The Irish government has eased savers' fears by guaranteeing savings up to _100,000. It's high time our regulators did the same!
First, some great news for savers: the government has increased its guarantee for savings by a factor of five. Now for the bad news: it is the Irish, not the British, government that has taken this bold step.
On Saturday, the Irish government decided to increase the statutory limit for its deposit-guarantee scheme for banks, building societies (and, now credit unions) from _20,000 to _100,000 per depositor per institution. This safety-net applies to 100% of each individual's deposit. So, with immediate effect, Irish savers can now rest assured, knowing that the first £78,700 of their savings will be protected if a bank were to fail.
The Irish government has done this in order to improve consumer confidence in the strength, stability and safety of the Irish financial system. By quintupling the protection on offer to savers, and with one of the highest guarantee levels in the EU, I think the Irish Ministry of Finance has done a terrific job!
Savings safety-nets around Europe
As you can see from the table below, saver protection varies widely across the EU. However, on this side of the Irish Sea, the savings safety-net is now much weaker than that in Ireland:
EU country | Deposit protection (_) |
|---|---|
Italy | 103,000 |
Ireland | 100,000 (was 20,000) |
UK | 48,500 (£35,000) |
Denmark | 40,300 |
Netherlands | 38,000 |
Finland | 25,000 |
Portugal | 25,000 |
Austria | 20,000 |
Belgium | 20,000 |
Cyprus | 20,000 |
Germany | 20,000 |
Greece | 20,000 |
Luxembourg | 20,000 |
Malta | 20,000 |
Slovakia | 20,000 |
Spain | 20,000 |
Double your savings protection today!
Now here's a crucial point: deposits with credit institutions authorised in another European Economic Area (EEA) country and operating in the UK on a branch basis are covered under the home country's system. Thus, the savings protection afforded by UK branches of an Irish bank is now more than twice that of a home-grown British bank.
Thus, we could see British savers with savings over £35,000 taking advantage of `regulatory arbitrage' by switching their savings to a UK branch of an Irish bank. Unless our government hurries to increase the depositor protection available here, then we could see British savers rushing to move their money into Irish banks.
For example, savers with Anglo Irish Bank are covered by the UK's Financial Services Compensation Scheme (FSCS) for up to £35,000, plus they enjoy the enhanced protection of roughly £78,700 afforded by the Irish Deposit Protection Scheme. In other words, their safety net has been expanded by £43,700, which will cover all but the very richest savers.
Three first-rate accounts from Anglo Irish Bank
Recently, I've become quite a fan of Anglo Irish Bank, particularly its no-catches Easy Access Deposit Issue 2 account. This terrific account pays a market-leading interest rate of 6.40% AER on savings of £1 to £2m, with no annoying penalties, notice periods and so on hidden away in the small print.
In addition, Anglo Irish Bank offers a table-topping Fixed Rate Bond, which pays a fixed rate of 7.05% AER for one year on £500 to £2m. What's more, its 7 Day Notice Issue 2 pays a hefty 6.55% AER on £1 to £2m, subject to seven days' notice for withdrawals.
Finally, I don't know about you, but I certainly intend to transfer some of my savings to one of these three accounts. After all, as things stand today, they are now more than twice as safe as savings in any British bank!
More: Find splendid savings accounts via The Fool | Beat Inflation With These Beautiful Bonds | Which Banks Are Connected?