Northern Rock Crisis Article Discussion

IGK

maypole wrote: »

Am I right in saying they are only guaranteeing existing customers funds and those that reinvest money taken out in the panic and NOT new investors?

New investors that opened accounts up until midnight on the 19th are protected, but not new investors from today onwards.

orangetdavis

MSE people - can you add a question to the article about what us NRK shareholders should do?

Anyone else got any ideas?

Basically lost a whole load of money and don't know whether to sit tight in case it recovers or cut my losses...

Aegis

orangetdavis wrote: »

MSE people - can you add a question to the article about what us NRK shareholders should do?

Anyone else got any ideas?

Basically lost a whole load of money and don't know whether to sit tight in case it recovers or cut my losses...

MSE members can't tell you that because it would be giving you financial advice, and that's against the rules and illegal.

You have to decide what you think is likely at this point based on how much you've already lost at this stage in the game, how much more you stand to lose and whether you are prepared to risk what you've got left on the possibility of a recovery or a takeover above the level the shares are currently trading at.

Unfortunately this has to be a personal choice. Best of luck with whatever you decide though!

napoleon

orangetdavis wrote: »

MSE people - can you add a question to the article about what us NRK shareholders should do?

Anyone else got any ideas?

Basically lost a whole load of money and don't know whether to sit tight in case it recovers or cut my losses...

Get out quick. Hedge Funds are targetting this stock.

orangetdavis

Yeah, but maybe there's a long term side to it, no?

SussexResearcher

The OED definition of solvent is actually when you have enough money to meet your liabilities.

In fact, an accurate definition of solvency in finance is "the ability to repay debts when they become due."

Otherwise, imagine a mortgage lender suddenly turning up at the door of a borrower, demanding the full loan payment. You cannot be serious, as John McENROE used to say.

This is what the thousands of concerned depositors, who suddenly turned up at Northern Rock branches, actually did. Even so, Northern Rock did not run out of cash, though it faced huge logistical problems. All those responsible for maintaining the integrity of the banking system (FSA, BoE and the Treasury) had to do something to stop the panic spreading.

If most of the savers and investors suddenly turned up at the branches of any other bank, the same might happen. Most banks keep perhaps no more than about 10% of their total deposits in cash. This is why 'notice accounts' exist - for a little higher interest rates, banks encourage savers to give them advance warning that they intend to withdraw money and everything is normally okay on the day.

A simple equation which defines solvency accurately is -

S = Assets/Liabilities
(If the assets are greater than the liabilities, the retio is more than ONE and the individual or organisation is SOLVENT)

Northern Rock paid £2b of savers' money and, as far as I know, it has £22b cash sitting in its branches. The bank also has immovable assets (mortgaged properties), I think, worth £120b. According to the above, accurate, definition, there doesn't seem to be much doubt that Northern Rock is solvent.

The FSA had the responsibility to double-check the solvency matter by examining the Northern Rock's financial statements. This was done before approval was given for an overdraft facility to the bank. There is no indication that Northern Rock has used this facility yet.

isofa

napoleon wrote: »

Get out quick. Hedge Funds are targetting this stock.

What are the implications for NR shareholders if a hedgefund company picks up the company, as opposed to if a another bank/bs makes a successful takeover bid?

dreamer33

thead wrote: »

i have northern rock shares which i invested on behalf of my daughter (all the money she received as christening gifts!)

Obviously i keep following all the news articles but no-one is really telling shareholders what to do??? this is my first and probably last time i buy shares - what will happen if they get takeover? or worse, go bust? PLEASE ADVISE/REASSURE!

thanks

Buying shares always carries risks, they could go up or down thats the risk you take.

dreamer33

andrew_simpson wrote: »

I have a 5 year NR Bond for £29.000 which has a year to run and gives me 115% of the Ft100's progress.
I feel I should sit tight.

Any thoughts Martin?

Any bond which tracks the FTSE can only be closed upon death, I'm sure anyway.

dreamer33

caveman38 wrote: »

Martin. do you think that if as been reported in the media that NR is sold in chunks. That the money savers still have with NR will be 100% safe or would that side of things be referred to compensation by the FSA scheme.
My point being that if it is accurate should us with more than the safety net figure apply for our money now with loss of interest ie Bonds

I would like to add that no matter what happens to Northern Rock all deposits held in the bank are 100% guaranteed, the government guarantee overides the FSCS. You would be silly to lose funds whilst the guarantee is in place.