Are your savings safe? article discussion

[MSE Dan]

This discussion relates to the fully updated

Are your savings safe? article

Please click reply to discuss

[ps646566]

I would argue that, regardless of the FSCS, savings with UK based institutions are inherently safer. As Northern Rock showed, HMG cannot afford a UK institution of any size and significance to go under because the political, financial, and economic ramifications are just too awful for it to contemplate. If however a bank in, for example, Iceland, India, or Nigeria were to fail then the situation is much less clear cut for the British investor. It could take a very long time and involve a great deal of time, effort, and stress to recover all money invested up to £35,000.

[1echidna]

Originally Posted by ps646566

I would argue that, regardless of the FSCS, savings with UK based institutions are inherently safer. As Northern Rock showed, HMG cannot afford a UK institution of any size and significance to go under because the political, financial, and economic ramifications are just too awful for it to contemplate. If however a bank in, for example, Iceland, India, or Nigeria were to fail then the situation is much less clear cut for the British investor. It could take a very long time and involve a great deal of time, effort, and stress to recover all money invested up to £35,000.

I can understand the time (and my situation is that I can afford to wait for the machinations of the FSCS) but why effort or stress? The FCCS surely does not expect the individual investor to assist in recovering monies available in the event of failure by a foreign bank operating under the scheme?

[bryanb]

Is Hong Kong & Shanghai Banking Corp a UK institution?

[rosy]

Can I ask -hoping it's a theoretical question - if a British bank did have to be bailed out by the government and be nationalised, would you retain all of your savings in it or would you lose everything over the protected £35000?

[Stavros]

The FSA would gaurantee the first 35k, 'technically' speaking after that its a gonner. BUT. I doubt that this government would allow a UK bank to go under and seeing scenes of thousands of customers queuing outside banks again like we saw with the panic caused over the Northern Rock, I would expect the Chancellor (after changing his crap stained underpants) to re-assure customers that their savings are safe

[Aegis]

Originally Posted by bryanb

Is Hong Kong & Shanghai Banking Corp a UK institution?

Vaguely, yes

It's quoted on the UK stock market anyway (among others!)

[awadan]

OK I understand the rules for the FSCS for banks but does this also work for building societies?
:confused:

[Aegis]

Yup, same scheme, same terms.

[Exo]

Originally Posted by ps646566

I would argue that, regardless of the FSCS, savings with UK based institutions are inherently safer. As Northern Rock showed, HMG cannot afford a UK institution of any size and significance to go under because the political, financial, and economic ramifications are just too awful for it to contemplate. If however a bank in, for example, Iceland, India, or Nigeria were to fail then the situation is much less clear cut for the British investor. It could take a very long time and involve a great deal of time, effort, and stress to recover all money invested up to £35,000.

I do not follow your logic that investing in British banks is safer than foriegn ones, assuming of course the foriegn banks conform to the FSCS.
It could be argued that the economies in China and India are far stronger than the UK, so ICICI looks a safer bet in comparison to Alliance and Leicester.

If a bank did go under, then the saver may have a wait to recover his/her money via the FSCS, regardless of the location of the bank in question.

From your other posts on this forum, you seem to be averse to investing outside the UK.
Without competition from foriegn banks, do you think those in the UK would still be competing at the same level of 6% - 6.5% for savers?

I think the USA and British banks have been quite reckless with their investments/risks. They seem to be meeting target levels in order to sustain their high bonus payouts. Common sense and risk assessment seemed to be well down their check list. They seemed to be totally removed from the real world and their glass bubble has finally broken.

[Meltdown]

Originally Posted by rosy

Can I ask -hoping it's a theoretical question - if a British bank did have to be bailed out by the government and be nationalised, would you retain all of your savings in it or would you lose everything over the protected £35000?

Clearly not theoretical (nor hypothetical).
Northern Rock was a British bank, bailed out by the government, and then nationalised. Depositors with NR have retained all their savings, and received a bonus to their interest rate for staying put.

It's when a bank goes completely bust (bankrupt), and isn't taken over lock stock and barrel, that the compensation scheme will kick in.

[Meltdown]

Originally Posted by Stavros

I would expect the Chancellor (after changing his crap stained underpants) to re-assure customers that their savings are safe

Just a thought ...
Does anyone know what Messers (yes, that's the correct spelling ) Brown and Darling do about their savings. Clearly Brown is unlikely to keep Gold ...

