What's happening to AI? Their share price is down to 32 cents today. I don't have shares in the bank, only savings but how worried should I be about this?

I keep telling myself that it's an Irish Government guaranteed bank and that it's not going to be allowed to fail and that the sell-off of shares is largely just investor nervousness because no decision on government re-capitalisation yet has been taken yet. Am I fooling myself?

What do others think?

Sacente

Like you, I have been following the AIB stock price decline which adds more uncertainty to the present situation. Most financial observers feel that the IOM scheme offers little short term protection because it is unfunded and it may be optimistic to think that the IOM government has the resources to step in if there is a major failure. As I see it ,the Irish scheme will only cover losses over GBP 50,000.Therfore, if AIB fails, the parent company guarantee may be worthless and the depositor will have to wait for compensation under the IOM scheme.This may be a very long period. If any reader disagrees with this opinion, I would like to hear their views.

Steve C

ATM

Thanks for the detailed reply. It's some comfort to get others' thoughts. I'm dithering over whether to transfer most of my savings out of AI (IOM) to NS even though it's a hit on the interest. I'm just so sick of worrying about it.

I read today that AI's share price rose a bit on the news that Irish banks had met the "regulatory capital requirements" as set by the capital guarantee scheme (according to a PWC report). Also, it seems likely (just based on what I can read in The Irish Times) that the Irish government will, if necessary, re-capitalise Irish banks (as a last resort though). But this does seem to re-inforce the idea that the government is committed to making sure these banks don't fail which is the risk we should be concerned with rather than having a false sense of security offered by the dubious IOM guarantee scheme (which as you and others rightly point out) is unfunded anyway.

I wonder how long it will take AI (IOM) to reduce their rates to next to nothing once the BOE rates goes down to 1%!

Sacente

Sacente,
I withdrew my cash out of A & L IOM recently, but mainly because of IOM Guarantee being pathetic due to no funds in the pot until a bank fails as is happening with KSF IOM at the moment.

A & L say they are now owned by Santander which they say is a strong bank but bad news abounds about Banks recently and will probably continue doing so in the future. Banks assets like mortgaged houses and their foolish geared investments do not promote healthy balance sheets, so this can make Banks weaker or even liable to fail as time goes on. This obviously can hurt Spanish and Irish banks as well due to the declining property markets there.

I have moved cash around to lower interest rate accounts early last month and at least now I can sleep better, albeit with less interest income. I am investing in shares but only just re-started last month after selling my whole portfolio in October 2007, good timing but mainly due to getting ready to move from the UK and not having time to look after my investments.

Sorry if my post wasn't clear but I meant I wouldn't invest in Bank shares as I don't think things will get better for some time, and mentioned HSBC for deposits only as they are a stronger bank than most but National Savings rates are probably just as good.

Also if they are still taking deposits, Northern Rock Guernsey still have the 100% UK government guarantee for the next 3 years or so until they become a private concern again.

I hope not to see any more banks fail, but personally if their is a risk to my savings I would have to move the money. I do risk some of my money (about 20% at most) in the markets but am after a return of more than 6 or 7% on investment amount.

ATM

Thanks for the info. I don't own shares and never have - only savings in Anglo Irish (IOM). We've all been fretting about the guarrantee for weeks but I'm worried now about how safe the bank is now with it's falling share price. Just don't know whether to withdraw my savings while I still can.

Sacente

Sacente,

I haven't got round to checking up on the day's finance news yet as 8 hours behind GMT here, but one thing I noticed when comparing the banks is that HSBC and Standard Chartered Banks in the recent turmoil this last 12 months seem to have weathered the storm quite well.

HSBC down about 19% over the year and Barclays and Lloyds down something like 60%, didn't even bother to look at HBOS......

I would not invest into bank shares for a while yet but if I put any money into a Bank in Great Britain it would have to be HSBC as they have a better spread of risks than Lloyds etc. Barclays are not friends of mine so I won't comment too much on them, but they seem to take good customers for a ride.

National Savings is also a good idea for a safe haven during this financial crisis for a year or two till banks either go to the wall or bolster their balance sheets with more profits on new mortgages, remortgages and maybe a return on their investments which a kid could have done better with.

