Northern Rock Crisis Article Discussion

Optimist

£100,000 saver guarantees proposed

Chancellor Alistair Darling has said that he is considering guaranteeing people's savings held in a bank or building society up to £100,000 in the wake of the Northern Rock crisis.
In an interview with The Times, Mr Darling said: "This is a bullet that needs to be bitten".
Bank of England Governor Mervyn King identified the current system - where there is a 100% guaranteed on the first £2,000 and 90% on the next £31,000 - as one of the reasons for the run on the Northern Rock.
Giving evidence to the Commons Treasury Committee on Thursday, Mr King said that it was "logical" for savers with more than £33,000 to rush to withdraw their money once they saw the bank was in trouble.
According to The Times, Mr Darling is considering moving to an American-style system where savers' money is separated out in the event of a bank collapse and paid out within days.
Although a figure has not yet been decided upon, Mr Darling told the paper that £100,000 was possible. The scheme would be paid for by a levy on banks and other financial institutions.
It will form part of a wider package of financial reforms to be announced when the Commons returns next month following the party conferences.
Mr Darling said that the international "credit crunch" caused by the collapsed of the US sub-prime mortgage lending market which triggered the problems at Northern Rock had been a "major upset".
"What's happened in America, and what's now affecting countries all over the world is a major shock to the system. Its effects have been felt here, in the Far East, and we have to deal with it," he said.
He also expressed optimism about the state of the housing market in the UK.


http://ukpress.google.com/article/ALeqM5g72HFRpLyB33__HoHCH2av5bmhIg

baby_boomer

dunstonh wrote: »

The Govt has yet to give any support to NR. This has been one of the most misrepresented bits of information in the media. The BoE put in place a facility for NR should they require it. Northern Rock, to date, have not needed to draw upon it.

Well they used £3bn of it last week according to Saturday's Times.

£100K guaranteed protection, which is what Gordon wants to show his strength and competence in the forthcoming election, will come, I fear, at a hefty price to savers as the banks will have to pay for it.

MarkyMarkD

This protection won't cost anything unless a bank fails, which isn't going to happen. So it's a win-win for Gordo.

barak

Optimist wrote: »

.....the current system - where there is a 100% guaranteed on the first £2,000 and 90% on the next £31,000 ......

Extraordinary after all the recent publicity that both the Times - and incidentally the BBC - quoted the wrong figure yesterday. It's 90% on the next £33,000 not £31,000.

tristan727

MarkyMarkD wrote: »

This protection won't cost anything unless a bank fails, which isn't going to happen. So it's a win-win for Gordo.

Why not? These lot, if the press can be believed - are lending £hundreds of thousands out to lowpaid junior professionals, based on scribblings on the bag of a fag packet, & awarding themselves huge bonuses & holiday junkets....if you ask me they're a northern equivalent of Enron. Except now the tax-payer's being dragged in to back-up all this nonsense. Poorly run & high-risk banks are allowed to fail all round the world - don't see why we should be any different. Everyone with money in them currently is now perfectly aware of all this, and the risks it entails - so why should they deserve any more sympathy & compensation in the future, than someone say day-trading shares?

isofa

IGK wrote: »

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

I assume most people with accounts in NR have received the reassurance letter this morning. So in case you haven't, I'll reinterate some of the points which may be helpful...

All accounts existing at midnight on 19/9/07 are Treasury guaranteed,
as are all new deposits made into those accounts.
Future interest payments and movements of funds between existing accounts - again all covered by the Treasury guarantee.
All accounts closed and reopened between 13/9/07 and 19/9/07, covered by the Treasure guarantee.

Any new accounts opened from 20/9/07 will be protected in the normal FSA way.

baby_boomer

MarkyMarkD wrote: »

This protection won't cost anything unless a bank fails, which isn't going to happen. So it's a win-win for Gordo.

I disagree. This (election driven?) knee-jerk reaction to protect all savers with £100K is wrong IMHO.

Independent - Only £4.4m left in the UK fund to protect bank deposits :eek:

That compares to £24 BILLION in the US equivalent scheme. The government is going to do some arm-twisting to ensure that the UK scheme's funds are replenished PDQ.

The average saver is going to lose out .

harryhound

Sorry Alistair Maclean Darling, we are in trouble again. I've lost 60% of the divi and it looks like you have lost 30% if not your full share of 40%.
How am I going to explain this to you on next year's tax return.
I am really worried that I've let the side down, you might really need this money to bail out the depositors, not to mention rehousing those repossessed.
:o:o:o:o:o:o:o:o:o:o:o

tightwadman

I think there would be some kind of announcement when the guarantee expires, however for now its a very good guarantee. Its also a public Limited company meaning that the public have a right to know. Especially in cases like this one. It would not be in the public's interest not to be told any information relating to the guarantee.

And cue what will happen when an announcement is made and NR reverts back to the current totally inadequate compensation scheme...

Queues start to form outside NR branches......
The internet site cannot be accessed.....
NR staff tell customers their money is safe.... etc , etc etc

The government will have to deal with this problem sooner or later and the sooner the better. We need that £100,000 guarantee yesterday and that is the only way to restore stability. Personally I wont be going back to NR, even with a good rate of 6.3% online as I dont ever want to go through an experience like that again.

Orpheus_2

Dear Martin/ Anyone,

I have my money with Northern Rock in Guernsey. Does anyone know for sure whether these deposits, which are technically not in the U.K., are covered by the Chancellor's guarantee?

I telephoned Northern Rock in Guernsey who assured me that they are but I cannot find any reference anywhere in the Press or in Govt. statements..

Now that there is talk of Northern Rock not being able to find their "white knight" it is a worrying thought if they should go under and deposits outwith the U.K. not being included.

HELP!