Northern Rock Crisis Article Discussion

orangetdavis

Any thoughts on shares anyone? I too have NR shares but don't know what to do!

Mark_J.

bazz_iiii wrote: »

I too would like some info regards the protection or lack of it for account holders using the NR Guernsey.It is very worring that we may lose all our savings with no recourse to any claw back.

It is true that NR Guernsey deposits are NOT covered by the UK Financial Services Compensation Scheme. I spoke with the Guernsey Financial Services Commission this morning and they confirmed this and also added that there is no compensation sheme offered by them. ("It was not considered necessary as it only covers relatively small amounts and most investors in Guernsey have much larger investments").......

My investment is in Euros and not that large, but it would seem that investors in NR Guernsey have a lower level of protection than NR mainland UK investors.

Just my opinion: Therefore NR Guernsey investors have to rely on NR surviving! I wasn't too concerned about this situation as I could not envisgae the UK banking industry allowing one of their own to go under, as it would not look good for their business! (Should I be more worried?)

shoi

Just to say that i finally did manage to log on to the internet savings account
at precisely 1 minute after midnight Sunday morning

Steve

MrsGrey

I finally managed to access my account by telephone and the helpful person told me my savings are safe up to £33,000 though I could withdraw, of course. I'm sorry, but in what way is a guarantee of 90% safe? What that actually means is that you stand to lose 10%! If I had £100,000 saved (if only) I would lose £10,000. That is quite a loss. So this talk of guarantees is misleading, and I am surprised that Martin seems to think we should stay put and ignore this possoble £10% loss. Yes, I am selfish!:mad:

pounds_2

Are the current mutual building societies eg. Nationwide, likely to be more stable and safer than investing in banks that have shed their mutual status eg.Northern Rock

MrsGrey

I finally managed to access my account by telephone and the helpful person told me my savings are safe up to £33,000 though I could withdraw, of course. I'm sorry, but in what way is a guarantee of 90% safe? What that actually means is that you stand to lose 10%! If I had £100,000 saved (if only) I would lose £10,000. That is quite a loss. So this talk of guarantees is misleading, and I am surprised that Martin seems to think we should stay put and ignore this possible £10% loss. Yes, I am selfish!:mad:

harryhound

Reestit_Mutton wrote: »

I'm sorry Martin, I disagree with you here. It's not so much a disagreement over whether there is any reason to panic or not, more to do with the thrust of your arguments. Without going into too much technical detail, it's worth pointing out a few facts that are at odds with your article:

(1) It's misleading to say that the loan facility from the BoE is just an overdraft put in place "just in case" it's needed. It may not have been necessary to call on this facility yet. However it is a certainty that, without a takeover, it will be necessary for NR to use this overdraft facility in the near term. Without this facility, NR would have been unable to continue operating as they would very quickly have found themselves unable to refinance their commercial paper as and when their existing packages of short term debt expire. What's more, NR wouldn't have approached the bank if all other avenues hadn't already been exhausted as, by definition, it is a means of last resort and one that was guaranteed to hugely embarrass NR.

(2) It's misleading to say that the loan facility is "literally unlimited", as you put it - it has to be backed by prime collateral that isn't already used as collateral for other forms of debt. In NR's case, that currently equates to about £30bn (about 25% of their asset base).

Of course, prolonged panic will only worsen the situation and I certainly don't wish to feed that panic as I also feel that it is unnecessary (my reasons are probably too numerous and detailed to go into here). However, it is equally dangerous to provide hope based on inaccurate information.

Much of the above information can be found in the Northern Rock press release:
http://companyinfo.northernrock.co.uk/investorRelations/news/viewFeedarticle.aspx?id=50047106555046

I'm sorry, I don't like disagreeing with you publicly but the above had to be said to put matters straight.

Reestit Mutton

Hi Restit,

You have now got me somewhat worried.
The boss of NR claimed their asset base is 110 billion this morning.

Only 1/4 of this is financed by retail deposits (ordinary people's saving accounts.)

So are you saying that the financial institutions, who have put up the the other 3/4 on short term loans, can help themselves to 3/4 of the assets if/when NR cannot meet their repayments to these financial institutions?

Meanwhile, the ordinary retail depositors, have had their assets pledged to the Bank of England at 95% of their valuation in exchange for ready cash?

Some of these assets are low start mortgages, others are already delinquent, either way, these assets are in reality worth less than their book value. On the plus side NR does not seem to have too many of the SIV time bombs on its books; it seems to have been able to dump a fair few of its home made SPIV's on some bigger fools. I wonder where they are sitting.

The depositors are ripping out their deposits at a billion per day. Such closing of accounts automatically triggers payment of interest up to the day of withdrawal.

This feels to me like a game of musical chairs and pass the parcel, where every time the music stops, a person sitting, not holding a parcel is allowed to leave taking the chair with them.

I seem to remember a friend, a name worth worth millions at Lloyds being brought down because his syndicate was left holding the parcel. At Lloyds there was a spiral, you thought you had been clever by packing up your dodgy policies and selling them only to discover you then bought another parcel only to discover it had got your dodgy stuff double wrapped inside it.

The only way to stop this spreading to other banks, if for the Bank of England to GUARANTEE ALL the retail depositors (Only 30bn!) and give ALL the London banks 5 working days to supply their figures for holdings of these dodgy packages in the way that NR has already done. This would be backed up by loss of licence of anyone failing to publish their figures and jail for any directors publishing false figures. Similarly any Chartered accountant auditing these figures in the next three months and failing to find the fraud would loose his right to practice.

Anybody got a better suggestion?

Harry.

In USA, and perhaps next year in Britain, not to mention Spain, a lot of money is being written off. There are no longer enough chairs to go round. Somewhere there must be casualties.
The headless chicken panic is because nobody knows who it is going to be. Logically it should be the shareholders and foolish borrowers, not the depositors.

johnfthetraveller

sdooley wrote: »

The people who could be hurt by this, and I have seen nothing on this in the press, are buyers who have arranged mortgages with Northern Rock, perhaps even exchanged contracts on a house, and not yet drawn down funds. People in that situation should rearrange finance elsewhere if at all possible

So suddenly every tom, !!!!!! or harry is a financial adviser? This is herd mentality scaremongering at it's worst. I'm sure many people who are waiting for a NR mortgage to complete are anxious, but the chances of not getting the money are remote (they are still offering mortgages - this would stop first, and only after the Bank of England had given up on them - which they haven't). The cost, inconvenience, and pitfalls of switching between exchange and completion far outweigh the risk of waiting.

Andy9164_2

I dont have any money "invested" in NR, quite the reverse, I have THEIR money as in my mortgage, so believe my position is ok.

However, there is talk about NR selling some of it's (if not all) business parts and would like to know if this happens and my mortgage was transferred to another bank would I still retain the 4.95% I have fixed until 2020. Thanks

gt94sss2

Andy9164 wrote: »

However, there is talk about NR selling some of it's (if not all) business parts and would like to know if this happens and my mortgage was transferred to another bank would I still retain the 4.95% I have fixed until 2020. Thanks

Yes.

Regards
Sunil