Preparedness for when

jk0

I just found the Q&A section on the FSCS website:

http://www.fscs.org.uk/what-we-cover/questions-and-answers/

Question 10 is a bit of a worry:

What happens if the firm I am claiming against was insolvent or declared in default before the FSCS took over responsibility for compensation (1 December 2001)?

The rules and compensation limits of the pre-existing schemes will apply, although the FSCS will handle the claim. Compensation limits and eligibility rules may differ.

I thought they'd all been insolvent for donkey's years.

calicocat

I have had letters from both my banks this week reminding me i'm covered by the F...whatever it is.

I can't now think if they do this every now and again....but if not, why are they sending these out to people??

GreyQueen

I wouldn't like like to bet the farm on their keeping to the £85k rule. But even if they tried, could they realistically protect all the depositors? It used to be a lot lower, didn't it, something like £30k (can't recall exactly, mebbe someone else can?). And then it whooshed up to £85k in one leap.

What changed to suddenly make all that extra guarantee possible? Nowt as far as I know, other than a desire to comfort and reassure Joe Public.

My exposure to the banking system until payday is approx £250 and that's about how I like it.

ETA calicocat, like you, I am of a suspicious nature. Set your tin hat firmly down over your brow and be wary. They're bankers; if they're breathing, they're up to no good.

Frugalsod

mardatha wrote: »

I suppose it all depends on how much money you have and where you live.. we never have a lot of money and where we live is very safe, so we always take it out of the bank the day it goes in. But if I had thousands and lived in a city then I might not do that.. I wouldn't like to advise anybody on it in case they ended up losing the lot.

It all depends on how much you have. It is a decision that everyone needs to make for themselves. Personally I will only keep a few thousand in because if there is a "bank holiday" just like in Cyprus, then you will need some money. My personal risk of getting "taxed" is low because I am not near the bank deposit limit like some I know.

Though there are plenty of much lower cost solutions like old coffee tins or keep it in an ice-cream tub in the freezer, in the leaves of an obscure book. The options are endless.

Though having a fire safe as a decoy and filled with family photos will not only protect them in the case of a fire, but if you are forced to open it then it will offer no prize for a thief.

Frugalsod

Bedsit_Bob wrote: »

That's not a problem for me, as I'm under that, by at least £80,000.

I think that applies to most people as well. I remember a few years ago the average savings of the UK public was something like £150. I doubt that it is much higher now.

PS I am probably as far away from the limit as you are. :T

Frugalsod

GreyQueen wrote: »

I wouldn't like like to bet the farm on their keeping to the £85k rule. But even if they tried, could they realistically protect all the depositors? It used to be a lot lower, didn't it, something like £30k (can't recall exactly, mebbe someone else can?). And then it whooshed up to £85k in one leap.

What changed to suddenly make all that extra guarantee possible? Nowt as far as I know, other than a desire to comfort and reassure Joe Public.

My exposure to the banking system until payday is approx £250 and that's about how I like it.

ETA calicocat, like you, I am of a suspicious nature. Set your tin hat firmly down over your brow and be wary. They're bankers; if they're breathing, they're up to no good.

I have had my doubts about the £85 000 deposit protection limit for several years. It might be better to work on the assumption that it could be as low as £30 000 or even lower if there were another serious liquidity crisis. While most people are well below the limit it might be a serious problem for many businesses, these were the big losers in Cyprus and it impacted their employees pretty quickly as well. What remained of their cash would be required for working capital and paying suppliers for essential supplies. Wages may not be paid for months.

To be honest I do not think this government have a clue about what is coming in the next few years. The banks are not fixed and there are serious problems brewing but as long as I am debt free and solvent I feel I will be in a better position than most.

I still need to order that pitchfork as I expect it will be a must have item before long. :rotfl:

nuatha

jk0 wrote: »

It's meant to be £85,000.

However, if they are stealing money from all banks, I wonder if they may be tempted to add up what you have in all your accounts, and take anything over the £85k.

The initial proposal in Cyrus was 6.7% of all deposits under 100,000 and 9.9% over.
The 100,000 euros being the equivalent of our £85k safe zone. The eventual deal froze all accounts over the 100,000K, with (if memory serves) Bank of Cyprus customers loosing 40% of their deposits and Laika Bank customers still waiting to find out if they're getting anything back. If you lost more than 3 million euros in deposits then you can have a Cypriot passport in compensation.

Given the £85k is a government guarantee against bank failure and the people sorting out the issue will be politicians (many of whom will expect a rewarding retirement on the board of a bank) I would presume that there is no safe limit.

Unfortunately Britain's banks don't have a massive amount of Russian money on deposit therefore the options actually used in Cyprus are unlikely to work here - Aesop wrote a fable about trusting politicians, the scorpion and the frog.

Aside from this, there is an additional problem in a crisis caused by the next banking failure - is cash going to be worth anything or be spendable, if not, what are you going to do?

nuatha

Frugalsod wrote: »

I think that applies to most people as well. I remember a few years ago the average savings of the UK public was something like £150. I doubt that it is much higher now.

The average Briton is worth nearly £150,000, according to a study.
This includes an average current pension pot of £30,000 and mortgage equity of £75,000.
Yet the survey found nearly half of us have no idea how much we are worth, while 42 per cent do not think they are worth very much at all.
However, the average adult has £1,348.16 in a current account, £5,603.98 stored away in a savings account and a further £3,712.65 in an ISA.
With a car valued at £6,706.55 and home contents worth £15,077.90, average net worth tots up to £147,134.

Source:http://www.dailymail.co.uk/news/article-2591175/Pension-pot-mortgage-savings-mean-average-Briton-worth-150-000.html#ixzz3AOZiIPAv

Though a survey for HSBC late last year found that 8.8 million people have £250 or less in savings.
Source: http://www.newsroom.hsbc.co.uk/press/release/88_million_households_would_no

Frugalsod

nuatha wrote: »

Aside from this, there is an additional problem in a crisis caused by the next banking failure - is cash going to be worth anything or be spendable, if not, what are you going to do?

Actually the cash will still be worth it, in fact i suspect that when the next banking crisis strikes there will be a collapse in housing prices or shares and the economy. So the problem will be deflation as most customers will struggle to buy anything and cash will be king. The rich might find their assets are worth a lot less and the debts that are supporting the purchase of those assets will still be valid. Ultimately it will require massive debt write-downs. Then if you have outstanding debts then you are at risk of defaulting and bankruptcy might be the only way out.

There are loads of commentators who are already talking about the collapse of the dollar. The USA over took the UK in terms of GDP nearly 70 years before the dollar took over from the pound as the reserve currency. China has still not overtaken the US in terms of GDP and might not for a few more years. Even then there are many hurdles before China is even ready to take the mantle of reserve currency.

jk0

calicocat wrote: »

I have had letters from both my banks this week reminding me i'm covered by the F...whatever it is.

I can't now think if they do this every now and again....but if not, why are they sending these out to people??

I believe they keep emphasising the £85k protection so that people don't take out their cash. (Otherwise given zero rate interest, you might just as well keep it under your mattress.)