Credit Crisis FAQ

chris1

Reaper wrote: »

Q: What about interest?
A: Most accounts calculate interest on a daily basis even if it is only added monthly/yearly. These will pay up to the date of collapse...

I would have hoped this was the case, and logically it ought to be, but when I asked the FSCS they said that wouldn't necessarily be the case, and wrote "The compensation will be based on the amount that is held in the account at the time of default."

chris1

Suggested addition: someone asked whether Executor accounts were covered, and if so whether they formed part of anyone else's 50K limit, e.g. the executors or the beneficiaries.

Don't know the answer myself.

ShelfStacker_3

Why so much scaremongering here? "Is my bank/building society safe?" Well, yes, most likely. Northern Rock only collapsed because of the panicked reaction of its customers to a rumour, and following on from the Bradford and Bingley or HBOS affairs the chances that the government would stand back and let one of them fail is infinitesimally small.

Really, this whole thing is just... bemusing. People bandying about the term "35k" as if it has any real bearing, considering that the chances of a bank going under and not being rescued first and taking all its savers money with it are incredibly small. I've had people ask me whether keeping their £3k in an ISA with HSBC is "safe" - well, again, yes, why wouldn't it be - or whether their current account is "safe". People are just panicking for no real reason. When it becomes apparent that one of the major clearing banks really is at death's door, THEN is the time to panic. Right now? No. Nowhere near.

Are your savings with Barclays safe? Yes, because though their profits might have taken a hit they're nowhere near going under. Is it alright to keep your ISA with Alliance and Leicester? Yes, because they're about to be taken over by Santander, who are also showing no signs of death any time soon. Are you at risk of losing most of your money and everything you own if you keep £120k in one place and don't spread it around? Most likely not. Get some perspective. Martin should be ashamed for even giving such silliness credence.

yowza

RE: Question 6 - How long will it take to get the compensation?

Kaupthing Edge Help page gives the following advice:

Under EU law compensation for any losses incurred due to the failure of a bank should be paid within three months - regardless of whether it is through a passport scheme or the UK Financial Services Compensation Scheme.

KE also point out their right to repatriate your account from the UK bank to the Iceland bank in which case compensation, if needed, should be sought through the passport scheme.

KE also state that under the Icelandic Depositors’ and Investors’ Guarantee Fund the maximum protection is 100% of the first €20,887 (or the sterling equivalent).

Reaper

KingL - I'll probably ask for a lock eventually, but I'm happy to get suggestions and corrections to my answers for now.

chris1 - I've added a note to say the interest cover answer is uncertain. I'll update it with a definitive answer if anybody can get one. As for your executor question I have not included it partly because it is not a frequent question but mostly because I don't know the answer.

ShelfStacker - I didn't mean to be alarmist. I was trying not to favour either side. I do make the point the government has rescued everything in Q1, and that nobody has lost any money at the end. I don't want to labour the point and be accused of being complacent.

KingL

Just a head's up - Martin's "are your savings safe article" (linked at the top of the faq here) has been updated today, 7 Oct.

ladymiss77

Thanks for the FAQ.....I have another question!!

I am about to go travelling and I have a current account and ISA with the Alliance and Leicester. In the unlikely event of A&L collapsing in the next six months (whilst I am on a tropical beach ) what will happen to my current account? Will I still be able to withdraw cash? Will it still run as per usual, paying out my standing orders for rent and so on?

ShelfStacker_3

Reaper wrote: »

ShelfStacker - I didn't mean to be alarmist. I was trying not to favour either side. I do make the point the government has rescued everything in Q1, and that nobody has lost any money at the end. I don't want to labour the point and be accused of being complacent.

No, that's fair enough. It does worry me that people seem to be indulging in outright paranoia at the moment now, and I certainly don't advocate complacency; these are testing times.

But the fact is that we now have millions of people who before took next to no interest in their finances, having £28k in a !!!!poor Liquid Gold or Flexible Saver or whatever, suddenly gibbering on about how all the banks are going bust and they mustn't have more than £35k anywhere in case worst comes to worst, is downright concerning, as that's the sort of mentality that led to the run on Northern Rock; they don't know anything about the situation except a few titbits they picked up off the 6 o'clock news ("35k"/"Northern Rock is bad, take all your money out") and make some very rash decisions based on that, and I don't want to give that sort of rubbish any more credence to be honest.

Look at ladymiss' post above, for god's sake; Alliance and Leicester may not be in the best position, but they're quite unlikely to go under; they still turn a profit and they were certainly valued highly enough to be bought out by Santander. Most likely she's just heard stuff about banks collapsing and got !!!! scared, knowing nothing more about the situation than that.

Long story short, I appreciate what you're trying to do, but I'm philosophically opposed to it.

Reaper

ladymiss77 wrote: »

I am about to go travelling and I have a current account and ISA with the Alliance and Leicester. In the unlikely event of A&L collapsing in the next six months (whilst I am on a tropical beach ) what will happen to my current account? Will I still be able to withdraw cash? Will it still run as per usual, paying out my standing orders for rent and so on?

I think you can relax on that score. A&L have been bought out by Santander - a big bank that had the sense to stay out of trouble (actually the Spanish government wouldn't let them play with risky investments if I remember right).

Nothing much is likely to change in the time you go traveling, though if you are depending on plastic to get money out abroad it is just possible they will issue a new card with new branding which might be difficult for you to get forwarded. I'd always recommend travelers have multiple sources of money anyway. A couple of cards, some travelers cheques etc

RayWolfe

Thanks Reaper. Excellent post. Let's now hope that people actually read it and stop asking the same questions over and over.