Is Iceland headed for meltdown?

CannyJock

Yant1 wrote: »

Lansbanki/ICESAVE do a lot of corporate and commercial banking across europe and have some very rich clients. Lansbanki also do a lot off shore tax haven work in guernsey.

The the newspapers premise saying that putting your money in landsbanki is investing in fish production is a load of bunkem. They also do homeloans for the wealthy in the UK.

http://www.landsbanki.co.uk/

http://www.heritable.co.uk/

I have notified landsbanki/ICESAVE of this deformation of character and I hope they take the telegraph for everything they get.

Yup, Iceland's second largest export is actually software. I spent 5 years working for an Icelandic Software company in the UK at director level. They're a level headed people and I'm trusting them with a decent amount of my own cash without losing any sleep at all.

ixwood

http://www.moneyweek.com/file/41437/credit-default-swaps-how-to-spot-the-riskiest-banks.html

Then, there are the foreign banks who are offering us internet savings accounts. The basic rule of thumb here is: if they’re ING, they’re no worse a risk than a UK high Street bank. If they’re Irish, they’re likely to be over leveraged and a bit more of a worry (especially Anglo Irish Bank). But if they’re Icelandic, then be afraid; these banks are starting to be priced for bankruptcy risk and it’s not clear what protection UK savers might have with these foreign accounts.
Kaupthing is now having to pay almost 6% more than 5-year government bond yields (i.e. 10.2%) to raise funds. Kaupthing’s savings account pays just 6.5% AER, which doesn’t even come close to compensating us for the risk I’d say. The markets seem to be telling us that there is a very real default risk here. Glitnir Bank is not much better and even Landsbanki (owner of the popular Icesave internet banking business) has to pay the credit markets 3.2% more than risk-free rates and 2.45% more than ING does, for funds.
Given that Icesave pays 6.3% on their easy access internet savings account and ING pays 5.15%, perhaps shopping around for the highest savings rate right now is not actually the best thing to do. Perhaps, just perhaps, we should pay more attention to the risk side of the equation too.

masonic

nilrem wrote: »

It really does make one wonder if there is a concerted attempt to scare savers away from non UK banks.!

Nah, they're doing the same thing with some UK banks. They're just trying to invent a story in the hope that they'll get free advertising on some popular online forums. Looks like it worked. :rolleyes:

masonic

ixwood wrote: »

it’s not clear what protection UK savers might have with these foreign accounts.

It's totally clear what protection they have. These are UK accounts run by foreign banks. They have the same protection as any other UK account.

Aegis

masonic wrote: »

It's totally clear what protection they have. These are UK accounts run by foreign banks. They have the same protection as any other UK account.

Indeed. Bottom line is that even if the banks are at risk, there is if anything MORE protection against the bank going bust when it's covered by both a home-country scheme and the FSCS.

Your money is safe up to £35000 per person in these accounts, so all this panic really is unwarranted. With that said, there might be some delay, so splitting some of your capital off to an alternative account might be a good idea, but that's just best practice in general

bombardier

I've just read this thread (and the linked articles) with great interest. For the first time in my life I have - for me - a relatively large sum of money to invest. I willl certainly not have more than £35k with one institution but with the sum I have I don't need to worry too much about that for 6 months - 1 year anyway.

What does concern me is just how safe this supposedly cast iron £35k guarantee is?! I don't trust Gordon Brown or his government one little bit and so worry that the guarantee is just a set of words like so much else we have been promised and not received from them?

I already have an IceSave account (with virtually nothing in it!) and was considering putting the bulk of the money in there. I also have an NS&I Direct ISA that was the top performer when I opened it over a year ago but was looking at the IceSave ISA for this and next years allowances.

So, I guess my direct questions would have to be:

1) How safe is the £35k guarantee?
2) Assuming it is a safe guarantee, would it take me longer to recover my money if it had been in IceSave than if it was with a bonafide UK bank?

Thanks!

masonic

bombardier wrote: »

1) How safe is the £35k guarantee?
2) Assuming it is a safe guarantee, would it take me longer to recover my money if it had been in IceSave than if it was with a bonafide UK bank?

The system has never been tested with claims for deposit accounts, but it's inconceivable savers would not get their money back through the scheme, because it would likely lead to a national loss of confidence in the banking industry if savers saw the scheme fail.

I imagine the length of time you would have to wait would depend on the individual circumstances of the claim. It's pretty much impossible for anyone to accurately say how long it might take because it's never happened.

Steve_xx

masonic wrote: »

The system has never been tested with claims for deposit accounts, but it's inconceivable savers would not get their money back through the scheme, because it would likely lead to a national loss of confidence in the banking industry if savers saw the scheme fail.

I imagine the length of time you would have to wait would depend on the individual circumstances of the claim. It's pretty much impossible for anyone to accurately say how long it might take because it's never happened.

I totally agree with you.

It's worth noting that interest would stop being earned on the day that the bank went into default. So if it takes 6 months to pay out, then no interest is earned on the deposit during that interim period.

Also I would say that it's prudent to limit deposits per institution to 33k, thus allowing for interest at 6% compounding over a 12 month period briinging the total up to just shy of 35k. This fact will start to affect cash ISA's as they've been around long enough for people to have racked up deposits of around 35k in a single institution.

tradetime

masonic wrote: »

The system has never been tested with claims for deposit accounts, but it's inconceivable savers would not get their money back through the scheme, because it would likely lead to a national loss of confidence in the banking industry if savers saw the scheme fail.

I'd personally go a bit further than that, a failure of the government to honour such a scheme in any shape or form (and they can hardly stand up and say well we're only stalling because it'a a bank owned by damn foreigners, if it was a good Brtitish bank....) would result in an international loss of confidence in the stability of the UK treasury, the pound would crater, and the UK would be finished in the world of finance, and pretty much everything else, we would be relegated to the status of a third world currency.

pem2

What has worried me a little in thinking about this hypothetical scenario of the unlikely event of a bank going bust and then having to call on the untried/tested guarantee, is in proving you have the money there in the first place. Many of us have online only accounts/paperless options etc and this crossed my mind last September as I was trying to get on to Northern Rock's website to reduce my funds down to 35k, but fortunately I did and everybody else did who wanted to. Now if a bank went completely down, no website etc. difficult administrators, could you all prove you had the funds there and would they except a previous online statement as proof?