, why should picking a bank be any different?
Granted it won't stop the **** hitting the fan all the time but if the vast majority of people were just a bit more aware things like this might not happen so big, so quick and so often.

You have more faith in humanity then I do for sure.

I think to not have some form of bank guarantee would ultimately be disastrous in the short term at least. We'd go back to being close to 100% cash society and while some people might like that idea, it's a greatly inefficient system. There is also the danger of "no savings for a rainy day" spreading across society.

Perhaps in 30 yrs If people had more awareness, raised through experiencing things lile bank crashes etc it might be different

Also banks and government don't make it easy or cheap for you to spread your "wealth" around in terms of multiple institutions/systems

20Cent

Cookie_Monster wrote: »

why not? People should be reasonably aware of the macro economic climate and the general performance of banks and business they interact with.
There seems to be no issue telling someone to research the car they buy, or TV or a suitable pair runners, why should picking a bank be any different?
Granted it won't stop the **** hitting the fan all the time but if the vast majority of people were just a bit more aware things like this might not happen so big, so quick and so often.

Most information about banks is not publicly available in order for people to make a decision like that. Anglo's bed and breakfast deal arrangement for example.

books4sale

NIMAN wrote: »

The vast, vast majority of the public will not need to worry about having their savings tax'd if its starts at €100k, as most don't have those types of savings.

The vast majority? Wouldn't be so sure about that now.

You'd be surprised what people have stashed away for the rainy day or are building for retirement.

It been said many times, don't put all your eggs in one basket! This advise speaks volumes more than ever.

amacca

20Cent wrote: »

Most information about banks is not publicly available in order for people to make a decision like that. Anglo's bed and breakfast deal arrangement for example.

This more than anything would concern me when trying to select a "safe" bank

hmmm

books4sale wrote: »

The vast majority? Wouldn't be so sure about that now.

You'd be surprised what people have stashed away for the rainy day or are building for retirement.

It been said many times, don't put all your eggs in one basket! This advise speaks volumes more than ever.

Exactly. 100k is not "rich", at least not since the 70s - there's lots of middle class people who have retired who might have that sort of cash, and they're not living lavish lifestyles - try and eke out 100k for 20 years.

Or what about people who temporarily have 100k+ in their accounts e.g. someone who has just sold their house.

hmmm

amacca wrote: »

This more than anything would concern me when trying to select a "safe" bank

Risk managers in banks can barely keep up with the activities of their own banks, let along joe punter looking in from outside. And why should joe punter have to spend large chunks of their time studying international finance and the banking system - banks are a basic requirement of modern society and so should be regulated.

I think it's a basic function of a financial regulator that they regulate any financial institution that offers services to the general, non-specialised public. The limits on that regulation should also be specified e.g. deposit guarantees.

BTW I don't think that basic regulation should stop at banks. It should also be there to prevent things like Priory Hall, because housing is again a basic requirement of modern society and joe punter cannot be expected to understand the intricacies of modern building methods.

Wibbs

hmmm wrote: »

Or what about people who temporarily have 100k+ in their accounts e.g. someone who has just sold their house.

Would this also apply to business accounts, because even small business could easily have that in their accounts.

NIMAN

books4sale wrote: »

The vast majority? Wouldn't be so sure about that now.

You'd be surprised what people have stashed away for the rainy day or are building for retirement.

It been said many times, don't put all your eggs in one basket! This advise speaks volumes more than ever.

Well if you listen to the opposition politicians, especially the independents and UL, practically every person in this country is struggling to feed themselves.

What about the countless surveys telling us how many people have no disposable income after bills are paid. We last heard something like 1.7 million people have less than €50 (or was it €100) left after bills are paid.

I'm guessing these folks would not have to worry about having their savings taxed.

Plus, aren't these very same politicians telling us its time to 'tax the rich'? I would say that all these and their supporters would say that anyone who has €100,000+ in savings is rich.

Zulu

Wibbs wrote: »

Would this also apply to business accounts, because even small business could easily have that in their accounts.

Interesting point Wibbs. I take it that the cut would be tax exempt?

FamousSeamus

Well people do want the rich to be taxed and having 100k in the bank would be considered rich (I'm fair sure SF and independents would agree but I'm not 100%).

Am I right in thinking that the EU never wanted savings under 100k to be taxed and that was the local government decision?

Cavehill Red

hmmm wrote: »

If a bank gets into trouble, who would you like to pay for saving it? There usually isn't enough money available by wiping out bondholders and shareholders, so someone else has to pick up the rest of the tab.

