Channel 4 news running a feature on risks of foreign banks

meatandtwoveg

confused1 wrote: »

I have just written in to Ofcom to complain about channel 4's irresponsible, gross distorted piece of reporting.
p

Well done my son, hope you get a positive response, it really is starting to feel like a nanny state!

RayWolfe

confused1 wrote: »

I have just written in to Ofcom to complain about channel 4's irresponsible, gross distorted piece of reporting.
p

I think you've got this a little out of kilter.
The piece was not about Foreign banks at large and was not even about how "good" British banks are. It was very specific about two Icelandic banks, about which there has been some concern in the serious media for some time. (Do a trawl through the FTs archive.)
If you are happy to invest there, do so, but expecting Ofcom to protect you from bad news is possibly a little naive.

tawse57

Aegis wrote: »

It's not the British taxpayer that would foot the bill. The FSCS is funded by authorised firms, and it comes out of those businesses' profits.

On the other hand, the recent situation involving Northern Rock at one point had more budgeted for providing compensation and ongoing loans than the NHS receives in a single year, which would have required a direct use of taxpayer money if it was ever actually needed.

All in all, the more people going to Icesave the safer taxpayer money in general is in the UK.

Apparently there is sod all money in the FSA scheme unlike in the US scheme and if a UK bank ever went bust there is much doubt whether there would in fact be any money to pay back savers. It is doubtful, in such circumstances, whether other UK banks would be prepared to bail out a bust rival, especially as in such circumstances they might need funding themselves.

Of course, if UK banks started toppling then it would be the end of the UK as we know it as all our wealth comes from financials these days. However, the 35K limit might just be used by the Government to screw anyone who has more than 35K in one bank as the Government printing presses kick in to save the banks.

Dilemma Question - do you:

1. Keep all your money in a suppsoedly safe bank such as Lloyds even if you have more than 35K?

2. Put money into as many banks as possible keeping each sum under 35K but in doing so expose yourself to potentially at risk banks such as Bradford & Bingley, Alliance & Leicester and Johnny Foreigner?

Maybe the FSA knows that the financial storm heading towards the UK is much worse than we suspect and they are genuinely concerned that thsoe with money in foreign banks will lose their savings? Ben Bernanke said only last week that banks in the US would go bust before this credit crunch is over and one of the Middle Eastern Sovereign Fund Managers recently commented that his fund had indeed already saved a couple of banks from going bust.

bristolleedsfan

RayWolfe wrote: »

I about which there has been some concern in the serious media for some time. (.

Only during the last couple of months that I can recall.

Id be interested to see the earliest article that u can source to justify the " for some time" remark.

confused1

This is not bad news - just sacremongering news. With Northern Rock so fresh in people's mind, what does this report intend to achieve?
And where was the FSA when Northern Rock customers needed them the most?

RayWolfe wrote: »

I think you've got this a little out of kilter.
The piece was not about Foreign banks at large and was not even about how "good" British banks are. It was very specific about two Icelandic banks, about which there has been some concern in the serious media for some time. (Do a trawl through the FTs archive.)
If you are happy to invest there, do so, but expecting Ofcom to protect you from bad news is possibly a little naive.

bristolleedsfan

confused1 wrote: »

This is not bad news - just sacremongering news. With Northern Rock so fresh in people's mind, what does this report intend to achieve?
And where was the FSA when Northern Rock customers needed them the most?

Perhaps powers that be are thinking that if they keep going on about Iceland Banks, Northern Rock farce will get erased from peoples memories.

I dont recall any negative articles about Iceland Banks before 2008.

meatandtwoveg

bristolleedsfan wrote: »

Perhaps powers that be are thinking that if they keep going on about Iceland Banks, Northern Rock farce will get erased from peoples memories.

I dont recall any negative articles about Iceland Banks before 2008.

Never a true'er word spoke?

FSA, what a bunch of Brown Clowns, he has made a right mess of things, our Glordon Clown!

Stompa

bristolleedsfan wrote: »

I dont recall any negative articles about Iceland Banks before 2008.

A bit of digging around finds this sort of thing:

http://business.timesonline.co.uk/tol/business/economics/article700870.ece

ianmr65

OK the situation with the icelandic banks is complicated. (Very) The bottom line is that (I firmly believe) they are safe and solid. But the situation is far from clear, so bear with me and I will attempt to explain what's going on. NB Channel 4 don't have a hope, the current global credit and economic problems are just too complicated for TV reporting, (and to be fair, even broadsheet newspaper reporting) and explains the point at the end of the filmed report about people having to do their own research.

