Can the FSCS be trusted...?

C_Mababejive

Are the FSCS legally bound to compensate as per the normal arrangements,those institutions wo are registered with them?

If so,is there a max time by which they must pay out?

Surely they must have limited funds and so what if their potential liabilities exceeds their funds?


Is the FSCS worth any more than the promises made on the ICESAVE website when they were still raking in customers until the day they pulled the website?

agsnu

The FSCS has borrowed approx £20bn from HM Treasury.

MoneySavingUser

If a time comes when they can't pay - the world has probably gone to s**t and money lost it's value...

dunstonh

agsnu wrote: »

The FSCS has borrowed approx £20bn from HM Treasury.

And I am looking forward to paying next years levies....not

And Bradford and Bingley shareholders wonder why their defunct shares are worth zero.

C_Mababejive

agsnu wrote: »

The FSCS has borrowed approx £20bn from HM Treasury.

So what if a series of failures means they dont have enough money to pay out?

I dont think there will ever be an icesave style bailout again.

opinions4u

C_Mababejive wrote: »

So what if a series of failures means they dont have enough money to pay out?

The nation is well and truly goosed. The FSCS holds virually no money. It never has done. The people of this fine country hold around £1,000,000,000,000 (I think that a trillion) in savings accounts and I think pre-Credit Crunch the FSCS had the reserves to cover less than 0.4% of this. Now it has a debt of £20bn.

If the FSCS gets called on, it will have to turn to the Treasury for a loan. While that loan may be forthcoming, the bigger the amount needed the more significant the impact of the borrowing could be on the wider economy. In other words, you might get your £50k back, but it won't buy you what it would have bought you a few months earlier because the value of sterling would most likely collapse.

I dont think there will ever be an icesave style bailout again.

From memory, the Icelandic collapse cost around £4bn and Bradford and Bingley £14bn. I think HBOS hold around £130bn in their various brands - so you can see why HM Government was keen to push through the "merger" with Lloyds TSB.

So the FSCS needs to raise the money to maintain the interest on its loan from the Treasury. It gets that from banks, building societies, IFAs, credit unions, various deposit takers, insurance companies and others. Then it needs to start paying off the £20bn debt. Then, perhaps 75 years down the line (no joke, that's a reasonable estimate for the time it will take to clear up this mess), it needs to start building up a reserve so that it can fund claims without calling on the Treasury. All this will impact on profitability of banks and others.

As Dunstonh points out in his post above, even the small town IFA (no disrespect intended) has to dig deeper. Harsh if they didn't lend sub-prime, takeover debt-riddled Dutch banks or lend stupidly on UK property deals.

As for the big players, they are caught in a corner where they have to recapitalise their balance sheets because they've lost so much money (LBG, RBS), cover ongoing losses for new bad debt, pay the higher FSCS levy, find investors to buy out Government share holdings etc. Most brought it on themselves, but it doesn't change the situation that they're currently in. Quite why the Government doesn't understand why they aren't lending I don't know!

dunstonh

As Dunstonh points out in his post above, even the small town IFA (no disrespect intended) has to dig deeper. Harsh if they didn't lend sub-prime, takeover debt-riddled Dutch banks or lend stupidly on UK property deals.

There is talk about taking IFAs out of the requirement to pay towards the banking liabilities. Logically, it makes sense as an IFA cannot bring down a country (not even the large town ones ).

Plus, there is going to be a rebalance of funding. Prior to the credit crunch, IFAs paid more in levies (to FSCS, FOS and FSA) than the banks did. This is despite IFAs only being responsible for 2% of the complaints at the FOS compared to over 50% with the banks (IFAs also have a lower uphold rate at the FOS as well, so the gap is even more). The funding is totally illogical and is used by many to highlight the favouritism that the FSA is perceived to have towards the banks.

Surprisingly, this years levies were not too bad. About on par with last year. Although there are expected to be some special levies coming.

luvpump

The u.k economy suvived two world wars so i think it can survive a Banking crisis, And as far as i am concerned, if there is a time when it cant keep up its current liabilites , then the whole system we will on the verge of collapse.. Ask the many many people with huge amounts in there bank if they are worried ? & I dont mean 50k .. Nothing to worry about imo

C_Mababejive

luvpump wrote: »

The u.k economy suvived two world wars so i think it can survive a Banking crisis, And as far as i am concerned, if there is a time when it cant keep up its current liabilites , then the whole system we will on the verge of collapse.. Ask the many many people with huge amounts in there bank if they are worried ? & I dont mean 50k .. Nothing to worry about imo

Hmmm...maybe i read too much or they read too little...