Are your savings safe? article discussion

baby_boomer

I hope MSErs will be grateful to you for doubting my intentions. It's probably best for all concerned to concentrate on the arguments.

After the 100% compensation limit has been raised from £2K to £35K I think that the Chancellor and the Bank of England have pretty much ensured that a run by savers is unlikely. So a savers website would hardly be the right place to start for rumour mongers who have bought put options in a bank.

My main point, nevertheless, is that it would be wrong to think that savers would emerge entirely unscathed from a bank collapse, even with a 100% compensation scheme, because of time delays in getting your hands on your own money.

1echidna

baby_boomer wrote: »

Would I admit it if I had? [b_b waits in trepidation for MSE to report him to the FSA so that it can bring its first ever successful "trash & cash" prosecution ]

The whole issue of the credit crunch is that many institutions are in dire need of cash as mortgage institutions lend long but borrow short. I don't apologise for the word "dire" as it helps explain savings rates at an unprecedented 1.5% above bank base rates.

I think you need to address any accusations of rumour mongering to Morgan Stanley and the Mail on Sunday; I was reporting facts they had put into the public domain to help people make up their own minds.

Of course such savings rates might merely result in a hit on the profit & loss account rather for next year - or still higher mortgage rates if the market will take them.

Of course the whole rules of the game have changed with the sub prime crisis and with the difficulty in obtaining cash both for banks and their customers. Banks are having to rebuild their capital base, be more risk averse and operate in a falling housing market. There is bound to be less available for borrowers. I still maintain the word "dire" in relation to certain banks need to attract depositors may well be misleading, just that they are responding in a perfectly safe way to vastly changed market conditions.

baby_boomer

or. they must raise more cash to balance their books and the savings market is where they can do it without having to tell the City the up-to-date state of their current balance sheet.

ianmr65

baby_boomer wrote: »

It's probably best for all concerned to concentrate on the arguments.

Indeed.... so here goes....

baby_boomer wrote: »

Certainly the banks in direst need of cash are likely to be the same ones offering savings rates 1.5% above base rate. It's hardly sustainable business. I'm not surprised that a headline savings offering might get the City talking.

Uk based banks, and banks trading here, are not borowing at base (5%) Or indeed Libor (6%.) Nor able to issue public bonds. Thats why we are having the credit crunch.
Banks especially the rsikier ones, with high mortage exposure, are variously hordeing, cutting back on mortgage lending, going out to depositors, doing private equity deals or are scrambling for emeregency BoE funds, using their dramtically falling in value, less than prime, mortgage securities as collataeral - The signs are the uk government may unilatterally buy this rubbish, using tax-payers money - in a last ditch attempt to stop the forthcoming housing crash. Cos the ECB told darling (shut up), and mr Wobbley, to getted stuffed.

baby_boomer wrote: »

Kaupthing Edge accuses four hedge funds of trying to drive it into bankruptcy

Is the extra rate worth the risk of having your £35K left high and dry in the hands of the compensation schemes?

Kaupthing freezes 6.5% rate

"....Kaupthing stormed onto the UK savings market this year, but has since endured a tirade of unfavorable press after Morgan Stanley revealed its borrowing costs have increased 400% over the past year and analysts concluded it is 7.5 times more likely to default than any other European bank...."

The Daily Mail group has run a long series of negative articles, about the icelandic banks for months. They can in no way be described as 'facts'...they are:

1) normally a week behind the news.
2) inaacurate
3) misleading
4) one sided.
5) jingoistic


And is probbaly only doing so cos Kaupthing won't advertsie with them.

If you want amore rounded, informed, and accurate view please look at the FT links in a number of iceland threads on MSE.

The default percentage is over 5 years and closer to 50%. BUT it is calculated using modelling from the illiquid frozen and speculated on vastly by the rumour mongers - CDS spread.

The credit markets and credit default markets are in turmoil. Using them as a barometer of anything is pointless.
It is the equivalent of predicting the next goverment majority using the lastest william hill odds as the base number.

baby_boomer wrote: »

So a savers website would hardly be the right place to start for rumour mongers who have bought put options in a bank.

