Saturday, August 2, 2008

From the comments section - Latvian bank deposits

Hi! I am from Latvia. What do you think, what happens to people deposits in EUR at worst scenario? We have legislation, that government guarantees about 10 000 EUR for deposits. Where will they get this money?


I have no idea how Latvia plays out and no useful knowledge of Latvian politics. But in Argentina they just converted everything to pesos at the old exchange rate:

If Argentina is a model your guarantee will be in Lats in the end...

However it has worked differently in some crisis situations.


One person (someone who thinks I am wrong) in the comments section points to a Hansa Bank executive pointing out that Estonia goes bankrupt if the Kroon devalues:

No. Estonia is bankrupt right now. The Kroon devaluing is just Estonia hitting the rock of reality.

And the Estonian CEO of Hansa is right. There is no pressure from Swedbank. Its head-in-the-sand stuff there.


Anonymous said...

EU countries have their own 'FDIC'.

depending where the parent bank is incorporated the deposit coverage levels are different. so if the swedbank has the controlling interest in hansa, then sweden level applies. 10k euro seems low. the fund usually cover at least 20k.

John Hempton said...


This is wrong.

Take the terms of the Kaupthing Edge deposit protection listed in the contractual details of Kaupthing Edge's UK product.

First it depends on whether the bank is a branch or subsidiary. (Ie is Hansa a separately capitalised bank.)

It Hansa's case it is a SUBSIDIARY - which means the Baltic deposit insurance applies.

if it were a BRANCH the Swedish one would apply.

Kaupthing has two deposit products - one in a UK Sub and the other in a Branch.

They have different terms.

If someone knows about the really nitty gritty details of the law here for cross border EU branch banking I would love to hear.

Email me.


Anonymous said...

oh, crap. my bad then. to latvia poster. it's guaranteed up to 20k:

Anonymous said...

The key is "of EUR 20,000 translated into Latvian lats".

Who knows at what exchange rate :(

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