Channel 4 news running a feature on risks of foreign banks

Griffboy

Right, I understand this now. I think the powers to be still think we are still be invaded by the Vikings and they are still raping and pillaging. But now it's financial.

ianmr65

ps646566 wrote: »

I first came across the issue not on Channel 4, but in the Daily Telegraph, which published an article the other day quoting the FSA, and naming a specific senior executive.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/04/nbanks104.xml


As I said before, if there is no foundation in this, and if the compensation available from foreign banks, should one fail, would in fact result in a full, speedy, and trouble-free reimbursement to UK account holders, then those banks need to do their own PR and convince people like me to put money back with them. Until and unless they do that, I'll play safe.

Thanks for that link. I've also found this from the same FSA guy. It's a bit more detailed.

http://www.channel4.com/news/articles/business_money/how+safe+are+your+savings/1697147

Here is some PR from Icesave in an article from Motley Fool which gives a lot more detail on the compensation side.

http://www.fool.co.uk/news/your-money/2008/02/14/is-saving-with-icelandic-banks-safe.aspx

ps646566 wrote: »

To say therefore that this is all down to PR and spin from UK banks makes a serious allegation against the FSA. I have no time for the organisation, which like most other regulators is toothless, non-proactive, and possibly too cosy-cosy with the industry. However for them to stick their neck out publicly in this way, and to issue something to the press which has no foundation and in which they do not believe does beggar belief.

I don't think this is ALL down to PR and Spin. though i think there is a definate PR element in it.
The bottom line is that many banks are in serious trouble. One large European bank is rumoured to be in 'negative equity' The liquidity crisis is real, and some smaller banks may well go to the wall. Lex in the FT was talking about this having the potential to be the biggest crisis since the wall street crash in the 1930's. European CDS indexes are piushing 150 for the first time ever. You only have to look at the price of Gold - 100% increase in 8 months to see that people are getting worried.

The banks that are more likely to be in trouble are the ones with high loan to deposit ratio's, a big mortage potfolio in a falling market, and ones that have been highly exposed to the toxic CDO's. Northern Rock was a perfect example. Icelandic banks are NOT in this catagory.

The spanish property crash, the current account deficit and archaic banking structures would lead one to be worried about Abbey as Santander might get into real trouble. Though you're not seeing articles about Abbey not being safe!

The Icelandic bank ARE having trouble raisng money on the credit markets, along with most banks. They have large CDS, but many economists say that these are disproprtionate, and unfair. They have also suffered three
rating regrades in a year. From the rapidly increasingly discredited ratings agencies. This is about all that's wrong with them.
The icelandic Prime Minister is on a constant PR effort to get the positive stuff reported( High liquidity, low exposure to CDO, Low loan to deposit ratios ect ect) but funnilly enough reporters are not all that keen to report it.

Newspapers are there to sell papers. Channel 4 news is there to sell advertising. Good news does not sell. PR companies know this.

It's much easier from a large PR firm representing a major bank with liquidity problem to say to a financial journalist, 'look at iceland - that CDS spread looks dodgy' thus deflecting their own problems, and giving the reporter a good story. Than for a PR firm for an Icelandic bank to say look we are pretty safe, in comparison with many other banks. The negative stories are always a great deal more sexy

There is a great deal right with the Icelandic banks Much more than a great many household names.

http://www.channel4.com/news/articles/dispatches/how+the+banks+bet+your+money/1563152

Jon Moulton detailed the stupidity and greed of supposidly 'safe' banking giants, the supine regulators, and short sighedted politians who let them operate: in a Dispatches a few weeks ago, and how he had to explain to the FSA, and the Bank of England last summer what a CDO was and what the looming sub-prime crisis had in store.

The bottom line is that the Icelandic banks offer very good value, and are pretty safe. However if you want 100% risk free, go to NS&I or HM Goverment securities. The returns will be a great deal lower.

ianmr65

Stompa wrote: »

Unless I'm looking at a different table, it says under the "You should know" heading on the right-hand side: "These products are not FSA recommendations".

