Impact on banks after house price crash

wayne42

I was looking into putting 160k into anglo irish privileged interest bond 6.25% ..Hopefuly soon to rise.
They say they offer 100% capital security.

http://www.angloirishbank.co.im/personal-savings/privilege-fixed-interest-account.asp

wayne42

wayne42 wrote: »

I was looking into putting 160k into anglo irish privileged interest bond 6.25% ..Hopefuly soon to rise.
They say they offer 100% capital security.

http://www.angloirishbank.co.im/personal-savings/privilege-fixed-interest-account.asp

Should I assume that these capital guarantees are iron clad?

jamesd

No, you shouldn't.

wayne42

jamesd wrote: »

No, you shouldn't.

So are they breaking any FSA rules by advertising such a guarantee on the product information page?

lic

In my experience guarantee means that the company guarantees a product. This has always worked for me. With the exception of banks of course. Remember Mortgage endowment mis selling, i was guaranteed a good return then, but when they all collasped i was told my investment was subject to market fluctuations. HMG who incidently are another 'band of theives', stood by and let the banks default on their promises.
Pensions, and other bonds have gone the same way.
If you have a large amount of money to invest/save, i woud spread it around over several banks, so if one gets into trouble not all you saving will be lost.
I think if a bank goes under it only has to pay the first £15 in any saving account/scheme. (might be wrong on this figure)

wayne42

Thanks..But Im not sure that answers my question.

Browntrout_2

Flying_Scotch_Man wrote: »

Maybe I am being paranoid but can anyone reassure me that my life savings are not at risk from the impact of a house price crash on my bank. My bank is a well known building society who not too long ago was considering closing branches to save money but since the house price boom all this talk has been forgotten about. If house prices fall is my building society / bank liable to crash BCCI style and take my savings down with it, when borrowers start to default on mortgages? Obviously the bank has given very large sums of money per house buyer to developers supplying the houses. Where does the money come from and more importantly can the banks take my money stored in their savings account to pay creditors?

As per others have said eggs and baskets, there was a Local Authority in Scotland whose treasurer thought he was being smart having all their cash with BCCI as they were getting an extra quarter percent, or so he thought....


http://news.bbc.co.uk/1/hi/scotland/3391221.stm
Western Isles Council was one of the biggest losers when the bank went bust.
The local authority had to borrow £24m from the then Scottish Office, to be repaid over 30 years. Since then it has managed to recoup most of the money through the liquidation process and favourable currency movements, but it hopes that the action against the BoE will yield a further dividend.

Taking that to the extreme - if it all comes tumbling down paper money may be worthless, what you need are physical assets that are portable, like kruggerands, tins of beans and a gun!

mroller

Banks lose money if there is a Market crash.

Recent example: HSBC have set aside 10 billion dollars to cover their expected losses on the so called subprime mortgages in the US.

Also, 22 mortgage lenders have gone under in the US recently as well.

Dead_Eye_Jones

House prices arent crashing yet. People have been saying prices cant rise any higher for a good 5 years now lol. Sure, it may happen, but these things take a loooong time!!

tbh if you have massive cash assests stashed in a bank you might wanna chat to an IFA and see if it could be put to better use. Im guessing you wont be persuaded into a BTL portfolio though !

Spread your money around a variety of investments, stocks, gold, property, cash, and hey why not some fine wine and a pickled cow !