[ianmr65]

1) There is pretty much no such thing as a 'british' bank anymore - This is not 1950. All the major high street names, have share capital spread all over the place. are run by americans, and are active in dozens if not hundreds of countries, and depend on global markets for their financing. They are international banks who are headquarteted in the UK

The are as British, as Ford, or Shell, or Macdonalds.

2) The british governement is no more capable of nationalising Barclays or HSBC, or any bank other that A&L or B&B than I am.
Even HBOS, which is small by comparison, still has an asset/liability base of £650bn a market cap of £20bn , and they print bank notes which are legal tender!!! would be too big to nationalise.

So say hbos goes down, you honestly belive the goverment, can cover a liabillity base that is a quarter of the UKs GDP.


3) Northern rock was a one off. A provincial little bank, with ideas above it's station, who played in the big boy's playground and got burnt.

4) The FCSC scheme aims to pay out within 6 months, but if they sums required exceed £4BN, it reserves the right to call on the goverement to make a desicion, about compensation.

So what's riskier, a huge bank, which if it goes down... the goverment / world are impotent to do anything about it, the bigger they are the harder they fall. Too much for the fcsa to pay out on. Mass panic.

Or a small bank covered by two schemes one in the uk, and one in the HQ country. With a smaller asset base. That can easily be managed / or taken over by a larger rival, or nationlised.

You pay your money, you take your choice.

[ianmr65]

Originally Posted by Meltdown

Just a thought ...
Does anyone know what Messers (yes, that's the correct spelling ) Brown and Darling do about their savings. Clearly Brown is unlikely to keep Gold ...

Allister darling has or had a Northern Rock Mortgage , which may help shed some light.

[Meltdown]

from the MSE article ...
Q. Will my bank/building society will go bust?
A. In the first incarnation of this article, in September 2007, my answer was "extraordinarily, unthinkably, ridiculously unlikely", now I believe it is "unlikely".

Didn't that original article include something along the lines of :
"It is as unthinkable as Cardiff City winning the F.A. Cup" ... or something like that.

[1echidna]

Re Ianmr65

Could any government actually admit that it was impotent though? Surely not in the nature of governments especially British ones to admit impotence? Wouldn't they just print money?

[ianmr65]

Originally Posted by 1echidna

Re Ianmr65

Could any government actually admit that it was impotent though? Surely not in the nature of governments especially British ones to admit impotence? Wouldn't they just print money?

That's what the US fed is doing right now. Printing money to stave off recession, and it only just, just managed to pull off deal for it's fifth biggest investment bank.

In the case of the UK they'd spin it and would ceratinly not admit that they were too impotent, but they could never do it. And Certainly in the case of HSBC, Barclays, and Lloyds, and RBS would not be allowed to by the Fed and the ECB.

[jamesd]

This is misleading because it is in a section writing about the FSCS: "if you put money in stocks and shares, funds that invest in them, and pension funds, then you’ve got a “risk based” investment NOT savings, and this protection doesn't apply".

The FSCS does protect investments. While it's true that the 35,000 savings part of FSCS doesn't apply to investments, the investment protection limit is 100% of the first 30,000 plus 90% of the next 20,000. The trustee arrangement in pensions and unit trusts and OEICs gives an additional layer of protection from problems with fund managers, since the trustee is holding the assets in your name, not the name of the fund manager.

Instead of writing this in a section about the FSCS it would perhaps be clearer to put it before that, saying that the article is not writing about the FSCS and other protections that may apply to investments.

The following headings need English correction "Will my bank/building society will go bust?" and "How do I ensure get 100% safety?".

[ps646566]

Originally Posted by 1echidna

I can understand the time (and my situation is that I can afford to wait for the machinations of the FSCS) but why effort or stress? The FCCS surely does not expect the individual investor to assist in recovering monies available in the event of failure by a foreign bank operating under the scheme?

It's never been put to the test has it. I can just foresee all sorts of obstacles in a situation where HMG has no vested interest in keeping the lid on things. For my part the difference in interest rates is not worth the risk in today's climate. Other people obviously think differently. Each to their own.

[murphydavid]

Why really did the government bail out Northern Rock? They fear the domino effect. It is almost certain that if one bank is allowed to fall then there will be a mad panic to withdraw money from a lot of banks. They would almost certainly fail. The FSCS would be overwhelmed. This way leads to madness!