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FDIC Insured Savings Account Denominated in Foreign Currency?
Old 07-15-2010, 12:12 PM   #1
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FDIC Insured Savings Account Denominated in Foreign Currency?

First off -- this isn't about making a play on exchange-rate movements or fear of an impending dollar collapse or anything like that.

A elder family member in one of the PIIGS of Europe is concerned about the safety of his retirement savings (CDs and savings account, from what I can tell) from bank collapse etc. I don't know if these fears are well-founded or not, but if these basic investments were in the U.S. I could easily put his mind at ease and help identify FDIC-insured accounts (the value is under the 250K limit). But I'm clueless about the laws and rules overseas and not fluent in the language to figure it out.

One idea that came up was whether he can/should transfer his money to an FDIC-insured bank account in the U.S. But because the money will continue to be withdrawn/spent in euros over the next couple of decades, I cautioned him that adding currency exchange-rate risk is probably not a good idea in retirement. Which of course led to the question of whether one could maintain an FDIC insured bank account in the U.S. that is denominated in foreign currency, in this case euros.

I started poking around the FDIC website, but haven't found this question addressed in any of the FAQs I've looked at, and general internet searching reveals a pretty sketchy collection of scams based on any searches having to do with euros. I'm vaguely aware of Everbank, but it seems a little shady and I wouldn't feel comfortable opening a bank account for a pensioner in a bank like that even if it is legit.

I know we have a few ex-pats on the boards, and maybe some others have investigated this. Does anyone have any idea of where I can find answers to this question, or has anyone found this out already?

Many thanks for any advice.
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Old 07-15-2010, 12:23 PM   #2
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Why not open an account in Germany or other Euro-zone country in better fiscal shape than the PIIGS?

But if I had to take a currency risk and lived in Europe, I think I would open a bank account in Switzerland... Fiscally conservative country, stable economy and political system, and refuge currency. And deposits are guaranteed by a FDIC-like insurance authority (up to 100K CHF per bank and per customer).

Check deposit insurance limits by country here:
http://en.wikipedia.org/wiki/Deposit_insurance
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Old 07-15-2010, 12:52 PM   #3
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I know people in Everbank... they are as legit as the bank down the street.. do you feel uneasy depositing your money in a brick and mortar place
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Old 07-15-2010, 01:04 PM   #4
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Originally Posted by FIREdreamer View Post
Why not open an account in Germany or other Euro-zone country in better fiscal shape than the PIIGS?

But if I had to take a currency risk and lived in Europe, I think I would open a bank account in Switzerland... Fiscally conservative country, stable economy and political system, and refuge currency. And deposits are guaranteed by a FDIC-like insurance authority (up to 100K CHF per bank and per customer).

Check deposit insurance limits by country here:
Deposit insurance - Wikipedia, the free encyclopedia
Thanks for the tip, FIREdreamer. I'm a little hesitant to even introduce the idea of pulling in a third language/country into the mix, where we don't have any local assistance from someone we trust, or to recommend something that I am not familiar with or capable of helping out if there is some confusion or questions. That's why I was thinking of the U.S., because it's the only thing I really know (and even that is debatable, although it'd undeniable that I could LEARN if I needed to ... )

Maybe I'll check out Switzerland, I think they have a bunch of official languages, maybe one is English ...
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Old 07-15-2010, 01:11 PM   #5
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I know people in Everbank... they are as legit as the bank down the street.. do you feel uneasy depositing your money in a brick and mortar place
Not a knock on anyone who works for Everbank, but when it comes to making recommendations for elderly relatives I could never go with something like Everbank, for personal reasons.

If Citibank, WellsFargo, Bank of America, etc. turned out to be some giant ponzi scheme, the whole world would know, my relatives would understand that it wasn't just me picking some new-fangled internet bank that caused the problem for them, and Uncle Sam would step in and bail them out, if only for the brand-name damage it would do the the U.S. Over the past few years I've learned there is safety in numbers, even if the numbers are swelled full of morons jumping off a cliff (see housing bubble). If Everbank collapsed, or turned out to be some giant scam, I don't think anyone would care or notice.

My heart just can't recommend an elderly relative transfer money to an online-only bank on the basis of an FDIC logo on their website, even though my head agrees with you that it's really no different that a brick and mortar bank.

I use ING Direct myself, and though it doesn't necessarily make sense I do find some comfort in knowing they have a physical presence in the U.S., that could be raided by the FBI and result in people being thrown into jail if there were shenanigans going on there. I'm maybe a little paranoid when it comes to internet-only stuff and other people's money.
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Old 07-15-2010, 01:19 PM   #6
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Thanks for the tip, FIREdreamer. I'm a little hesitant to even introduce the idea of pulling in a third language/country into the mix, where we don't have any local assistance from someone we trust, or to recommend something that I am not familiar with or capable of helping out if there is some confusion or questions. That's why I was thinking of the U.S., because it's the only thing I really know (and even that is debatable, although it'd undeniable that I could LEARN if I needed to ... )

Maybe I'll check out Switzerland, I think they have a bunch of official languages, maybe one is English ...
English is not an official language in Switzerland, though many Swiss bankers I know speak English pretty well because it's kind of the language of reference in the world of Finance. If your relative is from Spain, he should perhaps look at Andorra (they speak Spanish). If he is from Italy, he should look at the southern Swiss canton of Ticino (they speak Italian). If he is from Portugal or Greece, then I don't know...
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Old 07-15-2010, 01:21 PM   #7
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Maybe I'll check out Switzerland, I think they have a bunch of official languages, maybe one is English ...
If you have enough cash, they speak any language you like.
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Old 07-15-2010, 03:03 PM   #8
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If you have enough cash, they speak any language you like.
Ain't that the truth! Unfortunately, this is not a large enough sum of money to excite a Swiss banker ... after all, I'm in the realm of FDIC limits here!
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Old 07-15-2010, 04:49 PM   #9
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Originally Posted by Lusitan View Post

My heart just can't recommend an elderly relative transfer money to an online-only bank on the basis of an FDIC logo on their website, even though my head agrees with you that it's really no different that a brick and mortar bank.

