Hungary’s government has proposed to set the ceiling for guaranteed deposits at 50,000 euros, government spokesperson Bernadett Budai said on Thursday.
In October last year, the government raised the guarantee limit from 6 million forints to 13 million forints for deposits, which at the time corresponded to the 50,000-euro limit recommended in the EU. The forint has substantially weakend since then, trading at near 300 to the euro. At current rates, the guarantee limit translates into about 15 million forints, Budai added.
The change could come into effect on June 30 this year, if parliament approves it.
And when the banks start collapsing, what do they plan to pay this guarantee out with?
F$£king buttons?
All smoke and mirrors, and for their next trick ………….
Were premiums ever charged to before? I don’t recall. TO increase the coverage, doesn’t more money have to be set aside into an “insurance” pool? If not, which piggy bank does Budai expect to plunder when a bank goes belly-up?
It’s ironic, this is meant to create trust, trust relies on credibility and yet just legislating without a clear funding strategy is not credible. Kinda defeats the purpose, no?
@JD. Yep, “Don’t Panic” buttons.
Rolrox: “Don’t Panic” buttons
Guess it’s time for, “so long and thanks for all the fish”
Nothing can be guaranteed in Hungary. Least of all anything “micky mouse” banks tell you.
JD. You are astute. If a bank goes “bust” – that means it’s got no money. Right? They will write you an i.o.u. which, will be paid out in the next world.
Hungary is the centre of the “surreal” universe.
I have just bought some crayons, and a colouring-in book. Tomorrow I intend to buy a train set, and some tin soldiers. AgggHHHHHHHH!!!!!!
Well, whereas 50,000 Euro limit is fine, in the USA it is $250,000 to $500,000 per account per bank. No wonder than only people who do not mind losing their deposits would even bank in the Hungarian banking system.
Actually 50k euro is EU standard guarantee – which was increased in the beginning of the crisis, and it is not the bank that guarantees the money but the government which is paying the money. So end of the day it will be tax payers/central bank that will pay failure of the bank. That is the way it works in all EU countries. Whether this is fair or not is good question and that’s why some countries had much lower limits in the past (bank is business like any other and dealing with them has its risks). Banks own capability is controlled by regulation how much it has to be able to pay from its own means(eu mandates 8 % – i.e if more than 8 % of the bank deposits are withdrawn it will collapse like Nothern Rock in UK). I don’t remember the regulation in US but if it is bank itself guaranteeing its own business – well…
Some governments (like Singapore) guarantee 100 %.
Ile, re. this deposit guarantee business, this is how it goes.
(a) All banks guarantee their despoits, i.e. funds deposited with them for safekeeping by the depositors. All over the world, in fact.
(b) Then, if/when a bank fails and they cannot honor their own guarantee, then the gov’t comes in and makes the depositors whole again, but only to the previously discussed maximum compensation limits. It is not as easy and automatic as one might think, however.
Yes, on paper Singapore guarantees deposits with no upper limit, but in practice this remains to be seen.
Looking at this scheme on a worldwide basis, nobody gives a hoot what the gov’t guaranteed limits in the EU are, or what the EU limits are, as other countries on other continents do not really follow everything the EU does, like so many little dumb puppies.
I don’t think this is actually disagreement as such but bank accounts fully are obviously guaranteed by all banks everywhere – as long as they operate normally. However, you only need guarantees when the bank actually cannot fulfill its promises. This can happen easily in case when people withdraw their deposits as NO bank ever has 100 % of the money available (otherwise there is no business). How easily that happens depends on the regulation on how much funds banks have to keep available (obviously more then can lend out, invest etc, more leverage they can have). After that government has to step in, according to legislation of most countries. For time being clearly hungarian banks seems to be safer bets than banks in some other eu/non eu countries lie UK, Icelandic… During the previous bank crisis e.g. in Finland, some people have lost money that has been beyond the regulatory guarantee. During this crisis, looks like all governments seem to protect all deposits.
However, i disagree that investors don’t care about the regulatory guarantees… my personal experience with private banking is that it is very much in mind of most people especially last two years or so.
Actually, just to set the record straight from my point of view.
I fully appreciate and always did that the story reports the Hungarian government guarantee’ing the saving funds in a bank should the bank collapse.
My point is, the Hungarian government is more bankrupt than most banks and they don’t actually have the money should the day ever come when they are asked to cough up.
Not only that, but considering the usual bureaucratic nightmare it puts most people through, you stand as much chance of getting your money back as the proverbial one legged man winning in an arse kicking competition.
“You only need guarantees when the bank actually cannot fulfill its promises.” MY TAKE: Exactly. In the USA, the 22nd bank has already folded just this year. They were taken over and dismantled/re-sold by the feds. Are you saying that something like that can never occur in the EU, just because it is the EU and not the USA?
