Northern Rock Crisis Article Discussion

heathcote123

bristolleedsfan wrote: »

the financial compensation scheme has
what hasnt been publicised is that a uk bank or building society might go bust, this is because a uk bank or building society will never go bust, northern rock was never going to go bust and wont go bust so the queues were due to media hype not because savers were at any risk of losing their savings,

People have short memories. Not heard of Barings?

This was not due to media hype. Northern rock simply had a bad business model, when the credit dried up (at the right price), they no longer had a business. When the city caught onto this, the share price plummeted.

The papers reported on this, which caused the run.

To say the media is responsible for this is hogwash - try the management at NR who were creaming millions on a short-term business model (funding 25 year mortgages with 3 month loans, happily assuming libor rates would never change), or maybe the FSA whos overseeing of the banking sector was obviously lacking.

People queuing outside the bank were doing the logical thing. Were it not for government promises (now reneged) NR would be no more.

keredewor

Martin

An updated view from you on the Northerbn Rock situation for "Re-Investing" would be most helpful........please.

isofa

I cannot believe these discussions are still going on, Barings and BCCI are not comparable with NR at all, they were not personal investing banks. Read through the 14 pages of this thread, it's been covered over and over again.

As Ian W said earlier "IIRC the last Building Society to go bust was in the 1890's so I don't expect there are too many first hand recollections of it." Totally correct. Show me a personal cash saver who has lost any money in a bank or BS going bust in the last 100 years.

Although I agree that the business model of NR was untenable, and built on some greed by the directors, the run on the bank, was entirely perpetuated by the media, I wonder how things would have occured had just their financial issues been relegated to the business section of broadsheets and the FT?

The media has been totally irresponsible for hyping up the situation in my opinion, and ill informed investors have been scared into thinking they were going to loose all their life savings, probably going home to stash it under the floorboards.

It's a pity the FSA didn't announce a 100K protection limit for accounts when they updated their terms a few days ago, this may have prevented such a panic in the future.

keredewor

My original posting still remains largely unanswered.

Is it OR is it not a risk to reinvest in NR under the terms that I have posted

bristolleedsfan

keredewor wrote: »

My original posting still remains largely unanswered.

Is it OR is it not a risk to reinvest in NR under the terms that I have posted

as has been posted numerous times the government wont allow any deposit savers ( excluding shareholders) to lose any money held in a uk bank or building society, how long the governments guarantee re savings held in northern rock is applicable for is irrelevant as northern rock in its current form will not outlive the guarantee.

i cant think of one good reason why anyone would want to make fresh deposits into northern rock, people should leave their bonds as they are until maturity and imo should give notice on notice accounts, NR offer to refund those who incurred penalties etc by moving money out of notice accounts if the funds were reinvested should have been used as an opportunity to stick the funds back in get the penalty interest back then give the appropriate notice to move the money back out again.

can anyone give one good reason for savers to keep their savings with northern rock once their bonds have matured/notice has been completed on notice accounts and for savers with no notice accounts to keep their deposits with NR.

melbury

I also have a fixed rate bond with NR which matures on 1st November. I sat tight over the past couple of weeks and tried not to panic, firm in the belief that the government couldn't let it go under as this would surely cause major problems with other banks/building societies.

I am just hoping that the government promise will stay in place for another 29 days and I will then move out of NR and try and find a safer home for my savings - wherever that is!!

bristolleedsfan

melbury wrote: »

I also have a fixed rate bond with NR which matures on 1st November. I sat tight over the past couple of weeks and tried not to panic, firm in the belief that the government couldn't let it go under as this would surely cause major problems with other banks/building societies.

I am just hoping that the government promise will stay in place for another 29 days and I will then move out of NR and try and find a safer home for my savings - wherever that is!!

government promise will stay in place until NR is no longer in its current form, if NR is broken up or sold off then government will make sure deposit savers dont lose out.

as everyone can see government appears to have more influence in the future of NR than NR board has over future of NR.

http://www.bloomberg.com/apps/news?pid=20601102&sid=aHRk2MFdhpzo&refer=uk

baby_boomer

Ian_W wrote: »

IIRC the last Building Society to go bust was in the 1890's so I don't expect there are too many first hand recollections of it.

Well Grays BS was salvaged by the big boys in 1978, after decades of fraudulent practice had holed it below the water.

Weblink - The sorry story of Mr. Jaggard - 51 years i/c - and the demise of Grays BS - did create potential problems

As it happens a current member of MSE actually has a first hand recollection of Mr. Jaggard's suicide and fraudulent activity at Grays.

BSs have always salvaged their fallen brethren - the last example was the Yorkshire's takeover of the Gainsborough in the 21st Century after some seriously dodgy property accounting .

Questions:

Why does the BS movement need to bother to prop up their fellows now that the Treasury has guaranteed 100% of savings up to £35K?

Doesn't the Treasury guarantee perversely make more BS business failures likely in future?

bristolleedsfan

baby_boomer wrote: »

BSs have always salvaged their fallen brethren - the last example was the Yorkshire's takeover of the Gainsborough in the 21st Century after some seriously dodgy property accounting .

Questions:

Why does the BS movement need to bother to prop up their fellows now that the Treasury has guaranteed 100% of savings up to £35K?

Doesn't the Treasury guarantee perversely make more BS business failures likely in future?

baby_boomers wealth of knowledge always impresses.

slightly off message but relevant to the post.

Mr Cornish yorkshire BS CEO stated six or so months ago that no building society mergers were imminent which appears to be correct.

does anyone else believe that the building society movement foresaw the impending credit crunch many many months ago and agreed amongst themselves not to seek mergers for fear that any merger announcements would be seen as panic measures ( even if they werent) and no merger announcements has effectively avoided the building society movement being thrust under a negative spotlight.


"Doesn't the Treasury guarantee perversely make more BS business failures likely in future?"

imo nope cos any BS business failures would cast the whole building society movement in a bad light and people would question how safe building societies are.

keredewor

bristolleedsfan wrote: »

government promise will stay in place until NR is no longer in its current form, if NR is broken up or sold off then government will make sure deposit savers dont lose out.

as everyone can see government appears to have more influence in the future of NR than NR board has over future of NR.

http://www.bloomberg.com/apps/news?pid=20601102&sid=aHRk2MFdhpzo&refer=uk

I could agree with this synopsis IF £7 billion in funds had not flowed out since 17/9, the political uproar would have been unnaceptable.........but NOW....the majority of investors in NR are institutional or < the FSA guarentee and the amount of depositors left with NR would hardly create a ripple if the bank folded.

On reflection I think the safest action for me is to re-invest in the original NR account by 5th October up to the FSA joint limit (£70k) get the interest on that amount back at least along with the £35 CHAPS transfer costs and include Instructions to close the account at maturity.

With the Treasury Guarentee end date unknown it is too big a risk to place all the funds back in to the account, the Guarentee could be withdrawn at any time.

I might be over cautious but the weasel words used by NR and the treasury give me little comfort, I called NR and asked them what the terms were that NR had arranged with the Treasury (What period did they arrange the facility for) after pregnant pauses (as if I had a cheek to ask them their business with my money!!) they said........"Until the current market stabilises!!!!" what kind of an answer is that.....NR say bring all your money back its safe, like hell it is.