Kaupthing Edge - No more foreign than HSBC/Abbey?

daveyb_2

Hi,

Just to test my understanding because like many I have come here to double-check my understanding of Kaupthing Edge.

Whilst owned by a foreign company, being a UK registered bank surely Kaupthing Edge is no different to HSBC (Hong Kong & Shanghi Bank - I'm sure there's a clue in the name) and Abbey (owned by Santandar, which are Spanish aren't they?).

Is my understanding correct?

Are we just worried because the parent company is Icelandic, whereas (we assume) that China and Spain aren't in the same degree of difficulty as Icelandic companies?

Thanks, David.

runciblespoon

HSBC is a global bank, but its HQ has been based in London since the handover of Hong Kong to China in 1997. Therefore it's pretty much a British bank for these purposes, albeit a huge one.

The difference between Abbey and Kaupthing is that Abbey have a mortgage business. So depositors money is used to lend to people to buy houses in the UK. I don't know what proportion of their revenue comes from non-mortgage activities, but expect their mortgage business is signficant (being an ex-building society, like Northern Rock, B&B or HBOS)

Kaupthing have no mortgages, so all the money goes abroad (at least to start with). I don't know precisely what they invest in, but I think it's more into companies than property.

It's not so much the ownership that's important, but how they operate.

bazster

Not forgetting another of our high interest favourites, ICICI Bank (of India).

In any regulatory sense you are correct, Kaupthing Edge is identical to HSBC and Abbey (i.e. Santander, which is indeed Spanish and a very nice city it is too!)

This means that the compensation scheme is identical across all those banks. However, what are completely unknown are the criteria the government might use to determine it's degree of intervention should any of those banks go bust.

When B+B hit the rocks, Her Majesty's Government could've just let it founder and left it for all of us to individually apply to the Financial Services Compensation Scheme to recover our lost savings. However, HMG chose not to do so, and instead it nationalised the mortgage book and handed the deposits over to Santander, thus saving us all a great deal of hassle.

I very much doubt whether it would do the same for Kaupthing or ICICI, and would probably leave us to fight it out with the FSCS bureaucracy. My guess is that it probably *would* try to fix a problem with HSBC or Abbey. Why? Because it's all down to popularity and votes, and having half the population fretting about their savings in one of the big banks is not likely to enhance Scrooge McDuck's popularity one little bit.

MadSage

Kaupthing are involved in many different things in varying capacities, including Debenhams and Newcastle United Football Club in the UK. They have business in several European countries and the USA. They do have some money in property - I recall something about a huge deal in Beverley Hills.

Their diversity is what should help them through the crisis, like any good investment portfolio.