Kaupthing Edge, Should I Avoid?

papolo

Oblivion wrote: »

BTW, you don't know me, so it's a bit presumptuous to call me 'My friend'.

sorry, i just being polite

EalingSaver

Rafter wrote: »

http://ftalphaville.ft.com/blog/2008/10/03/16644/the-news-from-iceland-thetta-er-buid/
Heres a thought. Why not invest your savings in a UK institution that might help UK companies to grow and keep people in jobs, might provide mortgages to your children, families and neighbours rather than send it off to Iceland/ Nigeria/ Ireland/ wherever for a few pence more each month in interest?

So presumably you think that savings deposited with UK banks are only used as collateral to fund loans to the UK? Conversely presumably you think that Sterling deposits made to UK branches of overseas banks are only used to fund loans back in the home countries?

In which case any worries there were about the level of exposure of UK to US sub-prime were complete nonsense. And the Latin American debt crisis of the 90's must have completely passed the UK banks by (instead of leaving a number of the large household names techinically insolvent for a good few years).

Lynt_3

jack111 wrote: »

The new egg account gives you 6.30%.
http://new.egg.com/visitor/0,,3_94368--View_2081,00.html

You can move money from you old account into the new one. I threatened to leave and was suddenly told about a policy change that existing account holders could create a new account online and have the 6.30% rate applied to them.
Ignore the last bit that it only applies to new accounts and new money

I think 6.30% AER is a good rate.

Oooh, I didn't know that!
I will get onto them straight away. I had been feeling a bit peeved every time I saw their ads for new accounts.
Thank you!
Lyn

Oblivion

papolo wrote: »

sorry, i just being polite

Your apology fully accepted. It's probably just a language barrier thingy, what with me being English and you being Icelandic

Now, I'd be interested in your answer to the main point I made in post #79.

Dave.

Rafter

Reaper wrote: »

As EalingSaver said I think you will find it's £4.3bn per year.

Besides, the governement has already said it will pay whatever is necessary then reclaim it back from the industry, in successive years if it goes over £4bn, as described in Martin's article.

Well, not according to the FSCS website here.

http://www.fscs.org.uk/industry/funding/Levy_Information/

I actually exagerated. It is only £1,840m for retail deposits - the other bits are all around insurance and other categories.

Totally with you that the government will bankroll it if there isn't enough but for me that is a very 'I'm alright Jack' attitude that you are happy for your families, friends and neighbours to pick up the bill.

Sure I'm being patriotic but I'm a bit miffed that savers think they can just plump for the highest interest rate without any risk of losing any of their savings if the risky institution they have saved with goes pop.

It means that more responsible banks and building societies have to pay more for their funds, which means higher mortgage and loan costs for everyone else.

Good for you if you have paid off your mortgage and have savings and absolutely you should get a fair return on them.

But once upon a time you probably had a mortgage and thanfully your parents and grand parents banked and saved in UK banks to fund it. If they had send all their money overseas there wouldn't have been any money to lend you, or to the companies you worked for or businesses you started.

Sorry. I'm ranting. I just feel we wouldn't be in this financial mess if saving and borrowing had been more balanced and our government and regulators weren't so quick to insure and underwrite savings in banks whose operations are outside their control.

R.

downs523

JUST FOUND THIS ON THISISMONEY, SAYS THE BANK MAY BE IN TROUBLE!!!
http://www.thisismoney.co.uk/saving-...9&in_page_id=7

Rafter

EalingSaver wrote: »

So presumably you think that savings deposited with UK banks are only used as collateral to fund loans to the UK? Conversely presumably you think that Sterling deposits made to UK branches of overseas banks are only used to fund loans back in the home countries?

In which case any worries there were about the level of exposure of UK to US sub-prime were complete nonsense. And the Latin American debt crisis of the 90's must have completely passed the UK banks by (instead of leaving a number of the large household names techinically insolvent for a good few years).

Nope - I'm not that naive!

If you invest in a UK building society MOST of your savings go to fund mortgages in the UK.

If you invest in the Co-op bank your savings go to fund ethical companies, mortgages and loans.

If you invest in a UK bank with international operations, your savings could end up funding anything, although the majority will probably be to UK based companies and individuals.

Sterling deposits in overseas banks contribute to the overall funding base of that bank and support their lending operations: Say Kaupthing have £5bn of savings in the UK, against that they can borrow in Iceland or wherever to fund their operations - even if notionally the savings are still safely tucked away here. (compare this to the £8bn transfered by Lehmans London to the US just before the collapse and the wranglings over whose money this is).

Savers cannot be expected to understand the lending operations and risks of every institution they might invest their savings with.

However the FSA should and could prevent overseas banks taking a disproportionate share of the UK savings market by offering market leading rates, unless those banks also pay a disproportionate insurance or levy for the risk that domestic banks or tax payers will have to pick up the bill.

It is totally wrong that if you want to insure debt to Kaupthing today you have to pay 10%+ for the insurance policy (CDS spread) but Kaupthing can merrily take savings from the UK at 6.5% with the tax payer and other banks picking up the huge risk that there will be a claim against the FSCS.