Wel spotted!! My mistake: I guess this is becuase the FSA will not be able to recommend any particular institution. But all the accounts are def covered by the FSA compenstaion scheme.

ps646566

ianmr65 wrote: »

Thanks for that link. I've also found this from the same FSA guy. It's a bit more detailed.

http://www.channel4.com/news/articles/business_money/how+safe+are+your+savings/1697147

And thanks for that link. The last paragraph was especially interesting, as it crystallised a thought that was forming in my mind. We should have a level playing field, such that every bank that wants to operate in the UK has to sign up to the full FSA and banking Code requirements, including the compensation scheme. There should be none of this 'operating as a branch' nonsense, and UK investors should not be at risk of having to (perhaps unwittingly) undergo the vagaries of a foreign country's compensation scheme. The article also cautions that foreign banks might get a free ride on the UK taxpayer. But I thought that the compensation scheme was at least partly funded by a levy on the organisations concerned ? If there is a taxpayer funded content in the £35000 guarantee then foreign banks should have to pay an extra levy to cover this too. There would have to be some sensible definition of 'foreign bank' of course otherwise this would also apply for example to HSBC and Abbey, which are foreign-owned UK banks. I doubt that it would be permissible for EU banks to be treated differently, but most of the main protagonists appear to be non-EU based.

I am not persuaded by the arguments about how blue chip the Icelandic and other banks allegedly are. A few months ago who would have thought that a bank of the size and prominence of Northern Rock would fail ? There has been something of a sea-change in the financial industry world-wide, and I believe it prudent to be more cautious than previously, for the foreseeable future.

bristolleedsfan

ps646566 wrote: »

We should have a level playing field, such that every bank that wants to operate in the UK has to sign up to the full FSA and banking Code requirements, including the compensation scheme.

. A few months ago who would have thought that a bank of the size and prominence of Northern Rock would fail ?

First paragraph above : They are

http://www.icesave.co.uk/legal.html

http://www.kaupthingedge.co.uk/About/KaupthingEdge.aspx

http://www.kaupthingedge.co.uk/About/KaupthingBank.aspx

All Northern Rock PLC actually were was a Building Society that had converted to PLC status, they were not a bank in the true sense of the word.

Some would say that all Northern Rock PLC really were was a morgage arm with a very small deposit base.

ianmr65

[quote=bristolleedsfan;9193051

All Northern Rock PLC actually were was a Building Society that had converted to PLC status, they were not a bank in the true sense of the word.

Some would say that all Northern Rock PLC really were was a morgage arm with a very small deposit base.[/quote]

Quite agree!! :T They would have been better off staying as a building socieity. A large part of their problems came from trying to operate as a global bank, when they wern't capabale of being one. They were in no sence of the word blue chip. Having said this i would no longer put any bank in the 'blue chip' catagory any more.

ianmr65

ps646566 wrote: »

There would have to be some sensible definition of 'foreign bank' of course otherwise this would also apply for example to HSBC and Abbey, which are foreign-owned UK banks. I doubt that it would be permissible for EU banks to be treated differently, but most of the main protagonists appear to be non-EU based.

Not sure the FSA have ever really made an offical statement on this. As i said there is nothing on their website. The statement that channel four referred to was probably a comment made by Jonathan Chapman when asked by Channel 4.

What the FSA are basically saying is that it is wise to check with the institution itself, what the compensation arrangements are.

Meltdown_2

ianmr65 wrote: »

Wel spotted!! My mistake: I guess this is becuase the FSA will not be able to recommend any particular institution. But all the accounts are def covered by the FSA compenstaion scheme.

including the Guernsey ones?

Meltdown_2

ps646566 wrote: »

I doubt that it would be permissible for EU banks to be treated differently, but most of the main protagonists appear to be non-EU based.

I think the important criterion is whether the country is part of the EEA (European Economic Area) rather than the EU, so that covers not just the 27 EU countries, but Norway, Iceland , and Liechtenstein :eek:

ianmr65

Meltdown wrote: »

including the Guernsey ones?

Good question!!:T

The delicious tax-haven that is Guernsey has branches of most UK, and many EU/EEA banks. Landsbanki for one, say that their branch there is fully guarenteed by the parent, in Iceland. However if you look at the Baliwick of Guernesey finance act (can't remember the year) you'll find a compensation scheme similar to the icelandic one, covering the first £15k odd.
To be fair it would be a bit much to expect the FSA, a UK body to cover the Non UK Guernsey branches, when the main reason people deposit there is to obscure their tax affairs, and the FSA is a UK Government quango. Ironically the only Guernsey Branch that is fully covered is Northern Rock!!. As all their branches are covered by the UK Goverments 100% cast - iron guarentee!! Apparently northern rock gurnsey is attracting a lot on non-eu residents deposits as a result.