If you are on the opinion that you accept the present government of Hungary’s “guarantee” on something as private as your own money held in Hungarian banks, go right ahead, continue your banking there. Just know that most if not all of these so-called “Hungarian” banks are nothing more than affiliate companies of foreign banks, anyhow. Fronts, in other words. And banking regulation, like insurance regulation, is in its infancy in Hungary, and probably elsewehere in E-Europe as well.
JD,
i agree with you in terms of country risk. Hungary has significantly higher country risk than e.g. UK or US – or Singapore, but not necessarily more than Iceland. Whether Hungary could actually live up to its guarantee it is a good question, might do or might not. It could resort to “monetary easing” type of solution (like UK) but what would happen in reality, although it would be pretty difficult decision not to honor this guarantee (depending also how many banks would collapse etc).
Anyway, quite a few people have not realised yet that there is very few – if any safe havens really in the world at the moment.
Hi ile
“although it would be pretty difficult decision not to honor this guarantee”
Unfortunately in Hungary I fear this decision would be all too easy to make.
The current government and their alternatives have questionable integrity. Sadly.
JD,
you well might be right. I had very little trust in Gy goverment – or even less so about its capabilities – i don’t recall worse or more reckless governance in central/nothern europe than the last six years of this government. Also it should be noted that you need to read pretty carefully the fine print, exactly what kind of deposits are actually guaranteed (this does not limit to Hungary – typically only the most basic cash accounts are covered, any better and you are considered as investor). My point just was that it is not the bank that can guarantee anything but the government. Anyway, my personal experience from previous bank crisis is that best surviving banks are the “stupid” banks, those that were laughed at earlier. It might well be that OTP survives crisis much better than e.g. Raiffeisen with its huge exposure (or then not). In Finland the only banks that survived the last bank crisis were the old fashioned countryside banks that were not part of the speculative games.
Ile, Hungary is in EASTERN EUROPE. Therefore, you statement that “i don’t recall worse or more reckless governance in central/nothern europe than the last six years of this (Hungarian) government” is not exactly correct, you know.
Of course, Hungarians are making dramatic attempts to convince everyone that whereas they were formerly part of Eastern Europe, now they are somehow moved the country to Central Europe, whatever. The ‘West’ starts on the Austro-Hungarian border, however, and has been for some time now.
With respect to the concept of bank deposit guarantees, you seem to disgree with the rest of us commenting here. Basically, think about it as a two-layer guarantee set-up. The first layer of protection is provided by the bank itself, then if that should fail, the governemnt comes in. Since in the EU the maximum gurantees per account are quite low (when compared to other non-European nations), and since in Hungary it is even lower than the low EU limits, chances are the the gov’t could pay eveyone off if push comes to a shove. Whether they would really want to do so, now that is another question. With the latest ilelgitimate Bajnai regime coming in to pick off the carcasses, they will likely make money off of the carcasses instead, like any od old vulture would.
Personally, I would only keep serious money (say, in excess of US$5m or thereabouts) on deposit in the following four countries: the Caymans, Bermuda, Panama, and Singapore. But that’s just me.
Nyalasi,
personally i know very few private banking customers (individuals) who keep more than 50-100k euro in cash bank accounts more than a few days, for the simple reason that it does not bring any return on the money. I don’t actually know what Hungarian legislation exactly says but typically guarantees only cover the lowest interest rate bank accounts. Any higher and you are considered having done an investment and as such you carry the risk of loosing money yourself (the same way as in equity, property, bonds etc etc). Keeping 5M $ in cash bank account for long term sounds to me foolish (and i would never recommend it to anyone) as even very low risk short term money market instruments bring you significantly higher return on the money (and those don’t carry the risk of default of your bank). The real losers with cash bank accounts are those hundreds of thousands of individuals who have their salaries etc in bank accounts and usually the amounts are less than 50k. And you do have excellent places for your money much closer (and with significantly lower costs) than in Carribean, depending on your requirements on rehoming (using) the money. However, Singapore is one of the better places when you don’t need frequent access to your investments.
Ile, you say “I know very few private banking customers (individuals) who keep more than 50-100k euro in cash bank accounts more than a few days, for the simple reason that it does not bring any return on the money.” MY TAKE: That is true, of course, but really, interest is not why these larger amounts are being still parked at bank accounts. I am not talking about Hungary ehre per se, of course, as very little legitimate money would be banked in our sorry-state country. Nobody is expecting to be able to make a living off of passive interest earnings any more, anyhow. Of course, any interest earned this fashion is better than no interest at all when the cash is stashed in a vault or bank safety deposit box. In Switzerland, foreign folks or all sorts and characters were parking money whoelsale decades ago, and even then the annual handling costs exceeded the interest earned on CHF accounts.
Now, with the largest Swiss bank (UBS) having already lost 2 billion Swiss francs in January to March of this year alone, and letting go of a further 8,700 of its employees, I would not advise any client to put their trust into swiss banks or the CHF any more. The days of Switzerland as a serious banking destination and tax heaven are permanently over. The OECD, the US, and the EU collectively saw to that.