Personally I think it is mostly right that the taxpayer picks up the tab*, upto a point (say, a 250k deposit guarantee). But you can't have it both ways - you can't say "taxpayers shouldn't pay for a collapsed bank" and then on the other hand say "our deposits must be kept 100% secure".

* Because "ordinary" depositors cannot be expected to be financially sophisticated enough to appraise the riskiness of a bank - so it is right that governments regulate the deposit taking banks on behalf of society, and it is right that government takes the hit if they get the regulation wrong.

Revolutionary thought here - but what about holding bank officials personally liable too?
I don't mean tellers - I mean directors of the board, CEO, CFO, etc. Let's face it, there's little sympathy these days for someone who did something generally perceived as being of low risk - ie buying a house for market price with a mortgage. The attitude tends to be - your bad luck, you did the deal, suck it up and pay your debts. They are considered to be held responsible for their own poor financial decision.
Well, where's the moral hazard for top bankers? How come they get to stay in their mansions, living it up on vast pensions and pay-offs while mug taxpayers and depositors get hosed for their poor decision making?

Scortho

Cavehill Red wrote: »

Revolutionary thought here - but what about holding bank officials personally liable too?
I don't mean tellers - I mean directors of the board, CEO, CFO, etc. Let's face it, there's little sympathy these days for someone who did something generally perceived as being of low risk - ie buying a house for market price with a mortgage. The attitude tends to be - your bad luck, you did the deal, suck it up and pay your debts. They are considered to be held responsible for their own poor financial decision.
Well, where's the moral hazard for top bankers? How come they get to stay in their mansions, living it up on vast pensions and pay-offs while mug taxpayers and depositors get hosed for their poor decision making?

You could and probably should. I think we should adopt similar white collar crime laws as that of America. However it won't get anyone there money back. You could make seanie liable for the billions pumped into Anglo, but he doesnt have a cent.
If it was America however at least he'd serve time.

On the bank deposits the government should guarantee deposits up to 100,000 and all deposits of businesses on an opt in basis.
Make depositors pay the government an extra 5% dirt tax for the privilege of insuring their deposits up to that amount. If you don't want to pay the extra tax you don't have too, you just take the risk that you could lose your deposit. It shouldnt be up to tax payers to cover any of this. Likewise each individual should be responsible enough to decide whether they want to take out a deposit protection insurance or not.

Out of curiosity does anyone know how much the gov charges the bAnks for the new deposit guarantee scheme that's coming into place?

ardmacha

It is rather strange that the present policy is largely driven by the "prudent" Germans and is having the effect of penalising those who save money (depositors) to the benefit of those who borrow money.

Cavehill Red

Scortho wrote: »

You could and probably should. I think we should adopt similar white collar crime laws as that of America. However it won't get anyone there money back. You could make seanie liable for the billions pumped into Anglo, but he doesnt have a cent.
If it was America however at least he'd serve time.

Seanie may well be the only one to go to prison at this rate.
But how is he allowed to maintain assets (even in the wife's name) that he enjoys the use of? How come he still golfs at Druid's Glen? Poor old Nick Leeson still has to pay a chunk of every penny he earns to the creditors of Barings. What is the rationale that differentiates him driving one bank bust and those who drove the banks bust here?

Grandpa Hassan

hmmm wrote: »

Exactly. 100k is not "rich", at least not since the 70s - there's lots of middle class people who have retired who might have that sort of cash, and they're not living lavish lifestyles - try and eke out 100k for 20 years.

Or what about people who temporarily have 100k+ in their accounts e.g. someone who has just sold their house.

We have seen that the desposit guarantee scheme is not worth the paper that it is written on, and if push comes to shove it can be torn up. I do not think any government be able to pass a bill taxing all savers, even small ones, but that said I think assuming anything below €100k is safe is completely naive - smaller savers might be hit with a lower tax that is imposed for amounts more than €100k, but I do not think smaller savings are untouchable. Those that claim otherwise are probably those that said, after our pensions were raided, that it could never happen to savings.

I will personally be ensuring that my balance with any one bank does not go above €50k.

FamousSeamus

I will personally be ensuring that my balance with any one bank does not go above €50k.

Well since I was young I was told never have all your money in one bank I have barely enough for one but that's not the point :P). I agree with your statement but I suppose if I was earning a high wage it'd be difficult to keep that money spread out!!

Anyone with any cop on should have diversified their savings into other banks if they saw their own giving out 40 year mortgages with 100% loans and interest only loans to property speculators.

