All bank deposits now guaranteed

EdInvestor

Chancellor steps in to halt bank run

A radical shake-up of the protection offered to savers has been launched after the government was forced on Monday night to guarantee the deposits of Northern Rock customers in an attempt to quell the growing crisis of confidence in the British banking sector.
Alistair Darling, chancellor of the exchequer, announced on Monday that the government was stepping in to guarantee all of Northern Rock’s deposits. The Treasury said similar assurances would be available to customers of any other lender that ran into difficulty in the current turmoil.

The Financial Times has also learnt that the Treasury, the Bank of England and the Financial Services Authority have concluded that the current system for protecting savers, which only guarantees deposits up to £35,000, is inadequate. They have already begun a review of the system and are minded to opt for a US-style alternative, ringfencing depositors’ money in the event of a bank’s failure.

The government’s move came amid signs that the crisis of confidence in Northern Rock was spreading to other lenders. Shares in Alliance & Leicester, Britain’s eighth-largest bank, plunged more than 30 per cent on concerns – denied by the bank – that it had been forced to call on the Bank of England for support. The bank said on Monday night that the government guarantee should remove any remaining doubt among customers.

:T:beer:




Sense at last.



Financial Times

Save&Spend

Does it means National Savings and Investments (NS&I) now become redundant?

Steve_xx

Well no, not really sense at last. But maybe on the right road.

The Chancellor said that these assurances are to be offered to Northern Rock investors and those of any other lender during the current turmoil. Cleverly there is no "timer" put on this current turmoil. So that means that there will come a day, when that protection offered today to Northern Rock and others, will evaporate. What joe public doesn't know is when the day of withdrawal of this guarantee will be!

darktrader

Too little detail, far too late.

He has made a statement pledging taxpayers money to support, in effect, any British Bank that suffers a collapse. I heard three interviews yesterday before the announcement where Ministers just refused to give such a guarantee - or, actually, answer a direct question. This looks like panic.

There are no details. "Your money is safe." My question would be, how long would I have to wait?

The simple, sad truth is that most of "us" no longer trust "them." Not after the scandal of lost Occupational Pensions.

Steve_xx

The protection offered to NR and other customers is valid during the "current" turmoil sitution. Alistair Darling did not put a "timer" on that assurance. Therefore, the assurance could end at any point, ie if things calm down at NR today, then the assurance could well end there!

Agri47

I wonder how long it would take the government to pay out investors in the event of the worst happening.

Sometimes the government can be very slow about paying.

For example many claimants of the Agricultural Single Payments Scheme have had to wait well over a year since the due date to receive their payment and possibly some long overdue payments have yet to be paid.

Little wonder so many people are so skeptical of what our politicians say. I personally would never trust them.

purch

What he didn't say was what would happen to the Banks assets in such a situation.

I would hope that if the Government intends to cover the Banks liabilities then they would also be taking over at least an equivalent amount of their assets too.

Steve_xx

purch wrote: »

What he didn't say was what would happen to the Banks assets in such a situation.

I would hope that if the Government intends to cover the Banks liabilities then they would also be taking over at least an equivalent amount of their assets too.

Such a happeniing at a bank would effectively "nationalise" it.

[Deleted User]

Just what I always wanted my tax payers money bailing out riskier and riskier bank actions bizarre financial tools and hedge funds.

Basically the equivilent of giving Nick Leeson the password for the populations share trading accounts and savings.

deary65

The trial took place in Westminster Hall presided over by Lord Camden, the Chief Justice of the Common Pleas. Camden held that Halifax had no right under statute or under precedent to issue such a warrant. In the most famous passage he stated:

The great end, for which men entered into society, was to secure their property. That right is preserved sacred and incommunicable in all instances, where it has not been taken away or abridged by some public law for the good of the whole. The cases where this right of property is set aside by private law, are various. Distresses, executions, forfeitures, taxes etc are all of this description; wherein every man by common consent gives up that right, for the sake of justice and the general good. By the laws of England, every invasion of private property, be it ever so minute, is a trespass. No man can set his foot upon my ground without my license, but he is liable to an action, though the damage be nothing; which is proved by every declaration in trespass, where the defendant is called upon to answer for bruising the grass and even treading upon the soil. If he admits the fact, he is bound to show by way of justification, that some positive law has empowered or excused him. The justification is submitted to the judges, who are to look into the books; and if such a justification can be maintained by the text of the statute law, or by the principles of common law. If no excuse can be found or produced, the silence of the books is an authority against the defendant, and the plaintiff must have judgment.

So the individual may do anything but that which is forbidden by law, and the state may do nothing but that which is expressly authorised by law.
The judgment established the limits of executive power in English law, that an officer of the state could only act lawfully in a manner prescribed by statute or common law.

EdInvestor

Looks like the plan is to reform the guarantee rules.

http://www.ft.com/cms/s/0/4008908a-6559-11dc-bf89-0000779fd2ac,dwp_uuid=f4ebce78-e821-11db-b2c3-000b5df10621.html

Undoubtedly they are too weak, with repayment arrangments too vague and limits too low.