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MSE News: Hope of extra safety for Bank of Cyprus savers

edited 30 November -1 at 1:00AM in Savings & Investments
4 replies 2K views
Former_MSE_HelenFormer_MSE_Helen
2.4K posts
edited 30 November -1 at 1:00AM in Savings & Investments
This is the discussion thread for the following MSE News Story:

"The bank has announced its intention to incorporate to a UK company meaning cash could be protected by the FSCS ..."

Replies

  • oldvicaroldvicar Forumite
    1.1K posts
    Lots of Ifs, Buts and Maybes. Nothing definitely happening. To be fair this is what the article says, although I struggle to see why this counts as news.

    What shines through is a presumption that protection under UK FSCS is better than the Cypriot scheme. We could do with some analysis or explanation of that presumption. Is the Cypriot scheme 'overdrawn' too, as the UK scheme surely must be soon?
  • Bromley86Bromley86 Forumite
    1.1K posts
    >What shines through is a presumption that protection under UK FSCS is better than the Cypriot scheme.

    This is a reasonable assumption, as we all saw with Icesave.

    Population of Iceland: 300k
    Population of Cyprus: 800k
    Population of UK: 62m

    From the article, and from our experience with Iceland, "The fear is that any overseas government is more likely to look after its own citizens before UK nationals."

    So on the one hand you have a small country with a large bank (assets equal to 250% of GDP), whereas on the other you have a large country with large banks (what is it, total assets 400% of GDP?). If the UK did ever need to honour its deposit guarantees across the whole industry, then with an independent currency it can just do what Iceland did and guarantee 100% of domestic deposits whilst implementing exchange controls. Exchange controls are obviously out for Cyprus as it uses the Euro, and if it introduced another currency you can guarantee that UK savers would get nothing (although even if the guarantee was honoured, their money would be tied up in a worthless currency that they couldn't get at).

    No-brainer, really.
  • edited 6 December 2011 at 11:41AM
    oldvicaroldvicar Forumite
    1.1K posts
    edited 6 December 2011 at 11:41AM
    I do prefer my deposits to be with UK banks. It feels safer, but that doen't prove thsat it is.

    Don't forget that the UK scheme is limited to raising £4bn (about £100 per adult) per year from its members ... although the government can lend it a lot more.
  • The Bank of Cyprus has just posted an 800 million Euro loss due to its Greek debt haircut, and if Greece defaults and this haircut becomes larger than 50% then the BoC will suffer further.

    Hold off until the BoC in the UK is regulated by the FSA is my advice.
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