The ‘big bad bank run’ is very quiet

bank run as defined by Barron’s dictionary of banking terminology as follows: ‘A series of unexpected cash withdrawals caused by a sudden decline of depositor confidence or the fear that a bank will be closed by the chartering agency. Today the ‘silent run’ is much more prevalent than bank runs in the past where customers lined up in front of the tellers window and demanded their cash. Today depositors simply transfer interest rate sensitive funds – called ‘hot money’ to other institutions, also called ‘a run on the bank’.

Several things have been happening in Ireland that feed into this, firstly is that some banks are leaving the country, that partly helps to make the €40bn that left in December make sense (the figure for all of 2010 is about €110bn). Then there are confidence issues with downgrades and the like.

One of the most common personal finance questions I get is about deposits being safe in the bank here, and on sums below €100,000 I hand on heart …

Read More

I (almost) feel sorry for the banks. Making sense of the credit crunch

If we are to look at where the subprime crisis came from and where it seems to be going (which is bulls-eye straight into a recession) you can see that one of the biggest casualties are the banks. Banks never get sympathy, but they should – at least a little maybe.Why? Well, if you have a pension it’s likely that indirectly you own part of a bank, if you have a bank account then you are using the service they provide, a service which helps to protect your money and gives you conveniences like ATM card withdrawals etc. In fact, unless you were miss-sold a mortgage at an exorbitant price and you are about to have your home re-possessed then there is no reason to ‘hate banks’ really, but if you ask people on the street – and to my detriment I actually did this – not many of them (in my test pool of 10 people on Pearse St. Dublin 2 it was 100% true) really care much for the bank, including …

Read More