Credit Crisis FAQ

drpachu

We have found out we are in excess of 20K shared between Halifax and BM!Now sleepless nights!Both are fixed and one is ending in 3 weeks!Shall we withdraw or hold the anxiety for 3 more weeks hopng halifax will not fail/govt rescues.
By the way if govt did rescue then ould that mean full guarentee?

Reaper

Does anybody read the FAQ? :rolleyes:
Whatever happens all your money is safe.

clipboard2

But what if - just suppose - the government's promise to compensate the first £50K e.g. of savers money turns out not to be worth the paper it's printed on?

The Chief Executive of the IMF said quote 'The world is on the brink of a finanial meltdown'. In extraordinary times, the rule book gets torn up.

Can't find Cynicus Economicus elsewhere on MSE..

http://cynicuseconomicus.blogspot.com/

With an uncanny record of earlier accurate economic pedictions, CE concludes that it is now impossible for the banking system to be saved, and that bank bailouts serve only to hasten and deepen the inevitable catastrophe.

Should the rule book get torn up, I hope Martin doesn't get blamed for saying your savings are safe because the government says so.

Personally, apart from a few thousand rainy day money in Nationwide, I moved all my savings into Index Linked NS&I a while ago. Index linking should offer protection again the risk of future hyperinflation.

I hope the excellent articles by CE help you to understand what the underlying causes are of our current economic situation, and encourage you to calmly and rationally take appropriate action to protect your hard earned money.

altocumulus

clipboard2 wrote: »

But what if - just suppose - the government's promise to compensate the first £50K e.g. of savers money turns out not to be worth the paper it's printed on?

That would be political suicide....

Reaper

I agree. If the UK government renages on its liabilites then it is effectively declaring itself bankrupt. Then nothing would be safe including NS&I, but it won't come to that.

That was the one of many mistakes the Icelandic government made. By saying they weren't going to pay under their own compensation scheme they were saying they were done for and what little faith people had in their economy evaporated. Now they have been backtracking and say they will pay - after the damage has been done. Sadly pretty much everything they have said and done was a mistake.

In my opinion Iceland has been let down in its hour of need by a government with little understanding of finance. For all Brown's faults he at least understands the world of banking.

yyzyyz

Quoting from Martin's article :
A piece of minutiae in the Financial Services Compensation Scheme rules dictates that if you have debts, such as a mortgage, loan or credit card with a bank that you also have savings with, any outstanding debts will be subtracted from the savings. For example if you have £20,000 in savings and a £15,000 loan, in the unlikely event that bank went bust you'll only get £5,000 compensation.


So now say I have £75000 savings and a £50000 mortgage with the same institution, and the worst happens and I have to claim compensation.

Do I
a) get £50000 of my £75000 savings protected by FSCS which is then written off against the mortgage so I get nothing back but have cleared the mortgage - so overall losing £25000

Or
b) get the £50000 mortgage deducted from the £75000 savings leaving £25000 which is less than the £50000 protection, so I clear the mortgage and get £25000 back from the FSCS losing nothing except the flexibility to decide when/if to pay off the mortgage.

Reaper

Thanks for asking this as it highlights an area of confusion.

My understanding is that the answer is B - the two figures are combined before the FCSC think about compensation. That is what they seem to have said in their FAQ (see point 5) and in this FT article:

...he said the FSCS stated amounts owed to the failed firm, such as a mortgage, were taken into account before any compensation was paid.

BUT it not certain. Back when the compensation rates were still £35,000 the Motley Fool wrote this suggesting banks and building societies were different and automatic combining would not happen in the case of the latter. However the key phrase "This cannot be assumed to apply to building societies, as there is no automatic set-off on insolvency" no longer apears on the FSCS we site so I assume the inconsistency has been resolved. I can't state that as a 100% fact though. Can anyone else confirm this?

KingL

Just wondring - is it now time to review what happens with this thread? e.g. un-pin it, edit it to remove the Icesave/Kaupthing-specific bits ?

Reaper

I'm happy to have it un-stickied whenever people feel it has outlived its usefulness. I've been keeping the Icesave bit up-to-date though news is slower now. I'll remove the Kaupthing bit as I don't think there is a need for it any more.

saving_novice

Hey - i was wondering if anyone could tell me whether high interest fixed term bonds from banks are covered in the same way that standard savings in savings accounts are, or do they work more like shares?

Any info would be useful.

Thanks