Brits flock to Irish savings accounts

02 October 2008 / by Daniela Gieseler
Savers on both sides of the Irish Sea have started to withdraw their funds and put them into Irish-owned banks after the Irish Government announced yesterday that it would guarantee 100% of deposits in its six biggest banks, including the Bank of Ireland and Allied Irish Bank, for the next two years.

The guarantee does not only extend to retails deposits, but also to money lent to the banks by other institutions, as the Government will underwrite the banks' debts and loans up to an undisclosed fee.

The announcement came in order to avert a run on the Republic's banks, after Irish bank shares slumped on Monday and fears arose that depositors would withdraw their savings.

Dublin's decision has been much criticised by British and European officials, and there are doubts that it complies with the European Commission's rules on state intervention as it offers competitive advantages to the Irish banks which some might deem as unfair.

While the guarantee has already shown its first positive effects for the Irish banks and attracted more custom from Brits keen to find the safest possible home for their savings, their British competitors cannot offer the same guarantee and fear they may lose a lot more savings accounts holders to the Irish banks.

All British depositors using UK branches of the six Irish banks, some of which have considerable holdings in Britain, are automatically covered by the Irish Government's guarantee.

These include Allied Irish Bank and the Bank of Ireland savings accounts and those of all their subsidiaries, which include Bristol & West and Post Office savings accounts.

Despite the fact that Gordon Brown has announced plans to increase the amount up to which savings were guaranteed from £35,000 to £50,000, the Irish Government's move has given rise to calls for a similarly extensive guarantee in Britain.

Lord Lipsey, the chairman of the Financial Services Consumer Panel in the UK, said it was a 'national disgrace' that British savers might be worse compensated than their Irish counterparts should a bank fail.

Saying that the Irish Republic was the safest place to go for savings account holders, Kevin McConnell, analyst for Bloxham Stockbrokers, commented: "This could act as a blueprint for a lot of countries across Europe in how they fix the credit crisis."

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