The taoiseach and the minister for finance won't like hearing this, but some (if not all) banks are probably already technically insolvent. That is, their assets are worth less than their liabilities on a mark-to-market basis. According to a recent report by analysts at Royal Bank of Scotland, all the major UK banks are in this situation. It's not credible to believe the same isn't true of Irish banks.

Yet technical insolvency doesn't mean the banks are bust. As long as a bank can fund itself by paying bond-holders, rolling over debt and making good on deposits, it's in business. And, of course, the government currently guarantees all the liabilities of the six domestic banks. So maybe the real concern should be national solvency...

What is currently guaranteed by way of deposits, and who is covered?

A national survey published last week by Postbank – the joint venture between An Post and French bank BNP Paribas – found 20% of Irish people have no confidence that their deposits are safe. People who live outside cities and towns are the most sceptical, the survey showed.

That may seem a small number, but when 20% of people pull their deposits it's called a bank run. One in five can bring down an institution in a day. Just ask Northern Rock.

Deposits at retail banks are all protected to a certain extent from this sort of panic, though. The six banks under the government guarantee – AIB, Bank of Ireland, Anglo Irish Bank, Irish Life & Permanent, EBS and Irish Nationwide – are covered for 100% of all deposits. Whatever you have you keep, according to the law.

Some foreign-owned banks, such as Halifax and Ulster Bank, opted out of the scheme but are still covered by the old deposit protection scheme. This provides a guarantee on all deposits up to €100,000.

Then there are the foreign banks that chose to go with the protection offered in their home countries. National Irish Bank (Denmark), Rabodirect (Netherlands) and KBC (Belgium) fall into this category.

Would a foreign bank be safer?

Some bank customers are already voting with their feet. The Anglo nationalisation two weeks ago and subsequent share price collapse in the other Irish banks spooked depositors. Counter staff at two foreign-owned banks in Dublin reported a steep rise in deposits coming first from Anglo and then from AIB and Bank of Ireland in recent days.

There is no empirical reason to believe that a Halifax or an NIB is any safer than a fully-guaranteed domestic bank. Yet there is sentiment out there that the Irish banks and the government backing them will not be able to make good on their promises should they be called upon.

There is a legitimate concern about how the government could realistically fund the guarantee should any institution be forced to invoke it. The six covered banks have liabilities between them of more than €400bn – more than 2.5 times national income. That's not as bad as Iceland, or even the UK, but it's bad enough to make people wonder whether the guarantee is a mere stage prop.

On the other hand, authorities in the UK have told savers there that savings in Irish banks with UK branches will not be covered by the British compensation scheme, leaving all the liabilities to Dublin. If Brian Lenihan decides he doesn't want to be Alistair Darling's chump, he could return the favour, which would leave Halifax, Ulster Bank and First Active in an awkward position.

A more practical consideration: where do you want to go to court to get your money in the event of a total catastrophe? Dublin, London, Copenhagen or Amsterdam?

What about credit unions?

Before the bank guarantee scheme came into effect, the government extended the €100,000 deposit protection to credit unions as well. This was a big departure because as credit unions – as member-run organisations – are not as tightly regulated as banks. However, in light of recent revelations about inappropriate investments of members' funds and the ensuing risk of insolvency, the Financial Regulator and the Department of Finance extended full protection to credit union savers, too. The only hitch is that your loans get netted off the covered amount. So if you have €20,000 saved and €13,000 borrowed, you'll only get €7,000 back if your credit union goes wallop.

What about state-owned
institutions like Anglo Irish Bank or An Post?

Again, the only danger here is sovereign default. For the moment, Ireland is still a AAA-rated country. That means there is little chance of the state not meeting its financial obligations, including the money it 'borrows' via An Post accounts and investment instruments, which are managed by the National Treasury Management Agency – the people who manage government bond issues.

Anglo Irish Bank has been nationalised, but it's not on the government balance sheet. It's more a semi-state along the lines of ESB or Bord Gáis now. Postbank, the An Post/BNP joint venture, is also a commercial company and not an arm of the state, so it gets treated like other banks in the event of a default.

An Post and Postbank deposit rates aren't particularly competitive, but both institutions have been reporting significant inflows since September. That says something about risk perception, if not actual risk.

What's happened in other
countries like Iceland, and what does it mean for us?

You've probably already heard the joke: What's the difference between Iceland and Ireland? One letter and six months! Har har.

Iceland's highly-leveraged banks brought down the whole country, forcing the government in Reykjavik to call in the International Monetary Fund for a €4.3bn bail-out. It was touch and go for savers at first, with a lot of uncertainty about who was covered and for how much. Official deposit protection stood at about €20,000 when Iceland's banks started going under last autumn. That's being paid now. But the country is effectively on its own, unable to raise credit abroad. Its currency is more or less worthless too.

So the bright side of the Iceland/Ireland joke is that, even if the worst comes to pass, guarantees still work. The dark side is that our guarantee is far, far bigger than Iceland's ever was. Cross your fingers we never have to use it.