Iceland

home_alone

nilrem wrote: »

So why are you pruning your account to exactly £35k then? Surely if everyone does this it will take a huge amount away from them, it appears that you are only confident in Icesave as long as all your savings are protected?

I don't wish to offend you but it seems from your comments that you are removing all your cash except the guaranteed amount based on a few rumours and the misguided belief that UK banks will be more safe than Icelandic ones (your words)

I also have more than £35K with icesave and will prune it down a bit (as its a joint account to £70K), which according to martin is what we all should be doing, all your eggs in one basket is not a wise practice even in normal times, although I see it could be a problem with those of you with millions. It must be awful for that young girl that won the 10 million on the euro lottery I bet she can not sleep at nights worrying.

gary

casper_uk

ianmr65 wrote: »

No bank in the world could pay out all it's deposits in one go. The principle of banking is that people lend the banks money, eg depositors, and the banks lend it on again, eg mortgage holders.

Erm that's not quite true, HSBC for one have enough. Why do you think their share price is much higher then the other banks? Am sure there are a few more banks around the world that could if needed. I think the problem with the majority of western banks is fractional banking, the system just doesn't work when times are tight.

Money_Grabber13579

casper_uk wrote: »

Erm that's not quite true, HSBC for one have enough. Why do you think their share price is much higher then the other banks? Am sure there are a few more banks around the world that could if needed. I think the problem with the majority of western banks is fractional banking, the system just doesn't work when times are tight.

I somehow doubt that - if HSBC had enough liquid reserves to pay all their deposits in one go, the loan book would be 0. Their share price is much higher than other banks because:

1. It's the UK's biggest bank
2. They have better managed their risk by not borrowing an extremely high proportion of their money from the money market.

SouthCoast

Because many people in the UK have deposited money with several of the Icelandic banks due to excellent service and rates.

Many thanks.
Having raised funds from UK Investors at premium rates, what do they actually do with it?

Continuing my analogy with Brighton & Hove I would guess that the City has a larger tourist industry than the country of Iceland.

Money_Grabber13579

SouthCoast wrote: »

Many thanks.
Having raised funds from UK Investors at premium rates, what do they actually do with it?

Continuing my analogy with Brighton & Hove I would guess that the City has a larger tourist industry than the country of Iceland.

The tourist industry in Iceland is actually a lot bigger than you would expect and is still growing! (Well it was last year when I went!) It's not that far from the UK or America so gets plenty of tourists from both countries!

ianmr65

From todays lex in the FT...

Is Iceland really a worse bet than Kazakhstan or Lebanon? Debt markets think so.
This week’s government rescue of Glitnir, the weakest of the country’s big three banks, has got “house of cards” theorists salivating. Spreads on the credit default swaps of Kaupthing and Landsbanki have widened by almost half, as sovereign spreads have soared. The state bail-out has been deemed worse than useless – the cost of protecting Glitnir’s debt on Wednesday jumped more than 300 basis points to 1,800bp.

The witch-hunt is sustained by a sense of injustice that these upstarts got so big in the first place – combined assets of the top three are about nine times Iceland’s gross domestic product. Having twiddled its thumbs for months, the central bank of Iceland is now taking action.
The decision to seize Glitnir rather than help it out by relaxing repo rules (as in Denmark and the UK) or backstopping liabilities (Ireland), was an admission – at last – that this tiny nation is simply over-banked.

The remaining institutions are huddling together: on Wednesday, Landsbanki sold most of its overseas corporate finance business to Straumur, the country’s number four bank. Bank executives have long complained that CDS prices are a sideshow. In the long run, they may be right.
On paper, Icelandic banks are some of the most solvent in the world: they all have liquid assets sufficient to cover debt maturing over at least a rolling 12-month period. But current markets are more interested in their ability to roll over interbank and money market lines, at a time when every analyst is telling clients to steer clear of anything but the big insurers and the even bigger banks.

