Insuring against Bank Collapse

tony1947

Apologies if this has been asked before but I did a quick search and couldn't find anything.

I will have several investments/bonds maturing in November and having spent some time deciding where to put the cash to a)maximise the return and b) minimise the risk of another ICESAVE debacle. I am beginning to wonder if the two objectives are possible to achieve with so many financial institutions now being merged.

Is there such a thing as an insurance policy to protect any losses above the FSCS limit?

Cheers
Tony

Loughton_Monkey

Yes, and it's free. Just spread the money around institutions keeping no more than the FSCS limit in any one of them.

getzegold

seeing as the title is about bank collapse, what happens if they all collapse like they all almost did in 2008? what will you do then?

bendix

getzegold wrote: »

seeing as the title is about bank collapse, what happens if they all collapse like they all almost did in 2008? what will you do then?

Really? The banks almost all collapsed in 2008, did they?

I must have missed that.

Primrose

There are proposals to increase the £50,000 compensation limit to approximately £85,000 from January 1, 2011 so that may give you a little more leeway in spreading your assets around to ensure you're compensated. I don't know of any insurance policy which would protect them.

VT82

Credit Default Swaps. Although the typical size of one is to insure $10m-$20m. How much were you looking to protect? :beer:

tony1947

Loughton_Monkey wrote: »

Yes, and it's free. Just spread the money around institutions keeping no more than the FSCS limit in any one of them.

Sorry, but I should have added to the post c) and to save the hassle of opening lots of current accounts in order to get the best savings package. Even if I did open lots of current accounts I still can't reconcile condition a)good interest and b)security.

This morning I had to open a Natwest current account in order to apply for their eSaver account even though I will never use it. Now of course I can't use their attractive 1 year bond or any RBS package if I want to feel secure. I already have in excess of 50K in a Halifax web saver so that excludes another swathe of institutions and finally I have a cash ISA with Santander.

So I have already done what you suggest but the monies maturing in November will be in excess of £150K and once I start trying to satisfy condition a) a good return I find condition b) means I am looking at sub 2.5% rather than the market leading other institutions of around 3.0%.

Cheers
Tony

tony1947

VT82 wrote: »

Credit Default Swaps. Although the typical size of one is to insure $10m-$20m. How much were you looking to protect? :beer:

Approximately £350K

Sceptic001

If you are concerned (and presumably you are since you asked the question), it seems a small price to pay to accept a marginally smaller return by spreading your savings between several institutions rather than piling the lot into the one best buy and losing sleep.

Incidentally, you don't need to open a NatWest current account in order to open their eSaver.

Loughton_Monkey

tony1947 wrote: »

Sorry, but I should have added to the post c) and to save the hassle of opening lots of current accounts in order to get the best savings package. Even if I did open lots of current accounts I still can't reconcile condition a)good interest and b)security.

So I have already done what you suggest but the monies maturing in November will be in excess of £150K and once I start trying to satisfy condition a) a good return I find condition b) means I am looking at sub 2.5% rather than the market leading other institutions of around 3.0%.

OK. If we 'stick a pin' into any of the major's. Let's say HSBC who might happen to have a unique 3% deal. You want to stick your £350K into that, but need to insure the £300K (excess over FSCS limit) against loss due to bank failure.

Although I have never heard of such insurance, it would be capable of hawking around Lloyds if you can find the right broker.

But I know what would happen (best case). The lead Underwriter would sit back, cautiously, and come to a conclusion as to the chances of a major bank going belly-up. Surely once every 200 years? No. Silly. Need to be more realistic and cautious. Let's say once every 100 years. Right, so that gives risk premium of 1%. I need 10% expense margin, 5% profit margin, 25% Broker commission, and a little bit for luck and IPT. Bingo! 1.5%

Even if you were lucky to find a Kama-Kazi underwriter to do it at, say, 0.4%, then your 3% would be net 2.6%, hardly more than the 2.5% you can get by splitting. And wouldn't you spit one month into the deal, when Barclays came along at 3.25%

bendix

Putting £350k into a bank account is like displaying a Faberge Egg in an egg cup.