R.

altocumulus

downs523 wrote: »

JUST FOUND THIS ON THISISMONEY, SAYS THE BANK MAY BE IN TROUBLE!!!
http://www.thisismoney.co.uk/saving-...9&in_page_id=7

From the link.....and of interest.....

Fitch analyst Gordon Scott said of Kaupthing: 'There have been strong inflows of deposits, but now market sentiment may put a halt to that. The interesting thing about the bank is that they have savings brands in more than 10 countries in Europe and an increasing proportion of fixed products, which will act to support it.
'We think its assets are adequate, but in the current environment it's difficult to predict when external factors are coming into play.'
Kaupthing said earlier this week it has enough cash to pay all of its obligations for 'at least 360 days' and has increased the level of savers' money in its coffers relative to its loan book by 8% to 44% between April and June. A statement released on Icesave's website said it has a deposit to loans ratio of 63% and €8bn sitting in its coffers.



The £35k (soon £50k) compensation still covers savings in KE.....

EalingSaver

Rafter wrote: »

Nope - I'm not that naive!

Hi Rafter,
Good. In which case I will treat your posts more highly. It was primarily your comment which said that there was only a limited annual pot, which very stronlgy implied that once that was dried up that was it, which got me. This could have alarmed even more people, or the same people more. Unforunately there does seem to have been a rash of semi mad postings recently (on all sides) which has coloured my judgement of these forums.

Covering a number of your comments. Some of what you say is certainly valid, but don't forget that a number of UK institutions are probably running overseas operations which are operating under the local banking guarantees. Its not a one way street.

Also, in my opinion, actually it probably is more fact, the UK banking industry has been very uncompetitive historically when it comes to saving rates. They have got away with it because of the inertia of the 'man on the street' when it comes to managing their finances. The influx of newcomers to the market should be seen as very posititive, and made possible by advent of widespread internet banking in particular. The current financial mess has of course put a bit of a different spin on things.

As you say, savers - as in the Joe Bloggs on the street - can't be expected to understand the business models of the average bank. And that is one of the reasons these guarantees exist. It is of couse also up to the FSA to issue the banking licences for the UK operations of these overseas banks. If at the time the licences were issued they thought they were dodgy, presuamlby they wouldn't have done so. They can't just setup shop and start taking deposits and still be covered.

However the FSA should and could prevent overseas banks taking a disproportionate share of the UK savings market by offering market leading rates, unless those banks also pay a disproportionate insurance or levy for the risk that domestic banks or tax payers will have to pick up the bill.

But what is 'disproportinate'? The amount they take is relative to how competitive they are, and competition - in general - is a good thing for the 'consumer'. You have to start from the premise that they are not on a level playing field to assume its disproportinate.

It is totally wrong that if you want to insure debt to Kaupthing today you have to pay 10%+ for the insurance policy (CDS spread) but Kaupthing can merrily take savings from the UK at 6.5% with the tax payer and other banks picking up the huge risk that there will be a claim against the FSCS.

But as I say, if the FSA thought that these overseas banks were a significant risk at the time the banking licences were granted, then presumalby they wouldn't have been granted. You could equally well - and frankly with what we know at the moment you could say with more certainty - that it was completely wrong that e.g. B&B and NR were able to take money from depositers with the guarantee cover while operating a loans business model straight out of the worst excesses of the late 80s early 90's mortgage/housing boom e.g. 125% mortgages, large volume of self-certification mortgages etc., plus a very high dependance on borrowing from the money markets etc. This is an issue of poor oversight in general, not of the principle of foreign banks being able to operate in home territories. And at the moment, regardless of CDS rates, KEs business model looks a damn site sounder than either of those two were.

I may be mistaken on this, as I'm not definite, but in regard to the 'cost' of the risk being on the UK banks - I had always assumed that the comittments to the FSCS scheme applied to ALL UK banking operations i.e. the UK operations of the likes of KE, ICESAVE, whoever, were equally required to make contributions to the scheme (if/when required) as 'British' banks were. And those contributions were proportianate to the deposits they had. [MAYBE those operating under the passport scheme are different?]

What is clear that is unreasonable is that banks contributions don't take into account their riskiness. How you measure that - I don't believe CDS is really the simple answer - is a different matter. I could see a better framework in the future where there is a pre-paid scheme of some form where contributions are based on not only the level of deposits but factored for the 'risk' of the banks operating model. But recent history shows there is either insufficient oversight, or insufficient transparency, to really be able to fairly measure that.

Reaper

Rafter wrote: »

It is only £1,840m for retail deposits - the other bits are all around insurance and other categories.

So it is. I managed to look at that page previosuly without that actually sinking in. Though as you say it is a technicality since the government is prepared to exceed that.

As to the rest of your mini-rant... actually some of it I agree with. I would dearly like to see heads roll once this is over. The bank bosses should be fired and all those who earnt huge commissions buying the dodgy debts that got us into this situation should be taxed on them at a 100% rate retrospectively. Not that it will happen sadly.

In the meantime we savers need to be protected from something that is not our fault.