Very worrying stop press news re Anglo Irish

soulsaver

WD40 wrote: »

Thanks, MC. If you don't have a cooling off period, I doubt there will be one for my mother. I can bear to wait 2 months - I doubt the proverbial will have hit the fan by then. Her bond is for a year... Will AI be intact in a year? I looked up Ireland's credit rating at the S+P website. It says, although their rating is still AAA, that their currency outlook is 'negative' - is that the same thing they refer to as 'negative watch'?

If Ireland's rating goes down, I predict a run.

T&Cs for their ftbs from Anglo website (not Allied Irish (AI) for the avoidance...):

19. Cooling off
19.1. As this is a Fixed Term Bond no cooling off period is
available to You.

BTW this is not a recent change, but has been in place for at least 12 months as it's on mine too.

WD40

Thanks,SS

http://www.independent.ie/business/irish/eu-banishes-ireland-to-sin-bin-over-borrowing-1644915.html

Most of the articles I read seem to focus on the impact the govt's bank guarantee will have on long-term public spending. It appears from these articles that not honouring the guarantee is an option, but major compromises are.

If I'd seen the articles claiming Ireland may not honour the guarantee 2 weeks ago, I would never have advised my mother to invest in Anglo-Irish.

soulsaver

WD40 wrote: »

Thanks, MC. If you don't have a cooling off period, I doubt there will be one for my mother. I can bear to wait 2 months - I doubt the proverbial will have hit the fan by then. Her bond is for a year... Will AI be intact in a year? I looked up Ireland's credit rating at the S+P website. It says, although their rating is still AAA, that their currency outlook is 'negative' - is that the same thing they refer to as 'negative watch'?

If Ireland's rating goes down, I predict a run.

IMHO waiting a couple of months to avoid the penalty is a waste of time. If you could get it out now & get the near same interest rate elsewhere you'd be in the same position as you would be in two months but not in Anglo:
roughly 95@4%/365 = interest pdx60 = £625 pen so 94.375k returnedx 4%/365x60=£621 interest & yr back to £95k all but pence.
Consider tho' : Will FTB rates be better than now in 2 months? Or will you have a better chance of getting your money out now? Or in two months?
BTW this is not a recommendation; it's just the basis for consideration on the bare facts.
My personal opinion is Ireland will get rockier, may even go t*ts up (I doubt it) but WILL get baled if necessary. And even if not, I think depositors in the UK branches WILL get UK treasury compensation (not FSCS). But if my dear old ma's house depended on it.... I think I'd try to get it somewhere I'd not lose sleep over..

JamesJames101

The Irish government is always go to repay the money they have guaranteed - even if a country defaults that doesn't mean it walks away from its obligations! It just goes and gets funding from somewhere else like a sovereign wealth fund (via the IMF).

In my opinion the worst that can happen is that there is a delay in getting the money back. I rate this as a very slim possibility - almost impossibe - although my bond expires in Nov this year so i have a relatively short term view.

gozomark

WD40 - why do you think you have a getout clause ? I thought Anglo Irish were now rejecting all attempts to close fixed rate bonds

gozomark

WD40 wrote: »

?

If Ireland's rating goes down, I predict a run.

why ? everyone knows its likely to happen

Midnight_Cowboy_2

gozomark wrote: »

WD40 - why do you think you have a getout clause ? I thought Anglo Irish were now rejecting all attempts to close fixed rate bonds

Read #322 - he/she doesn't. The FAQ on the Anglo Irish website says business as usual, which I would take to mean that withdrawals are permitted for emergencies, at their discretion.

melbury

WD40 wrote: »

Thanks,SS

http://www.independent.ie/business/irish/eu-banishes-ireland-to-sin-bin-over-borrowing-1644915.html

Most of the articles I read seem to focus on the impact the govt's bank guarantee will have on long-term public spending. It appears from these articles that not honouring the guarantee is an option, but major compromises are.

If I'd seen the articles claiming Ireland may not honour the guarantee 2 weeks ago, I would never have advised my mother to invest in Anglo-Irish.

I haven't seen anything that says the Irish Government may not honour their guarantee - how could they do this? That would be totally dishonourable.

Midnight_Cowboy_2

soulsaver wrote: »

IMHO waiting a couple of months to avoid the penalty is a waste of time. If you could get it out now & get the near same interest rate elsewhere you'd be in the same position as you would be in two months but not in Anglo:
roughly 95@4%/365 = interest pdx60 = £625 pen so 94.375k returnedx 4%/365x60=£621 interest & yr back to £95k all but pence.

I'm a but doubtful about your maths! The penalty will be the same whenever the withdrawal was made. At 4%, that would be £95000*4%*60/365*.8= £499.73 net. If the money was withdrawn before 60 days, the investor would receive less than they'd paid in; I mentioned this because WD40 might want to avoid the psychological pain of that, plus having to explain to his mother where £500 of her money had gone!

WD40 will be slightly better off if he/she stays in for 2 months, because they will be earning 4% on the money rather than what they may get in another typical savings account. If they closed immediately, and deposited the money at, say, 3% the return would be:

£95000-£500 penalty=94500*3%*.8= £2268 net. In 1 yr WD would have £96768.

If on the other hand WD withdraws after 60 days, they will receive back £95000 (60 days interest loss as penalty). If they then deposit the money for the next 10 months at 3%:

95000*3%*10/12*.8=£1900 net, so £96900 in 1 yrs time.

So, WD would be better off by £131 approx. WD has already been in for a couple of weeks, so by the time a withdrawal goes through he/she might be 30 days into the bond term anyway, halving the loss to £65 ish. If I'd made my mind up to get out, I'd forego the £65 to £131 to avoid 2 months of sleepless nights. To be honest, WD has far more to lose by staying in (like his/her mother's house, apparently!) than getting out. I know what I'd do.

For myself, the only reason I haven't asked for my money back yet is that my loss would be much greater than WD's, my bonds are 7.05% and 5.75%. So to revert to normal savings rates of 3% or so would lose me over a grand. At the moment, greed is beating fear and keeping me in.

JP45

Midnight_Cowboy wrote: »

Read #322 - he/she doesn't. The FAQ on the Anglo Irish website says business as usual, which I would take to mean that withdrawals are permitted for emergencies, at their discretion.

Exactly, and I really can't see Anglo Irish accepting any more requests for withdrawls from UK bond holders based on suspiciously timely family emergencies. There's got to come a point where they invoke the 'at their discretion' qualifier and effectively deny any further such claims, and I would have thought they must have reached that point by now.