FSCS - Not worth its salt???

Honest_Banker

Two things to start off with:

1 - I work in a bank (branch level)
2 - I believe that branch staff should be entitled to their bonuses.

What do people think of the FSCS, I have been in the 'firing line' over recent months re the protection people get from the FSCS.

I found it very interesting though to read your article about the FSCS. Basically, the FSCS could not afford to pay customers if any of the top 25 banks in the country went under as their levy is capped at £4 billion, the only way they could help is by effectively taking a loan from the government, which they would have to pay back at a later date with interest.

Therefore, as I see it, we (the tax payers) would have to bail out the FSCS if any banks went under, so basically there is no way that the government would ever let any bank go under to the point that the FSCS scheme would have to pay out.

So in a nutshell, the FSCS is not worth its salt as it has no way of being able to pay depositors of any bank without taking a loan from the government. So basically, the government would never let a bank go this far down the line before being nationalised.

I have been over the past months I have seen customers day in and day out during which I do my very best to meet their needs and offer reassurance. But isnt it interesting to read between the lines about how effective the FSCS would actually be!

Any views...........??????

Generali

Honest_Banker wrote: »

Two things to start off with:

1 - I work in a bank (branch level)
2 - I believe that branch staff should be entitled to their bonuses.

What do people think of the FSCS, I have been in the 'firing line' over recent months re the protection people get from the FSCS.

I found it very interesting though to read your article about the FSCS. Basically, the FSCS could not afford to pay customers if any of the top 25 banks in the country went under as their levy is capped at £4 billion, the only way they could help is by effectively taking a loan from the government, which they would have to pay back at a later date with interest.

Therefore, as I see it, we (the tax payers) would have to bail out the FSCS if any banks went under, so basically there is no way that the government would ever let any bank go under to the point that the FSCS scheme would have to pay out.

So in a nutshell, the FSCS is not worth its salt as it has no way of being able to pay depositors of any bank without taking a loan from the government. So basically, the government would never let a bank go this far down the line before being nationalised.

I have been over the past months I have seen customers day in and day out during which I do my very best to meet their needs and offer reassurance. But isnt it interesting to read between the lines about how effective the FSCS would actually be!

Any views...........??????

The FSCS has been rendered completely meaningless by the UK Government's decision to accept every liability of every UK bank onto its balance sheet (effectively at least).

chewmylegoff

Generali wrote: »

The FSCS has been rendered completely meaningless by the UK Government's decision to accept every liability of every UK bank onto its balance sheet (effectively at least).

the FSCS does do other things, so it is not rendered obsolete. in reality the FSCS was never intended to be a means of compensating depositors in the event that a major high street bank went bust.

Generali

chewmylegoff wrote: »

the FSCS does do other things, so it is not rendered obsolete. in reality the FSCS was never intended to be a means of compensating depositors in the event that a major high street bank went bust.

I thought its sole function was to recompense depositors if a deposit taker went bust.

chewmylegoff

Generali wrote: »

I thought its sole function was to recompense depositors if a deposit taker went bust.

not just deposits - it covers obligations under insurance contracts, and compensates for missold financial products as well (although initially the firm who missold it to you is supposed to pay you redress - but if they no longer exist, the FSCS will compensate).

Generali

chewmylegoff wrote: »

not just deposits - it covers obligations under insurance contracts, and compensates for missold financial products as well (although initially the firm who missold it to you is supposed to pay you redress - but if they no longer exist, the FSCS will compensate).

Well you live and learn. Thanks chewmylegoff.

Honest_Banker

Sorry people,

My original post was probably 'pitched' wrongly. I know that the FSCS do have other areas within the financial services industry which they work within.

My main point though was that investors day in day out think that they have peace of mind and protection for their savings via the FSCS. In reality, it turns the FSCS could not help the investors of any of the top 25 uk banks without going to the government for a loan.

It is beginning to appear more and more of a viscious circle to me, and at the end of the day the government have to bail out investors either directly by nationalising a bank, or indirectly by lending money to the FSCS, which tax payers would eventually have to pay back with interest!!!

I suppose my point in general is - Customers investments are NOT protected by the FSCS scheme, but by the government.

dandy-candy

Honest_Banker wrote: »

Basically, the FSCS could not afford to pay customers if any of the top 25 banks in the country went under as their levy is capped at £4 billion

That seems incredibly low ??!!

chewmylegoff

dandy-candy wrote: »

That seems incredibly low ??!!

the levy cap is annual.

in reality if a high street bank went bust, it would be many years before pay outs would be made. the FSCS could build up a warchest by levying the maximum amount over a number of years, or fund payments with a govt loan that it pays back by maximising the levy over a number of years after the payout. it would be clumsy, but possible i think.

there has to be a fairly low levy cap, as it is shared out amongst all eligible financial services companies. if you start levying 5% of their turnover, then you would send more companies bust and defeat the object of the FSCS.

Reaper

My understanding is that consumers are protected by the FSCS for the first £50,000 because this is an industry agreed figure. Because of levy caps the government has been lending it the money to pay out and will recoup the money from the banks by nicking levy contributions in future years.

What is less clear (to me anyway) is what happens when the government decides to compensate those savers with more than £50,000 as they did with Icesave and others. The FSCS is not obliged to pay that and therefore the government can't claim the money back from future levies. I think the tax payer just takes the hit.

Reaper

By the way mainland Britain has it much better than offshore accounts on the Isle of Man etc. Over there the supposed £50,000 compensation is covered purely by levies with no loans so if a big bank goes under it could be many years before you get your money.

You might think that irrelevant to you but actually many of the "Guarenteed Investment Bond" schemes (you know - the "Get 50% of stock market growth over 7 years and guarenteed no loss" sort of thing) offered by UK banks including Barclays are registered over there and come under their protection, not the FSCS.