JWL

On a previous thread Novocastrian (think it was) mentioned the folly of keeping too much invested with the bank. Some thoughts and questions...

1. I believe there's a limit of 100,000 euro that is considered 'untouchable' by governments if banks go bust, and beyond that they can help themselves. I think Cyprus (was it?) savers broke that golden rule, but in general what then is the best way to send and save money in France before heading there in person?

2. Novocastrian and all, if not the bank, where else is a safe (too old for too many risks) investment with a return better than a kick up the backside? I have some DAT accounts which pay around 4.2%, but if there's anything better sharing would be wonderful..

bigglesworth

A SAFE investment? No such thing. Return and Risk go hand in hand.

Alternatively, after you have found such a thing, I have an old bridge you might care to buy?

Chatter Static

I invested my cash in a company that makes DVD Rewinders, they save people loads of time between films.

InVinoVeritas

I think your first point is broadly true bearing in mind that this limit of €100K is per bank. Therefore you could have €100K with multiple banks with each deposit having its own protection.

This is confirmed in the following EU banking legislation:-

Europe gets ready for big "haircut"

Europe is leaving others behind on the way to introducing the haircuts of deposits. Or the European Union, to be exact. The first step was made on April 24 this year when the Economic and Monetary Affairs Committee (ECON) of the European Parliament voted on its report on the proposal for a directive on bank recovery and resolution. This is a key pillar in the reform of EU banking legislation, following the agreement on the capital requirements and single supervisor package. Gunnar Hökmark, MEP, Sweden’s Conservative Party, was one of the new system’s architects. In the middle of May the deposit cuts issue was debated by Economic and Financial Affairs Council (ECOFIN) session chaired by Michel Barnier, European Commissioner for Internal Market and Services. On May 20 a group of lawmakers in the European Parliament’s economics committee overwhelmingly voted that, from 2016, large depositors in the EU might suffer losses if a bank gets into serious trouble. The plan was similar to a deal in Cyprus, where wealthy depositors at two banks took hits to save the country from bankruptcy. The European Parliament has joint say with the 27 countries in the EU on the law that would give regulators powers to impose losses on creditors and take other steps during a bank rescue. The legislation envisions creation of national resolution funds based on bank contributions. As of today the main provisions are:

1. Deposits under 100,000 euros would be spared.

2. A bank would dip into large deposits of over 100,000 euros once it had exhausted other avenues such as shareholders and bondholders.

3. The new banks bail out system will become effective in 2016.

4. The legislation envisions creation of national resolution funds based on bank contributions. Some lawmakers are calling for a Europe-wide resolution fund and the European Commission is due to propose such a fund in the coming months but that faces resistance from Germany.

5. Bank depositors are divided into reliable and risky. The confiscation measures are defined by what category a depositor belongs to.

The last provision is the most interesting one. There are no definite criteria for defining the depositors. But some analysts read the provision as follows.The reliable ones are «ours», that is those who belong to Eurozone. The risky ones come from outside. Evidently, the depositors from Russia will be considered to be risky account holders. This attitude towards the clients from Russia is not new. This spring the Russian Cyprus depositors started to look for «back-up airports» in Latvia, Lithuania, Estonia, Poland and some other states of Eastern Europe. A stern warning came from Brussels. The eurobeaurocrats said the bankers in Eastern Europe should keep away from dealing with Russian clients – the reason was that the Russian depositors’ sources of income did not meet the legitimacy requirements. So, there should be no surprise that the money of Russia’s citizens deposited in the European Union member countries will be constantly under the Damocles sword of confiscation.

Although I can't find the article at the moment, I am sure Christine Lagarde, of the IMF, proposed that governments, which are unable to sustain their debt obligations, should have the ability to force depositors holding over €100K to invest any surplus in government bonds. She made no mention of a per bank deposit so it was assumed that it would apply to total deposits, though whether this information is held anywhere is doubtful.

Regarding your second point, I think €100K is the best guarantee around at the moment but the returns on bank deposits are pretty poor. For better returns (and 5% pa is not unreasonable from AAA rated investments) you will not find the same level of guarantee should the investment vehicle collapse. On the other hand these investment vehicles (funds in most cases) are unlikely to be raided in order to bail out central banks.

Best advice is to spread your investments, not be overly greedy and keep any bank deposits below €100K. The only problem is that if everyone does this then the solutions anticipated by Michel Barnier and Christine Lagarde won't work and they'll have to dig deeper should the need ever arise.

Cheers IVV

JWL

Nonsense. The 4.2% I'm getting now isn't going to make me rich, but it's safe. Just wondering if there's anything better or similar I should know about.

JWL

Thanks for the other info.

The second part in bold is what I'm asking really. Where do you all spread your vast wealth to keep loss to a minimum? Do you go for low and safe or, at our time of life, are you risking the markets?

EuroTrash

Novocastrian

I'm surprised to see that you attribute the advice in your OP to me. I don't remember posting it and I'm not usually one to give out financial advice.

But I may have been referring to the long established system whereby a bank deposit of up to 100,000 euro, pounds or dollars depending, is insured by a central bank if the regular bank goes belly up. This is reflected in the EU policy suggestion reported by IVV above.

I don't think I would have said only to have 100,000 in banks, just not in any single one. I'm a complete incompetent when it comes to personal finances but I have a substantial amount in mutual funds, well diversified across risk level and across managers.

Err, what's a DAT account?

JWL

Opposite of DIS. You know, DIS and DAT..

Novocastrian

I think I like you after all. But it was a serious question. I suppose it's some acronym for an investment instrument available in the UK, but I haven't lived in the UK for 38 years. Nor have I felt the need to stay current with investment instruments.

Mr. Google tells me its a Dental Aptitude Test, but that can't be right?

JWL

After all..??

Only in France. CA bank fixed term deposit account over 4-5 years. DAT Libre. It's only available for 'new money' transferred to France.

JWL

Sometimes Google is not your friend...

InVinoVeritas

I don't think this can be right. It's a treaty principle in the EU that you can't treat people differently based on origin, race or colour and the same must go for their money.

JWL

Ah, yes, but my money, before it hits the shores of fortress euroland with its rather toytown looking currency, is the mighty yen. Well, it was mighty once...

bigglesworth

I did not know that.

My apologies if you thought my earlier response was a bit glib. I was jumping between things.

"New money" transferred into France means that you take the exchange rate risk. So a reasonable return, although I have no idea what a DAT account is. Against Sterling you would have lost more than that over the past year, and against the dollar.....

Against the yen that might look a much better bet of course.

IMO and that of many others, the Euro has a way to go yet although probably not for some time. The Yen is a closed book to me though. Probably fortunately.