Channel 4 jumped on this story following the recent re-grade of the icelandic banks by Moodys to A3 reported by the FT. http://www.ft.com/cms/s/0/5fdff520-e893-11dc-913a-0000779fd2ac.html, and which on the bank's own websites under news. This brings them back to where they where before the ratings agencies changed the way they graded due to monoline (see below) amongs other things.

Now Moody's and Fitch the credit ratings agencies, are in deep trouble as they rated the Monolines (US Municipal Bond re-Insurers) as AAA and the monolines are now all going down the pan. AAA enabled the monolines to insure what are now known to be toxic cdo's, sub prime derivatives and the like. So the ratings agencies are under pressure about all their ratings, as they are going to get sued big-time over the monolines.

In an effort to sure up their business the ratings agencies have re-graded across the board.

Since the have been AAA, and untill about July 2007 it had been very cheap to cover cash lent to or guarenteed by the Icelandic banks, (so the cost of a credit default swap note (the CDS refer to in the programme which is a sort of insurance against a bank or company defaulting, on it's bonds, deposits, and loans that is traded) was very cheap.
These are now getting more expensive for these banks mainly because: Credit traders don't understand the Icelandic bank structures, and have not taken into account the positive year end results. The ratings agancies anounced they were re-grading. And the Icelandic banks are all inter-owned. (This I think is a good thing- see later)
AND The CDS notes themselves are sold short, IE hedge funds ect are betting on the price of these rising, and making money when they do.
See here for the full story (good luck it's pretty technical) http://www.financialnews-us.com/index.cfm?page=ushome&contentid=2449887362
Quite what the FSA mean when they say that people should look at CDS spreads, when deciding on banks is difficult to guage. Bearing all the above in mind. My guess is that in common with the Treasury, and the House of Commons select comitee, and the Major banks executives they don't actually understand credit, or derivatives markets.

NB In 2006 when the icelandic banks were last A3 and CDS were again expensive. As result of that the Icelandic central bank encourged much greater liquidity. And so the banks went out to market with higher intrest rates, to drum up customer deposits, and succeded.

Now many people especially the credit markets, and the giant US banks think that the interownership, of the icelandic banks and the close relationships to the lslands central bank and goverment is a bad thing. As it has enabled rapid expansion, and gives a lack of visibility. That is certainly one way of looking at it.
Another way is that the whole of Iceland is now a super hedge fund, an enlarged and much more profitable version of Gurnesy. It is now the richest country in the world, per head. And the economy is incredibly sound. They have grown fast and safely, have no exposure to any of the sub-prime, cdo's, or svi's. They have major intrests in UK retail and many other countries financial institutions. PLUS If any of the 3 banks hit liquidity problems, then the others would take it over (The icelandic prime misister implied this). Landsbanki, WAS the bank of iceland for sometime.

Another fact to bear in mind is that many UK banks who are in far worse trouble and posted terrible results, say B & B. Or who have far greater exposure to the subprime toxic derivatives, say barclays, and HSBC are all a bit miffed that £6bn, and rising of UK savings have flown off to iceland. When they are all desperate for the liquidity here. As they are all struggling to borrow cos of the credit crunch.
So I suspect there was a certain amount of PR hype, when the UK instututions saw that at last, they had something that would muddy the water, to stem the outflow, so they probably got their PR agencies to bang the drum in order to help the writers of the negative articles and reports that have been published.

All three banks are covered by the FSA, the UK banking code and the Icelandic scheme. (This was not spealt out in the programme) The only reason the FSA would co-ordinate claims is so that people could not claim twice. In effect your first £15k is covered twice, as if the Icelandic scheme fails, then the FSA kicks in. Or if the FSA fails then the icelandic scheme would pay out.


ian

ianmr65

tawse57 wrote: »

Ben Bernanke said only last week that banks in the US would go bust before this credit crunch is over and one of the Middle Eastern Sovereign Fund Managers recently commented that his fund had indeed already saved a couple of banks from going bust.

In fact Ben 'stagflation' Bernake, said that some smaller US banks were at risk of going bust buut the at the larger institutions are all solid. You're right about the soverign funds tho.