Well, as they wer/are shorting the Icelandic Krona, as well as shorting, the banks stocks, and no doubt shortiung the CDS, a saver's run is exactly what they had in mind. And being as Kaupthing is international, internet based: then posting anywhere, feeding stories to the press, and ringing influential people would, no doubt all be part of the game plan.

baby_boomer wrote: »

I hope MSErs will be grateful to you for doubting my intentions.

Posting rubbish quotes from the daily mail slagging iceland, will allways cause MSE's to doubt your intentions. Bearing in mind the Hedge funds alleged activities.

If you would like a debate about the impact of the Icelandic current account defecit, and fiscal vs monetary policies, on it's banking activities, I'm all ears...

baby_boomer

On the contrary, I'm all ears. Is this reassuring news for UK savers with Icelandic banks?

ianmr65

baby_boomer wrote: »

On the contrary, I'm all ears. Is this reassuring news for UK savers with Icelandic banks?

if you mean 'is the current account defecit, and fiscal vs monetary policies impact on it's banking activities' reassuring news?

The only answer i can give is yes and no.

The word 'debate' implies you are going to posit some fact based opinions, that i can rebut or agree with.

1echidna

baby_boomer wrote: »

or. they must raise more cash to balance their books and the savings market is where they can do it without having to tell the City the up-to-date state of their current balance sheet.

Have you any evidence that this is the case for any bank? If not I suggest you keep clear of that kind of near accusation.

jamesd

6.5% is not a high rate. Take a look at the 8%+ rates offered for bank corporate bonds and preference shares (with greater investment risk than savings accounts, more for preference shares than bonds).

1echidna

Oh I now understand where baby_boomer is coming from

http://forums.moneysavingexpert.com/showthread.html?t=846123

as far as I am concerned there are legitimate and illigitimate ways of influencing people.

Optimist

Kaupthing accuses Hedge funds of 'smears'

Simon Watkins, Financial Mail
13 April 2008, 8:59am
Leading Icelandic bank Kaupthing has taken the extraordinary step of accusing four London hedge funds of illegally trying to drive it towards bankruptcy for their own profit.

In what looks likely to lead to a massive legal showdown in financial markets, the bank, which has attracted billions from UK savers to its Kaupthing Edge accounts, claimed the hedge funds deliberately spread false rumours about financial difficulties at Icelandic banks to make profits on complex financial investments. Kaupthing chairman Sigurdur Einarsson told the Reykjavik newspaper Frettabladid: 'It looks like four hedge funds have mainly led this run.'
Einarsson named the funds, including one of the largest in Europe. The identities were also reported on the website Iceland Review until pressure from one of the hedge funds led to their removal.
A spokeswoman for Kaupthing refused to expand on the allegations: 'We have said what we have said and have nothing else to say.'
Three of the hedge funds declined to comment. The fourth issued a vigorous denial of any wrongdoing and said it had handed its trading record in Icelandic stocks to the Financial Services Authority to prove its innocence.
The claims of deliberate market abuse against Kaupthing come less than a month after UK bank HBoS saw its shares slump, leading to claims of a conspiracy - the accusations are being investigated by the FSA. A similar investigation is under way in Iceland over its banks.
The claims of deliberate market abuse centre on the market for credit default swaps, which in effect are insurance contracts against companies going bust.
The price on a CDS, measured as a percentage of the debt to be insured, is an indication of how risky a company is regarded. In recent months, CDS rates for Icelandic banks have soared close to 10%, implying a huge risk of bankruptcy.
Einarsson claimed the hedge funds had gambled on CDS rates rising and then tried to spread rumours suggesting the banks were in danger to drive up the CDS rates and make a profit.
Such activity would amount to market abuse both in the UK and Iceland and could constitute a criminal offence.

http://www.thisismoney.co.uk/investing-and-markets/article.html?in_article_id=440172&in_page_id=3