Kaupthing and Landsbanki have not done much wrong in the past 12 months. They have secured equity transfusions where they can and built up their deposit bases. Asset growth has virtually ground to a halt, while existing loans have not yet significantly deteriorated. Investors ought to recognise that Icelandic banks have done much to atone for their excesses.

edwinac_2

SouthCoast wrote: »

Having raised funds from UK Investors at premium rates, what do they actually do with it?

Deposits are used to make unsecured loans to the "credit impaired" at onerous rates for the purchase of consumer electronics..

Sub-prime lending at its very worst!

I noticed that one of the Landsbanki lending partners - BrightHouse - charges a whopping 30% - 35% APR.

From the FT (Nov 17, 2007 / Jul 21, 2008 )...

Swelling numbers of the “credit impaired” wanting big televisions has helped BrightHouse, the rent-to-buy purveyor of electrical goods and sofas, deliver strong growth.

After securing a new long-term banking facility with Icelandic bank Landsbanki, Leo McKee, chief executive, said the group now planned to take a share of both the retail and alternative credit markets.

McKee said the company – whose customers pay weekly for their purchases and own them outright at the end of about three years – was not affected by the credit squeeze as few of his core customers had mortgages.

“If someone who is credit impaired wants to do it another way they would go to Provident or Cattles and borrow the money then go to Currys or Comet and buy the product.

His customers "are people who can't or won't go to DSG [owner of Dixons, Currys and PC World] or Comet, and we are providing them with access to high-quality household goods in a straightforward way that protects them from the debt trap". If BrightHouse customers cannot keep up repayments, they are debt free.

Consumers are charged APR of 29.9 per cent and optional "service cover", which gives them the right of return, of about 35 per cent.

Although BrightHouse does not carry out standard credit checks, bad debt - the proportion of arrears - has fallen from 6.54 per cent to 5.74 per cent.

The company, whose heartlands are the less well-off parts of Britain's urban centres, operates 168 stores and plans to open a further 25 this year.

outof

I haven't seen anyone mention the following yet and I think it might offer some reassurance to people who think 300,000 is a low number of people to be defending two big banks

The central banks of Denmark, Finland, Iceland, Norway and Sweden all have responsibility for national financial stability and
a role as providers of emergency liquidity assistance where necessary (as in "Lender of last resort") The Memorandum of Understanding between their central banks should offer some further comfort to depositors in Icelandic banks who may be unaware of these agreements.

http://216.239.59.104/search?q=cache:8S3OwCySncYJ:www.sedlabanki.is/uploads/files/NordiskMoUGenerellslutligENG.pdf+nordic+member+banks&hl=en&ct=clnk&cd=17&gl=uk

I lifted the above from the fool. Credit where credit is due etc.

I am puzzled why it's not more widely publicized. Perhaps to even mention that other Scandinavian governments will back Iceland is to suggest that Iceland is incapable of standing up on its own.

I feel safe anyway.

fusionblue

That was a very informative post edwinac, thank you. If they are being charged up to 35%, maybe they should consider investing in oxygen instead?

I have savings in both Kaupthing and Icesave, and i'm only 22. The biggest mistake i can mistake at this stage is have a panic attack and start moving things about the place without a clear decision on where i'm moving it to. (Not that i'm planning on moving it anytime soon!). I'm sure many people have said something to the same effect already, but for those wanting to move their money about for moving sake... if you haven't already decided where you're going to move it to, and have a good reason to do so, then just leave it where it is.

Nervous_Norvus

http://www.icelandreview.com/ gives up to date news and editorial (in English) from Iceland. Some scary reading there. I am locked into two Icesave bonds, a third paid out in July and I withdrew that cash. I am in doubt as to whether Iceland could pay compensation if Landsbanki failed. It may be that the other Scandinavian countries will help with bailout. There is indeed a memorandum of understanding but it is not binding.

As to where to jump, I think National Savings is the best bet, followed by large UK building societies such as Nationwide and Coventry. I have split 75% of my savings across these three. I only wish the other 25% was not in Icesave bonds.

My wife saw someone today in the post office writing a Barclay cheque for £50,000 to National Savings.