Anglo Irish bans fixed bond cash-ins
Half the bank’s 240,000 customers are in the UK and a high proportion of them have fixed-interest bonds that run for one year or more.
The bank is enforcing conditions in the small print to prevent fixed-rate savers from taking their cash before maturity.
‘It’s as if we’re being held hostage,’ says one anxious UK customer who tried to withdraw his money.
Savers with other accounts can make withdrawals as usual.
Anglo told him: ‘Withdrawals are permitted only in the case of an emergency and at our discretion.’ Fears over the safety of the bank was not an adequate reason, as it said: ‘You have not provided a satisfactory emergency reason for us to action this transfer.’
Though legitimate, this practice will only add to the anxieties of Anglo’s depositors.
The bank wrote to customers last month, warning them their savings were no longer covered by the UK depositor protection, the Financial Services Compensation Scheme.
Instead, they would be covered by the Irish scheme.
This has a higher nominal protection than the FSCS’s £50,000 limit, but is only as good as the finances of the Irish state, whose economy is in worse shape than the UK’s.
Because of its exposure to the imploding Irish property market, Anglo is the weakest of Ireland’s three big banks.
The other two are Allied Irish and Bank of Ireland, which is behind the UK Post Office savings accounts.
These two received a £6.5bn Irish government bailout last week, but remain independent. Anglo was wholly nationalised last month.
Anglo has been embroiled in several scandals, including allegations last Wednesday that it had ‘cooked the books’ to flatter its financial position last year. Authorities in Dublin are investigating.
While Allied Irish belongs to the FSCS, giving its UK savers the same protection as other UK banks, Bank of Ireland, like Anglo Irish, is outside the FSCS.
This has left the Post Office’s 500,000 UK savers in uncertain territory. An unknown number - The Post Office insists it is small - have withdrawn their money amid worries over the safety of their savings. Unlike Anglo, the Post Office is not stopping withdrawals from fixed-rate bonds.
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But as retired company director Ken Elston, 65, from Birmingham, discovered, the process is not easy. ‘You can open the account in the post office in minutes and they’ll take your money off you in no time, but when I wanted it back, my post office couldn’t help,’ he says. ‘I was told to ring Bank of Ireland. Then, having done that, I was told to write a letter.’
He first asked for his money on January 26, but received the cheque only last Wednesday. ‘In these uncertain times, every day matters,’ he says.
Publicly, the Post Office insists that not belonging to the UK protection scheme is of little importance to its customers. But privately, executives are believed to be acutely embarrassed that because of its tie-up with an Irish bank it cannot offer its 500,000 customers the same safety enjoyed by savers with other UK banks.
Post Office chief executive Alan Cook refuses to talk to Financial Mail on the subject. In contrast, the Financial Services Authority last week called for a review of the lax system that allows foreign banks to operate in the UK without belonging to the FSCS.
Though Ireland was not mentioned specifically, the FSA said: ‘Depositors in one country are vulnerable to the failure of banks in another if that country lacks the resources to ensure bank solvency or the resources and willingness to fund bank rescue. The current situation should be reviewed.’