Are your savings safe? article discussion

Meltdown_2

jamesd wrote: »

arty4, The March review of FSCS funding by the FSA made proposals that would significantly increase the annual cap to about 4.4 billion Pounds a year....

arty4 wrote: »

now i've read the relevant parts of the document - do we know if the proposals were adopted?

Well, they had to adopt something from the 1st April 2008 ...
This from the FSA website still seems to be current, and this FSCS press release in Feb 2008 doesn't indicate anything other than it was going ahead as planned.

silvercar

jamesd wrote: »

...

3. Please don't speculate or use old FAQs but instead get confirmation from those within the company who know the strict and accurate legal answers.

It seems that often the information coming from a company is inaccurate. If you relied on information, even in writing, and then the unforeseen did happen and the company went bust, having supplied wrong information that you had relied on, where would you take your complaint?

HOLLY

With all the extra funding provided by Central Banks and BOE, do you think there is more stability. Also do you question the possibility of engineered financial crises, for more control of Global Markets ,by the selective players who move around like a game of Chess.

ianmr65

HOLLY wrote: »

With all the extra funding provided by Central Banks and BOE, do you think there is more stability. Also do you question the possibility of engineered financial crises, for more control of Global Markets ,by the selective players who move around like a game of Chess.

Yes there is slightly more stability, as the Fed, EcB, BoE, and goverments pledge support.
However if the crisis should escalate or widen again, then the ability of the central banks to quell it would be great deal more restricted.

While there are certain advantages in a wholescale global crisis for some people. It would be incredibly difficult to 'engineer' one. Certainly people or players as you call them, take advantage of aspects of the crisis to make money. And will also fan the flames for a particular organisation in trouble, to make more money. The financial markets overall are a great deal too big and complicated for individuals or groups to influence them very much.
Herd mentality is the best description that i can think of when it comes to how most people and organisations interact, with the markets.

mrodent

A piece of minutiae in the Financial Services Compensation Scheme rules dictates that if you have debts, such as a mortgage, loan or credit card with a bank that you also have savings with, any outstanding debts will be subtracted from the savings. For example if you have £20,000 in savings and a £15,000 loan, in the unlikely event that bank went bust you'll only get £5,000 compensation.

so you say. But today I have been on to the FSA and was directed to a document http://www.hm-treasury.gov.uk/media/3/5/banking_stability_pu477.pdf called "Financial stability and depositor protection". Look at section 5.43 on page 75:

At present, FSCS claims are calculated on a net basis; customers’ outstanding debts to the failed bank are netted against their deposits to arrive at the amount of the claim. Where, on that net basis, customers owe the bank money, they will not be eligible for any compensation payment under the FSCS, regardless of the size of the deposit they hold with the bank. [my italics] This makes it more complicated for depositors to understand their level of coverage and means that customers with both short-term deposits and illiquid long-term loans held at the same bank (for example, a mortgage) may suffer a loss of liquidity following a bank failure.

Does a "loss of liquidity" actually mean a "loss of money" or simply that customers' mortgages will get paid off earlier than they want? Sorry, but to me the wording of this para taken as a whole tells me that they are leaving themselves the option of making up the rules on the hoof if and when a catastrophic failure happens. I have decided to take steps immediately to move all my cash out of my mortgage lender.

Comments, please!

M Rodent

nicko33

mrodent wrote: »

Does a "loss of liquidity" actually mean a "loss of money"

No, it means a loss of choice about what to do with your money.

Before the institution collapses, you could have chosen what to do with those savings. Pay off your debt, keep in savings, buy a car, take a holiday.

After the collapse, you have no choice. Your savings are used to pay down your debt.

chris1

mrodent wrote: »

I have decided to take steps immediately to move all my cash out of my mortgage lender.

Comments, please!

I always think it's best to have your savings in a different institution from your mortgage, loans or credit card. Apart from the issue just raised, they all seem to have the right of offset, and mistakes can be made. If there is a mistake, or a disagreement over the amount you owe, they can take payment from your savings straight away and you wouldn't have access to the money until the dispute was sorted out.

mrodent

nicko33 wrote: »

No, it means a loss of choice about what to do with your money.

Before the institution collapses, you could have chosen what to do with those savings. Pay off your debt, keep in savings, buy a car, take a holiday.

After the collapse, you have no choice. Your savings are used to pay down your debt.

your interpretation is what one would hope. Even on that basis it obviously makes sense to remove one's liquid funds from the lender institution.
The problem I have with all this is that you never get to see, enacted in law, the actual rules and regulations. One thing is sure: assuming the worst costs you nothing: a click of a BACS transfer button ... et voilà!

jamesd

Comment: it would be nice if the FSA settled on one story and stuck to it instead of saying one thing in one document and another thing in another one. We don't need the FSA lending its authority to the confusion by giving different answers.

Meltdown_2

jamesd wrote: »

Comment: it would be nice if the FSA settled on one story and stuck to it instead of saying one thing in one document and another thing in another one. We don't need the FSA lending its authority to the confusion by giving different answers.

Hear! Hear!