ATM

Anglo Irish's share price is down to .89 euro today - and the rest of the banks are down too. How worried should we be about the safety of savings in IOM guarrantees notwithstanding? Is it time to run for cover to National Savings yet?

Sacente

Hi how do the above comments effect Allid Irish in the Isle of Man....I did post some comments earlier form one of the finance officers at allied irish but the view here was that nobody was sure if IOM bank was fully covered.,\......anny new thoughts

What about the currency, its in euros and not GDP therefore if you fix the rate in UK held AIB the value of your capital could rise and fall due to Irish currency (Euros).

Can anyone clarify on this please.

I have spoken to two different members of staff at AIB London and both have said the UK Scheme will kick in if the Irish government default to the tune of £50k per person. They said it was because the London/UK branch of AIB is registered in England??

Also they have agreed to hold their rate of 7.06 providing the paperwork reach them by 17th November.

I can't see nothing in writing on AIB website that the Irish Gov will provode 100% cover on all deposits, no matter what amount?

All I can see written is up to 100,000 Euros = approx 75,000 GDP. So I rang AIB in London, they say its FSA regulated but protection is provided by Irish Gov as mentioned above. UK FCS dose not apply. So you have to direct to the Irish Goverment, UK FSA has no involvement.

AIB website is not very clear about how much is protected it only says 100,000 euros?

Now if I was to invest into AIB wih GDP it has to be converted in Euro currency, therefore one has t take into consideration changes in currency as well -so what you put in may not be what you get back .....depending on fluctuations in currency?

I thin the same problem applies to ING customers too?

Please can somone correct me on all the above before I invest in AIB, as when I phoned , they were very vague.

This is probably all not too relevant now as Anglo Irish have reduced their rates and are not particularly competitive. I understand that the Irish government put pressure on them to reduce rates.

I am equally confused roger!

I found this in the Times 12th October:

"Anglo Irish, alongside the Bank of Ireland, which owns Post Office accounts, is not fully covered by the FSCS, so savers would need to apply first to the Irish scheme.

Ireland guarantees 100% of deposits, so there should be no need for savers to call on the UK scheme unless the Irish government is unable to pay."

Cuhullain:

I have a sum saved in the Anglo Irish Bank (Issue 2) as I believe it has a very good 7 day notice rate. I am just worried that it is not covered in the UK Compensation scheme of £35k. Can someone shed any light on this? I live in the UK (NI) and have invested via their London branch.

Also, does anybody know when the new rates of compensation come into force - and what these rates are? I heard £50k mentioned.

Thanks.

I am in the process of taking out a fixed rate bond with Anglo Irish but thought I had better check what compensation scheme they were covered by.

I rang the FSA first to ask if I was covered by the UK scheme as well as the 100% cover by the Irish government. I am not that confident when a government (Iceland comes to mind) gives their backing. The guy at the FSA should have been a politican! I asked him 4 times for a straight yes or no as to whether I would be covered by the UK scheme if the Irish government failed to pay up. All he kept saying was the Irish have a scheme in place and are obliged by an EEC directive to pay up if a bank defaults.

He did give me the number for the Irish government scheme and when I rang their offiice the lady told me straight away that I would not be covered by the UK scheme but I should ring the number on my application form to be sure.

This I did and got another straight answer saying I would be covered by the UK scheme!!!

Roger King

Can anybody help!

STEVEC, thanks for the explanation. It seems clear enough. I just want to summarise the situation so far as nothing has been posted on this for a while.

As far as I understand from your and other posts, (please correct me if I'm wrong) we no longer need to talk about the "guarantee" as this is now in place - on paper at least. However, it is basically just intended to be a psychological re-assurance as it's doubtful if the funding would be there to cover depositors in the event of the bank insolvency in the first place. Our chief concern now is the health of AIB (IOM), AIB Plc Ltd and ultimately the Irish economy, correct?

I note that AIB (IOM) have just reduced their top savings rate by 1.2% (ouch!). I wonder if they've passed anything like that cut on to their borrowers!

Are there any other indications in the air that you are aware of that have changed the situation since you last posted? I've been watching AIB's share price as well as the news in the Irish Times and elsewhere but not sure if I can afford to feel more relaxed about safety of savings than 3 weeks ago.