Scrap deposit protection to avoid banking crisis

antrobus

Graham_Devon wrote: »

...However, would you be in favour of this? Would you be happy with no guarantees for your money if it helps avoid a banking crisis?...

I would disagree.

Having no guarantees makes a banking crisis more likely. There is a reason why Mr Darling guaranteed all of NR's deposits, and why the Irish government guaranteed the deposits of all Irish banks. When panic hits, everybody takes their money out and stuffs it in under the mattress, which is the very thing you want to avoid.

Mistermeaner

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.

why does having £30,001 make someone dishonest?

kinger101

I know we're having a vote on staying in or not, but isn't this something we have to do because of an EU directive anyway? If we stay in, it's nothing more than a thought exercise by the CPS.

danothy

stator wrote: »

It should be capped at something like £30,000. The most any honest person would have in savings.

This is up there with the "No-one needs more than £X income" kind of statements. What about people with outgoings greater than £X or who are saving up for something that costs more than £30,000?

Generali

antrobus wrote: »

The model already exists.

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

Trouble is you then need a CDS on the broker that sold you your CDS just in case:money:

antrobus

Generali wrote: »

Trouble is you then need a CDS on the broker that sold you your CDS just in case:money:

Or even a CDS on whatever counterparty you'd done the deal with.

But that's always the case with insurance. It's just somebody else that is bearing the risk.

Generali

antrobus wrote: »

Or even a CDS on whatever counterparty you'd done the deal with.

But that's always the case with insurance. It's just somebody else that is bearing the risk.

The point is that there is always moral hazard: if you want to make money from money then you can only do that by taking on risk. Taking on risk means you are exposed to loss.