Euro deposits in non-Euro banks

In pretty much any country with an open banking system it is possible to open a Euro denominated account. I would imagine this is particularly prevalent in the non-Eurozone members of the EU (UK, Denmark, Sweden, Poland, Czech Republic etc.) and especially in non-EU territories within Europe known as non-resident banking centres (Channel Islands, Isle of Man, Gibraltar, Switzerland, Lichtenstein etc.). I’ve been pondering what happens to Euro deposits in these countries if the Euro breaks up. Will Credit Suisse in Zurich or HSBC in Jersey just tell their non-resident customers “sorry, the currency you deposited with us is now worthless”? What about PKO Bank Polski or Komercni Banka and deposits held by Polish/Czech citizens?

I guess it all depends on the chain of events that leads up to the Euro breaking up but if, as has been mooted as a possibility, it took the form of Germany withdrawing first, and then other countries following suit, are deposits held outside a Eurozone country going to be rendered instantly worthless? It is likely that deposits held within Eurozone countries will be able to avail of conversion to the replacement national currency but would there be any basis/logic/incentive for deposits held outside the Eurozone to also be converted to one of the replacement currencies?

I know that any discussion about this is purely speculative but I would be interested in hearing about any hypothetical scenarios. (And, yes, I do have a vested interest in the answer.) This question was touched on by someone in the ‘EUR Wedge on De Edge’ thread a while back but seemed to get lost in the fog so I thought it might be worth a thread of its own.

While obviously there’s no definite answer to this one, this only really becomes an issue if the euro ceases to exist – if one or more countries withdraw then the currency will readjust on the FOREX markets and carry on at its new value (presumably lower if the northern countries withdraw, higher if Ireland, Greece, Portugal, Spain or Italy are forced out). The disaster scenario here is total euro disintegration where all current euro countries revert to national currencies. Given the total financial chaos that is likely to exist under those circumstances, it would seem likely to me that EUR deposits in a non Euro country would become utterly worthless. I suppose that it’s possible that a planned and structured euro withdrawal process could unfold but I can’t envisage how – if the euros collapses then it’s going to get really really messy IMO – indeed wedges might be the least of our worries…

I too keep part of my wedge in a EUR denominated account outside the euro zone but rightly or wrongly it’s the part I’m most uncomfortable about as it could end up being the worth the equivalent of confederate dollars if the euro collapses. I moved it there originally to protect against losses from the intro. of an punt nua if we were forced out of the euro zone.
For me it’s a matter of balancing out these risks against each other and against the risks of FOREX losses if I changed that part of my wedge into another currency.

As grim as matters look right now, I still don’t feel that a euro collapse is immediately likely. That said I do like the fact that the particular bank I hold the wedge in will allow me to convert to USD/GBP/CHF instantly online. Admittedly whether or not I’d be able to covert it in the middle of a financial shit storm is another matter entirely.

It’s would seem a safer option to hold your wedge in say a German bank account but the risks of possible capital controls along with a distinct possibility that non residents could be subjected to a quite different regime than German residents in a disaster scenario don’t make this option entirely risk free either.

what about non Euro currencies in domestic pillar banks…?

I think I know the one you have and I have that service too. I have all my funds in Euro too but am tempted to convert some to GBP/USD. The problem is that whenever this temptation arises, the exchange rate is shit, ie now!

Yeah, no small concidence of course :laughing:

Think I’d choose CHF myself if the poo becomes airborne - already have a small USD wedge which was converted at 1 euro to 1.21 USD way back when… goes a long way to explaining my adversion to FOREX risks…