I use ING Direct myself, and though it doesn't necessarily make sense I do find some comfort in knowing they have a physical presence in the U.S., that could be raided by the FBI and result in people being thrown into jail if there were shenanigans going on there. I'm maybe a little paranoid when it comes to internet-only stuff and other people's money.

Everbank does have a physical address... somewhere in Florida... and you can check out the FDIC site to see that they are FDIC insured... no difference than ING Direct... except that Everbank does have other currency accounts

BTW, there has been over 1,000 banks fail in the last few years... with brick and mortar... some very big... and Citi would be gone if not for being to big to fail.... so having brick and mortar... and being big is not that great...

I think the biggest hurdle is do they have a SS number If not, you would need to get a tax ID number etc... and I guess use your physical address... it sounds like it would be much easier to get an account in some other country in Europe than in the US... and since you think Citi is so good, I am sure you will find them over there.... even in the PIIGS....
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Old 07-16-2010, 09:47 AM   #10
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Citi would be gone if not for being to big to fail...
Yeah - that's kind of my point. We now have two tiers of businesses in the U.S.: ordinary businesses, and too-big-to-fail. For someone else's money, I only feel comfortable recommending a bank that would get a gov't bailout of the highest degree, and that generally means the big guys with the big names.

Quote:
I think the biggest hurdle is do they have a SS number If not, you would need to get a tax ID number etc... and I guess use your physical address...
Good point, I hadn't even researched that far yet, first I was trying to see if it's even possible to get an FDIC insured account in a foreign currency in a U.S. bank. But I am sure there is more red tape after that. I suppose a foreigner interested in investing in the U.S. could get a SSN, but I'd have to research that next.


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it sounds like it would be much easier to get an account in some other country in Europe than in the US... and since you think Citi is so good, I am sure you will find them over there.... even in the PIIGS....
True, but the point is to get an FDIC-insured account. I suspect there is something similar in other countries, but I am not able to really give a recommendation on that, because no matter what I read I doubt I will be able to educate myself enough on the intricacies of foreign banking systems to know whether it's a good idea or not. I'm comfortable with the U.S. system, and that's why I wanted to stick with a U.S. bank account.

I've sent a message to the FDIC asking this question, so I'll update this thread if/when I receive an answer.
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Old 07-16-2010, 09:53 AM   #11
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Is there something wrong with buying, say, bunds?
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Old 07-16-2010, 10:25 AM   #12
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Most European countries have bank deposit insurance schemes. See here. Just make sure the money is spread around a bit between banks.

From what I can see, in many European countries the banks are now in better shape than the governments. But as they showed over Greece, the richer nations can't afford to allow the PIIGS to fail. So it might still be prudent to keep some of the money in government bonds - if necessary, German government bonds.
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Old 07-16-2010, 12:21 PM   #13
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Yeah - that's kind of my point. We now have two tiers of businesses in the U.S.: ordinary businesses, and too-big-to-fail. For someone else's money, I only feel comfortable recommending a bank that would get a gov't bailout of the highest degree, and that generally means the big guys with the big names.

But my point is that NOBODY lost a penny in an insured account in any of the failed banks... so as long as there is FDIC insurance, good to go..

BTW, the company I work with has spread its cash around to get some of the higher interest rates for MM accounts... we had one of them fail this year... nobody bought the bank... we got a letter saying that if we did not move the money by X... they would send us a check... we just moved it to another bank... and one of the ones we were going to move it to was Everbank... they pay a nice rate...

SO.. IMO, your worries are unfounded... real for sure, but unfounded...
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Old 07-26-2010, 09:15 AM   #14
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UPDATE: QUESTION ANSWERED

Straight from the horse's mouth, below is an email reply I received from the FDIC; the short answer is that an U.S. bank account denominated in foreign currency is eligible for FDIC insurance just the same as an account denominated in U.S. dollars.

"Thank you for contacting the FDIC. In your correspondence, you asked is FDIC insurance available for a savings account (held at a U.S. bank) denominated in a foreign currency.

Deposit insurance coverage is provided for deposits in an insured bank that are denominated in a foreign currency. Deposit insurance for such deposits will be determined in the amount of United States dollars that is equivalent in value to the amount of the deposit denominated in the foreign currency. If an insured bank fails, the value of the deposit will be determined using the rate of exchange "noon rates" for United States dollars as of the date the bank closed.

Also be aware that the availability of deposit insurance is not limited to citizens and residents of the United States. Any person or entity that maintains deposits in an insured depository institution is entitled to FDIC deposit insurance coverage. In addition, deposit insurance for deposits denominated in a foreign currency shall be determined and paid in the amount of United States dollars that is equivalent in value to the amount of the deposit denominated in the foreign currency as of close of business on the date of default of the insured depository institution. The exchange rates to be used for such conversions are the 12 PM rates (the "noon buying rates for cable transfers") quoted for major currencies by the Federal Reserve Bank of New York on the date of default of the insured depository institution, unless the deposit agreement specifies that some other widely recognized exchange rates are to be used for all purposes under that agreement, in which case, the rates so specified shall be used for such conversions.

We hope this information is helpful in responding to your inquiry on this matter. If you need additional assistance, please do not hesitate to contact the FDIC at 1-800-ASK-FDIC."
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