Scrap deposit protection to avoid banking crisis

Generali

michaels wrote: »

But the current scheme is charged for isn't it - the issue being that the charges may not be properly risk adjusted. The man in the street just doesn't have the resource in terms of time and knowledge to monitor a deposit taking institution to assess it credit worthiness and thus you would end up with a missing market and a reduction in economic activity as people only feel safe to deal in gold under the mattress - good business for security companies though....

The average man in the street doesn't have enough to worry about.

Have deposit protection up to £3,000 for free, paid for by the Government. Then have private insurance provided by unlimited liability partnerships provide the rest of the insurance.

CLAPTON

Generali wrote: »

The average man in the street doesn't have enough to worry about.

Have deposit protection up to £3,000 for free, paid for by the Government. Then have private insurance provided by unlimited liability partnerships provide the rest of the insurance.

how, in practice, could insurances companies themselves remain solvent in the event of a general financial crisis.

Graham_Devon

CLAPTON wrote: »

how, in practice, could insurances companies themselves remain solvent in the event of a general financial crisis.

Get out clauses.

Generali

CLAPTON wrote: »

how, in practice, could insurances companies themselves remain solvent in the event of a general financial crisis.

They can't which is why the principle of unlimited liability is important.

CLAPTON

Generali wrote: »

They can't which is why the principle of unlimited liability is important.

unlimited liability doesn't guarantee I get my money back, merely that they go bankrupt.
some consolation but not sufficient.

Generali

CLAPTON wrote: »

unlimited liability doesn't guarantee I get my money back, merely that they go bankrupt.
some consolation but not sufficient.

That's the point.

Both parties have large potential losses.

stator

I think the protection is too generous.
It should be capped at something like £30,000. The most any honest person would have in savings. It should also be limited to per person, not per account.

System

Why is financial protection by the state any different from legal or physical protection? Perhaps to avoid the risk of a security, law and order, or health service crisis we should abolish those services too?

Thrugelmir

princeofpounds wrote: »

Personally, I think the best model is to have the protection in place, but charge banks properly for the credit default insurance.

The UK imposes a banking levy. The money collected from the banks covers the costs of defaults. All consumers who use the services bear the cost. Not all taxpayers.

antrobus

michaels wrote: »

.... perhaps it would be better to have a similar model for banks - although no doubt it would make banking more expensive overall....

The model already exists.

Costs you 19.90 basis points for a one year CDS for Lloyds Bank, 79.30 for Banco Santander.

CLAPTON wrote: »

a solution to 'secure' banking is for deposit only banks like the original TSB ..i.e. they look after your money for fee and don't lend to anyone.......

Actually, they lent the money to the government, so effectively the government guaranteed the deposits; same difference really.

stator wrote: »

I think the protection is too generous.
It should be capped at something like £30,000. The most any honest person would have in savings. It should also be limited to per person, not per account.

It is limited per person, per institution, not per account. Unless you believe that muliple institutions are going to go pop all at the same time, having any other kind of rule would be pointless.

And, by the way, I have more than £30,000 on deposit and I am perfectly honest.