Northern Rock Crisis Article Discussion

gt94sss2

bristolleedsfan wrote: »

does anyone else believe that the building society movement foresaw the impending credit crunch many many months ago

No - no bank or building society saw this credit crunch occurring -some may have foreseen that the sub prime loans in the USA would have problems - thats quite possible but not the side effect of wholesale borrowing generally drying up.

Regards
Sunil

gt94sss2

keredewor wrote: »

2) Do I re-invest the amount withdrawn as if nothing happened and let the bond run its course for 26 days (05/10/07 to 01/11/07) and in doing so in my re-investment instructions write to confirm that all funds are to transfer to my external account immediately on the maturity date (By 01/11/07)

I would do this and be thankful that Northern Rock is actually giving its ex-customers the opportunity to do so - especially if the bond only has 26 days to run - if I was running the business I probably wouldn't..

The way Northern Rock is now, the 'Treasury guarantee' - which is worthless apart from as a PR gesture as it will never be used - will remain until NR is sold off or broken up.

Regards
Sunil

bristolleedsfan

keredewor wrote: »

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Guarentee end date unknown it is too big a risk to place all the funds back in to the account, the Guarentee could be withdrawn at any time.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

personally id take same action as u plan to re your bond. personally i keep all my savings in mutuals ideally at best rates because one thing is certain whilst keeping savings in a mutual "might not" reap a merger bonus keeping deposits in a PLC definately wont produce a merger bonus.

re my point about government having more power to dictate what NR do than NR board has power to do i took it as understood that people would be conversant with how its all unfolded and recognise that the governments stranglehold over NR has come about SINCE it gave its NR deposits guarantee and NR started borrowing money from BOE

re your point about it not mattering if NR went bust now cos hardly any ordinary savers left with NR. its not NR reputation that is at stake, its reputation of both government and the banking community that is at stake.

Ian_W

baby_boomer wrote: »

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

The point in quoting that wasn't to say that some BS's haven't been in trouble [but not allowed to fail] - but to counter another poster who stated that others had "personal experience" of having to wait 6-12 months for compensation from the FSCS.

If no banks or BS's have failed, how could they have had that experience? Still waiting for the answer. :rolleyes:

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

Ditto to bristolleedsfan's reply. Deposits were already protected up to 90% - the issue for other societies was confidence in the BS mutual movement, would a society failing and the others not bailing it out inspire confidence in them even with 100% protection of the first £35K? I don't think so, and I don't think the BS bigwigs would take that chance either.
Still the BS's seem to me, maybe wrongly, to be more secure ATM than some of their erstwhile colleagues who've forsaken mutuality for the greater corporate governance of shareholders in PLC status, NR being the basket case but B&B and A&L also considered a little more flaky than a week or 2 ago.

harryhound

For several days, I have been thinking who will take out NR.

As an employee of a reasonably well know subsidiary of a very well known Plc, I got bought and sold a couple of times.

If there is a Plc involved, it must get permission from its own shareholders, for a big deal like NR. This means there has to be a period of "due diligence". In reality this translates into a team of expensive accountants from one of the best known audit firms, mysteriously renting an office over the street, complete with sound proofing and cyber locks etc. (You can recognise them by their lap tops a badge of rank like a civil service briefcase.) They have to chew over the figures for weeks before the recommendation to shareholders can be published and voted on. I cannot see the depositors or the Government sitting on their hands, while the press speculation continues.

So expect some sort of "Private Equity" (vulture fund?) taking out the NR problem. It is probably only the mortgage holders who have to sit on their hands watching.

http://news.bbc.co.uk/1/hi/business/7025430.stm

On the topic of further emergency consolidation of the Building Society movement. Something like Grays would not be a problem, that was a case of "fast women and slow horses" as the saying goes, if I remember correctly. But if we are talking about the second tier players; there is only one top tier player now:
Nationwide; is it prepared and can it afford to play haven of last resort; especially it is still trying to digest Portman?

bowks

I am new to this and have posted this query elsewhere but probably in the wrong place. Can someone answer my query please? I have 2 savings accounts with Northern Rock 1 x ISA and 1 x TESSA/ISA under separate accounts. Am I covered by the £35,000 if they jointly exceed this amount or do I need to transfer 1 to bring it below this figure. Or, because they are under different account numbers and are 2 separate accounts do I not need to do anything.

Bowks

Crabman

Hi - have a read of the new article, it should give you all the info you need on this very subject:

Are your savings safe? Save up to £315,000 at top rates in perfect safety

:beer:

gt94sss2

harryhound wrote: »

If there is a Plc involved, it must get permission from its own shareholders, for a big deal like NR. This means there has to be a period of "due diligence". In reality this translates into a team of expensive accountants from one of the best known audit firms, mysteriously renting an office over the street, complete with sound proofing and cyber locks etc.

This isn't necessarily true.

While due diligence happens, this is normally after the takeover deal has been announced but before its completed.

However, the only shareholders who have to be asked to accept the deal are Northern Rocks.

The company buying Northern Rock does not have to ask its shareholders - unless it is a 'big' deal in relation to its existing business.

For example, when Nationwide 'merged' with Portman, Nationwide members didn't get a say as Portman was less than 20% Nationwide's size.. its a similar principle with plcs.

A company like HSBC could easily buy NR without asking its own shareholders - it would only be a very minor deal for them given the size of their business.

Regards
Sunil

gt94sss2

mean_momma wrote: »

If the cream of the financial brains can't work out that passing the parcel with bad loans is going to lead to some organization(s) getting caught in a credid crunch, then savers should definitely beware of investing more than the guaranteed limit in any of them.

I'm sure they would have recognised that banks holding bad loans/sub prime would suffer but not the almost total stopping of any financial institution lending to another globally.

These days companies like BP can borrow money more cheaply from banks at 5.55% than banks will lend to other banks including those banks with government guarantees like KFW (german gov guarantee) at 5.63% or EIB (Suprantional) at 5.62% (that is guaranteed by all of the member states of the EU) which is crazy

Regards
Sunil

keyboardman

i am new to the site and hope im not duplicating this question.can you please tell me Martin is all my money covered up to 35k if i have a fixed rate one year bond under the governments guarantee scheme