Is Your Money Safe?

opinions4u

Around 30% of savings balances held by banks is above the £85k FSCS limit.

If the Government failed to honour these deposits in the case of one larger bank collapsing, it would lead to a remrkable amount of activity by a relatively small number of savers that could easily lead to further banks falling over.

whatyadoinsucka

during the last banking crisis did one uk citizen lose money to a uk bank...

NO

ps. i'm not talking pension, property or other investment vehicle. purely bank/savings account

oldvicar

JayBrun wrote: »

If one bank fails without substantial or full compensation being paid there would be a run on the banks and all the others would also fail since they obviously couldn't re-pay all depositors.

<snip>

I'm a cynic, which in this context means I believe they would very reluctantly pay compensation as the consequences of not doing so would be untenable - there could however be some sleepless nights waiting for the cheques to arrive and trying to work out how much the compensation was really worth.

I am not sure that ALL the banks would fail. For the first one, two, three, etc there will be sleepless nights waiting for compo cheques. What will people do with them if they get them? Pay them into a bank they think is safer (and maybe take out a lot in cash, subject to the physical printing presses at BoE being able to keep up, but one can imagine some baknote 'rationing' being introduced). Then there will be panic and orderly queues (because we're British) outside banks perceived to be vulnerable (whoever Moodys et al give the lowest ratings to) demanding withdrawals. And queues outside those perceived to be the strongest, to pay in cheques (there won't have been enough banknotes to transact in cash).

In the UK the money will flow perhaps to the likes of HSBC or government owned or part owned banks like Northern Rock (how ironic) etc.

In America, this is already happening to an extent, albeit without extreme bank failure yet. IIRC I have read on these forums (I have no other evidence) that The Bank of New York Mellon has huge amounts of cash flowing in, to the extent it is charging customers to look after their money rather than paying interest or 0% to them.

If the worst happens, then the end-game scenario I see is that there are a smaller number of banks with huge amounts of customer deposits (I almost said well-capitalised banks!). Some banks may have failed along the way and some people will not have been 100% compensated, but not everyone will have lost their shirt. There will still be a functioning banking system, (to say 'working' is bit too strong) although it will be uncompetitive and unbalanced, much of it state controlled and with fewer players than the competition authorities would like to see.

Could be Nasty - Yes. Doomsday or Armageddon = No.

JayBrun wrote: »

One concern to me is that the expression 'civilisation is skin deep' seems increasingly applicable to this country so we might see the troop pull out from Afghanistan being brought forward
It might also curb the PM's desire to strut the world stage showing how generous he is with our money in terms of rapidly increasingly the already generous International Aid budget.

I sincerely hope you are wrong on a number of counts. Apart from being seen as a 'safe haven' for international funds, the UK also stands head and shoulders above the rest of the world for sticking to its promises on International Aid. Both of these show how 'civilisation' is still alive and well in the UK, despite a few local riots. Our 1.5% of GDP promise to the world's poor and starving will not cripple us, and is the right thing to do, especially as we have already promised this to the world. If we renege on this promise, how can we be credible that we will honour our other international promises and debts (which are far worse than other countries who dont still have an AAA rating). It is a mark of our trustworthyness which will only do us credit (literally).

Even looking at it entirely selfishly, taking (less than) 1.5% of GDP from starving people to feed fat cats in the City of London is not the answer! IMO a government who thinks it OK to renege on its international aid commitment would not have the backbone (or the financial capability) to keep its vague promises to lend money to such as the FSCS - and that would scare me witless.

justjohn

If it does happen , and its a total collapse. Think you will see the return of the riots.

The banks are not getting richer, they are just making the same as they always have with the help of the goverment.

The tories are helping the rich stay rich.

oldvicar

whatyadoinsucka wrote: »

during the last banking crisis did one uk citizen lose money to a uk bank...

NO

ps. i'm not talking pension, property or other investment vehicle. purely bank/savings account

Err, actually YES. As recently as this year 14 people (over 1 in 20 depositors) with over £85K in a bank called Southsea Mortgages have lost their money when it collapsed.

To burst a bubble only needs a little pr1ck! [I'm waiting for the insults:rotfl:]

justjohn

UK info structure is based on large companies and banks. We no longer have enough small company's too sustain our economy. Its catch 22 we cant afford to let them go to the wall however they are also the cause of the problem. They strangle the competitiveness of the market.

oldvicar

justjohn wrote: »

If it does happen , and its a total collapse. Think you will see the return of the riots.

The banks are not getting richer, they are just making the same as they always have with the help of the goverment.

The tories are helping the rich stay rich.

I do hope you're right. We need to have some people with money left. For investment. For philanthropy etc.

Those who are heavily indebtted are also being helped, by inflation stoking policies (some might be 'the rich' again?)

Those who have nothing will have just the same as yesterday, and maybe we should do somethig for this group tomorrow when the crisis blows over.

MrRee_2

opinions4u wrote: »

Around 30% of savings balances held by banks is above the £85k FSCS limit.

If the Government failed to honour these deposits in the case of one larger bank collapsing, it would lead to a remrkable amount of activity by a relatively small number of savers that could easily lead to further banks falling over.

About 30% of savings balances are Joint Accounts - thus the protection is £170,000 (I think?).

Therefore I would guess that every penny would need to be covered and hence why I don't think there are enough funds to go around.

opinions4u

MrRee wrote: »

About 30% of savings balances are Joint Accounts - thus the protection is £170,000 (I think?).

Therefore I would guess that every penny would need to be covered and hence why I don't think there are enough funds to go around.

My comment wasn't anything to do with joint accounts.

Let me re-word it.

30% (approximately) of all retail deposits are not covered by the FSCS.

Truepat

Am I the only one who thinks the government guarantee is probably not worth the paper it is written on. If things get bad the government will just rewrite the banking guarantee so that people will only get a proportion of what they have saved or nothing at all.

If there is no money then there is no money!