Bank of Ireland downgraded

Wednesday, 08 April 2009 12:00

Bank of Ireland, which offers savings accounts through the Post Office, has been downgraded by credit rating agency Moody's - prompting fears Ireland could be the next Iceland.

Moody's cut the financial strength rating on 12 Irish banks, including the Bank of Ireland, despite the Irish government announcing a bail out yesterday.

Shares in the bank immediately plunged by about a third, although have since rallied.

Finance Minister Brian Lenihan announced yesterday a plan to buy toxic debt from banks in exchange for government debt, but Moody's said profits will be damaged anyway from the downturn.

The Irish government has already guaranteed 100 per cent of deposits at Irish institutions, but some analysts are concerned a run on the country's banks could overwhelm the system.

Liberal Democrat Treasury spokesperson, Lord Oakeshott, said: "This announcement raises further concerns about the Bank of Ireland and puts a further strain on the guarantee provided by the Irish government.

"The UK Treasury must learn the lessons from Iceland and stop turning a blind eye to the issue."

"It is now time for the Post Office to seriously re-evaluate its commercial relationship with the Bank of Ireland. It is essential that Post Office customers can be confident in the security of their savings."

A spokesperson from the Bank of Ireland said the bank does not comment on ratings, but said all deposits are fully covered by the Irish government's guarantee, which is in place up to 2010.

A Post Office spokesperson added: "We are completely confident in our successful joint venture with the Bank of Ireland.

"Many of our savings customers continue to benefit from interest rates higher than any available at the present time and the additional protection offered by the higher level of the Irish Deposit Protection Scheme, and the Irish government's unlimited guarantee until September 2010."

• Tags:
• news
,
• savings general