“Hungarian legislation exactly says but typically guarantees only cover the lowest interest rate bank accounts. Any higher and you are considered having done an investment and as such you carry the risk of loosing money yourself.” MY TAKE: Well, in Hungary things might be more complex as elsewhere then, because in most other countries one can easily distinguish between a bank checking acount (cash account), savings acount, or certificate of deposit, verus any sort of financial market instruments. Also, when a particular account is open, this fact should be easy to ascertain.
“You do have excellent places for your money much closer (and with significantly lower costs) than in Carribean… Singapore is one of the better places when you don’t need frequent access to your investments.” MY TAKE: I sure do not follow you here at all, Ile. The Caribbean is far from where — Budapest? Who cares? These days, you do not actually have to take a boat or an aircraft to sail or fly there to take money out or make a deposit, you know. You MIGHT have to go there once in person once to open an account, but even this can be done remotely via an agent, representative, or attorney w. a power of attorney letter. You are aware of electronic fund transfers and debit card withdrawals, correct? These work worlwide, all the same. And the closest good banking lcoation to the European continent is Bermuda, next is the Bahamas, then Panama, and that leaves Singapore as being the farthest away.
I think it is enough of this topic but i guess i am not making good job of explaining how private banking business works (although having done that some years…) As long as you are talking about pure cash accounts you are right, of course, you can access them electronically wherever that bank account happens to be. So we don’t have any disagreements here – or in general either.
However, very little (even illegal) money is kept on pure cash bank accounts as they can be easily invested in equity, funds, hedge funds, indexes etc etc via different kind of tools. Mostly you DO NOT access these other instruments directly but via private banking service. The costs, including taxes and tariffs and requirements to do it differ significantly depending on the place.
The banking security is another issue that applies to the funds (whether cash or other)different ways depending on the location, as is stability of the banking system and culture. Last but not least there is an issue of using the money and again there is wide choice of tools available however, from where you bring the money from does make a difference.
If a bank would default it does not mean that you loose your money that you have invested, except if the money would happen to be in cash bank account or any instrument relating to the bank as a company.
“Very little (even illegal) money is kept on pure cash bank accounts as they can be easily invested in equity, funds, hedge funds, indexes etc etc via different kind of tools.” MY TAKE; Well, if you call these things “investments,” you must have taken a serious beating in those “investments” during the past 6 months, correct? Like just about everyone on Planet Earth had done.
These vehicles are speculative investments at best, but the indistry prefers that people buy them as plaine old “investments.” Whatever you call them, you can lose your shirt on them — and in the past 6 months, just about everyone has.
Whereas if you were of the more prudent, risk averse kind, you would have your funds parked during this iffy period in cash or near-cash accounts instead of these so-called “investments” you had listed that all went down the speculative master toilet. Trouble is, if you want double digit annual returns — like those that were promised by the banks offering sub-prime mortgage bundles, you have to give up a low Beta risk factor and has to be willing to assume beaucoup de risk. Those who did, lost. Those who parked in cash reserves or short term money market securities lost nothing.
“Mostly you DO NOT access these other instruments directly but via private banking service.” MY TAKE: Private banking, what is it? It used to mean well-heeled individual account holder services for those having a net US$2 million or above investments with a bank. Right?
“The banking security is another issue that applies to the funds (whether cash or other)different ways depending on the location, as is stability of the banking system and culture. Last but not least there is an issue of using the money and again there is wide choice of tools available however, from where you bring the money from does make a difference.” MY TAKE: You lost me with that one, Ile, so no arguments out of me there..
“If a bank would default it does not mean that you loose your money that you have invested, except if the money would happen to be in cash bank account or any instrument relating to the bank as a company.” MY TAKE: On the contrary, if a bank defaults on its obligation, it exactly means that you will lose your monies with them. Are you banker, Ile? I mean, how else could anyone make this stuff up?
It’s worth checking out http://mno.hu.
First news bit: “Ügyfél-azonosítók megszerzésére irányuló phishing (adathalász) támadáskísérlet érte az MKB Bankot.” Wow! According to the PR office of MKB Bank, the would-be criminals did not attempt to break into the bank’s web page. Instead, they atatcked every single MKB online banking customer directly. My guess is, someone weorking at MKB bank sold off the client list for a pretty penny. Stadard banking ops procedure in the Wild Easty, you know.
The other clip explains who will now “gurantee” the Hungarian bank deposits. “A garanciát igénylőknek az Államadósság Kezelő Központ (ÁKK) Zrt.-nél kell benyújtaniuk kérelmüket, ez a szervezet „menedzseli” a garanciavállalást.” My vigilant suggestion would be, leave about a 1000 HUF in your account now, take the rest of it out and sew it in the pillow.
Budapest has got to be the most bank-infested city on the planet. At least it has the most retail branches per square mile. Hungarians must be easy targets for high interest loans. They just gotta have that ugly little Japanese car, and watch dumb reality shows on a big screen tv.
Győzike, Győzike, Győzike
Gyártását majd győzik-e
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Atta girl Debbie.