Fears over safety net: IS YOUR MONEY REALLY SAFE?

doogstoos

Saw this today in the times. I think MSE needs to factor this in to its article about 'how safe are your savings'. This is a major problem if true!

http://business.timesonline.co.uk/tol/business/money/savings/article3340738.ece

Fears over safety net

Elizabeth Colman

UK SAVERS investing in Icesave, the Icelandic internet-only bank, could face delays receiving compensation if it suddenly ran out of cash.
Savers who use banks solely regulated by UK authorities will receive £35,000 from the Financial Services Compensation Scheme (FSCS) if their bank defaults.
However, many of the 100,000 British savers who have placed £5 billion in Icesave savings accounts may not realise that they are not entitled to exactly the same guarantee.
Icesave, owned by Landsbanki, the Icelandic bank, is only partly regulated by the UK’s Financial Services Authority (FSA). The Icelandic authorities are ultimately responsible for the bank and must pay out compensation to distressed savers before a they can claim from the FSCS.
Under the Icelandic Deposit Guarantees and Investor Compensation Scheme, the first €20,887 (£15,635) of savers’ deposits is guaranteed.
The rest of any £35,000 claim would be made up by the FSCS, into which Icesave contributes.
However, the FSCS website also carries this warning: “The home state scheme has lead responsibility for claims, and must pay the first part of any compensation.
“This might cause some delays in resolving claims, as FSCS may have to depend on information from the home state schemes before paying any ‘top up’ compensation.”
The Bank of Ireland, Anglo Irish Bank, TD Waterhouse, the Dutch bank ING and Bank of Cyprus also top up their home compensation schemes in this way.

funkey_monkey

This needs to be sorted out ASAP. There are threads running amok on every forum I visit about this issue.

Whether this turns out to be true or not, public fear can cause havoc for the banks in question.

tawse57

Maybe that it is the plan - to cause panic against Icelandic banks who are offering better IRs than the UK banks and get people to put money into the UK banks?

The UK banks then get lots of deposits which they pay little IR on and then they can regenerate their profits by loaning that money out at higher IRs to their mortgage customers?

Rafter

tawse57,The other way of looking at it is that British tax payers shouldn't be subsidising deposits at UK branches of overseas banks where the UK regulators have less oversight over the quality of lending and regulation outside these shores.It is true that the overseas banks are paying higher rates. In doing so they are driving up the cost of mortgages for UK homebuyers. But they are offering the same guarantee as safer uk deposit takers and paying no premium to the guarantee scheme for doing so - that can't be right.R.