If you currently have deposits in Irish Banks and Credit Unions then you need to be aware of the risks involved and alternative options available.
The main risks that you need to be aware of and protect against are:-
- The Irish government goes bust because it is unable to push through the austerity measures.
- Large Bad Debt/Mortgage write-offs in the 3 main Irish Banks
- As a result the Irish government guarantees on Irish banks deposits become worthless.
- The Irish government places restrictions on deposits in Irish based banks and you cannot move them out of Ireland following a Bank failure.
- Ireland leaves the euro or the euro collapses
- EU/ECB/IMF refuse to fund any further bailouts
- The EU/ECB goes bust because it can’t afford to bail out Greece, Ireland, Italy, Portugal and Spain.
Diversificationis the key to spreading your risk and ensuring that should any of the above events happen you have at least safeguarded yourself as much as possible. The trick is to diversify into the right things.
Assessing the Risk
You need to properly assess the risks associated with your Deposits/Savings and Investments.
This means looking at issues such as
- Looking at the Company solvency and their Credit rating
- Guarantees that may apply
- Asset Mix
- Access to your Money
- Currency Exposure
Who do you listen to?
- Your Bank? They badly need your deposits to keep their Balance Sheet propped up, to fund their next round of loan write-offs.
- Your Government? They need you to put your money in Irish Banks so that they can use their bailout money elsewhere to keep their budget on track for the IMF/EU
- Your Post Office? They need to build up their deposit book
- Your Credit Union? A big problem affecting the Credit Unions is that much of their surplus cash is invested in Irish bonds and with Irish Banks. So some Credit Unions will fail if the Irish banks fail and the Government guarantee is found to be worthless. Many credit unions are under-capitalised, in arrears and making losses and there are questions about the capital adequacy of many of them. http://www.rte.ie/news/2011/1014/creditunion.html
Arm yourself with the key facts and then contact your Financial Adviser who will work with you to put together a plan that you understand and are comfortable with.
Your adviser needs to be independent, experienced and competent. If you have the bulk of your funds in cash with an Irish Bank then you need to come up with a plan that you understand and is suitable for your needs.
Our next article will highlight some of the Capital Protected solutions and products many of our clients are using at the moment as alternatives to Irish Bank deposits.