MSE News: EU deal spares small savers in Cyprus from bailout tax

kidmugsy

The_Green_Man wrote: »

I don't see why there is such outrage at this. In the UK our savings are insured up to £85k or £170k in joint accounts. Prior to the credit crunch it was insured up to £50k.

NO; 100% on the first £2k and 90% on the next £33k.

kidmugsy

Glen_Clark wrote: »

What a contrast to the British Way of bailing out wealthy bank investors - who chose to take a risk for better interest rates - with innocent people's money who had nothing to do with it!!!

It's less the British way than the Brown way.

grey_gym_sock

kidmugsy wrote: »

It's less the British way than the Brown way.

well, it's continued by the funding for deleveraging - sorry, for lending - scheme ... call it the brosborne way

kidmugsy

Reaper wrote: »

Savers are not generally considered to have accepted risk, unlike bond and shareholders.

Aye, but it's rubbish. Savers lend their money to a bank, whereby they take risk. If they persuade themselves otherwise, it's just a triumph of stupidity or ignorance or wishful thinking.

The folly of the original euroscheme for Cyprus was to throw the guarantee for the first 100k euros out the window. But when there's no money left in the bank, someone has to lose. If the shareholders and bondholders have already lost everything, only the depositors are left. If the balances below 100k are guaranteed, then the balances above have a heavy charge to bear. Them's the laws of arithmetic.

Glen_Clark

grey_gym_sock wrote: »

well, it's continued by the funding for deleveraging - sorry, for lending - scheme ... call it the brosborne way

or Br&King
They are all in it together

Reaper

kidmugsy wrote: »

Aye, but it's rubbish. Savers lend their money to a bank, whereby they take risk. If they persuade themselves otherwise, it's just a triumph of stupidity or ignorance or wishful thinking.

Not quite. At the start of the crisis it had not occurred to the public that they could lose their money if a bank went bust. In those early days there was a very real fear that the public could lose faith in bank savings and start a run on any bank they thought might be wobbly (i.e. all of them). It doesn't matter whether the public was right or not to think it was safe. The entire currency and economy could have failed if confidence was lost. The government therefore had no choice but to guarantee 100% of everybodies savings to restore faith.

Now the £85k/100k Euro limit is well understood so it is fair enough that governments only agree to guarantee that amount.

What Cyprus did that was unforgivable was to threaten to take money below that amount, and in doing so undermine faith in bank savings. In doing so they have raised the prospect of a serious run on the banks. Let's just hope the revised plan is enough to reassure people.

The_Green_Man_2

kidmugsy wrote: »

NO; 100% on the first £2k and 90% on the next £33k.

Can you please provide a link where it states this?

gadgetmind

kidmugsy wrote: »

If the shareholders and bondholders have already lost everything, only the depositors are left.

Agreed, but they were talking about hitting depositors while leaving senior bond holders intact!

Reaper

The_Green_Man wrote: »

Can you please provide a link where it states this?

Here you go:
http://www.fscs.org.uk/what-we-cover/eligibility-rules/compensation-limits/deposit-limits/
Past cover levels:

For claims against firms declared in default between 30 June 2009 to 30 December 2010, the deposit compensation limit is the higher of £50,000 or €50,000.* In the event of default, the Euro amount will be calculated by reference to the currency exchange rate on the day of default.

For claims against firms declared in default between 7 October 2008 and 29 June 2009, the maximum level of compensation is £50,000 (100% of the first £50,000).

For claims against firms declared in default between 1 October 2007 and 6 October 2008, the maximum level of compensation is £35,000 (100% of the first £35,000).

For claims against firms declared in default before 1 October 2007, the maximum level of compensation is £31,700 (100% of the first £2,000 and 90% of the next £33,000).

The_Green_Man_2

Reaper wrote: »

Here you go:
http://www.fscs.org.uk/what-we-cover/eligibility-rules/compensation-limits/deposit-limits/
Past cover levels:

So when Northern Rock effectively failed on 22nd Feb 2008 (this is the date it was nationalised after 2 failed takeover bids), then the depositors would have received 100% of the first £35k.

I believe that these limits are published and so people should structure their savings accordingly, especially those who have large deposits.