It is Darwinian. Personal responsibility. Don`t bank with someone who is literally throwing your savings away at a property bubble. If you get burned at least society will have learned something.

Lumping the burden on all, including the next generation and those without savings, requires money to be taken from people and given to those who have more money than them. It also means nobody learns that putting your money in a bad bank is a bad move.

Those with 100k in savings whether it is life savings, a pension or they make so much that this is their usual balance need to be responsible for their savings and it is up to them to be savvy with their money. Giving it to banks who throw it away at apartments in the west of Ireland is stupid.

Scortho

Cavehill Red wrote: »

Seanie may well be the only one to go to prison at this rate.
But how is he allowed to maintain assets (even in the wife's name) that he enjoys the use of? How come he still golfs at Druid's Glen? Poor old Nick Leeson still has to pay a chunk of every penny he earns to the creditors of Barings. What is the rationale that differentiates him driving one bank bust and those who drove the banks bust here?

His wife isn't bankrupt and has an equal share to the assets. While his creditors have a 50% share on his house, it's kinda difficult to sell on half a house etc. just because your bankrupt, it doesn't mean that your spouse can't pay a golf subscription for you or your holidays in the sun.
Nick lesson brought down a U.K bank where there are stronger laws and sentences for white collar crime.
In the uk you can go to jail if your wife takes your penalty points. In Ireland a TD can say he's on "dail business" and get them wiped

Bob_Latchford

are state savings over 100k outside the deposit guarantee scheme?

G Power

Uriel. wrote: »

Perhaps in 30 yrs If people had more awareness, raised through experiencing things lile bank crashes etc it might be different

sure we have plenty of generations going around today who've experienced this crisis many times over

Icepick

20Cent wrote: »

Most information about banks is not publicly available in order for people to make a decision like that. Anglo's bed and breakfast deal arrangement for example.

True, but it goes both ways. If enough people cared, this info would be available, because banks could not be run they way they are now.

nice_guy80

where is money now safe?

diversifying money holdings costs money - brokers fees, bank charges etc

When people say diversify, do they mean spread savings across a number of banks or do they mean get their savings out of cash. If the latter, as mentioned above, you have fee's, taxes etc to pay which are another minefield.

Cookie_Monster

Scortho wrote: »

His wife isn't bankrupt and has an equal share to the assets. While his creditors have a 50% share on his house, it's kinda difficult to sell on half a house etc. just because your bankrupt, it doesn't mean that your spouse can't pay a golf subscription for you or your holidays in the sun.
Nick lesson brought down a U.K bank where there are stronger laws and sentences for white collar crime.
In the uk you can go to jail if your wife takes your penalty points. In Ireland a TD can say he's on "dail business" and get them wiped

Ah but you can share credits, get more too for being married, why are the losses not shared also?
Especially when it's obviously the case that assets were transferred to avoid tax or repossession, what are the chances she actually paid the fair market value to 'own' such assets from him?

T-K-O

If we are getting the 'Cyprus Treatment' can we burn the bond holders?

PRAF

In theory I have a lot of sympathy for those who presumably have already paid taxes on their income and who are now going to lose a % of anything they have in excess of 100k.

However, isn't it better to 'burn' rich depositors rather than 'poor' taxpayers. Also, shouldn't large investors (IMO anyone with 100k in the bank is a large investor) try to keep a diversified portfolio rather than lumping everything into the one asset.

Scofflaw

20Cent wrote: »

Most information about banks is not publicly available in order for people to make a decision like that. Anglo's bed and breakfast deal arrangement for example.

Have to agree with Icepick here:

Icepick wrote:

True, but it goes both ways. If enough people cared, this info would be available, because banks could not be run they way they are now.

If the mass of people using a bank have no fundamental reason for being interested in how the bank is run because they expect the government to pick up the tab if the bank falls over, then you're removing a huge source of pressure for banks to be better run and more transparent. But if people are concerned that their bank might fail, a bank that can offer transparency to show it's well-run has a large competitive advantage.

On balance, I don't think it's a good idea either that people in general assume that the government will bail their bank out, or that governments assume the rest of the eurozone will bail their banks out if they can't. There's obvious moral hazard in both.

It's interesting to see what happens, though, when someone at Dijsselbloem's level says something like this. The reaction of the financial press was to search very hard for evidence of "market turmoil" caused by his remarks, while other sources which have been against saving banks have turned on a sixpence to condemn the terrible acts of financial aggression against the Cypriot people.

cordially,
Scofflaw