Are your savings safe? article discussion

earthlover

Hi,

I was wondering if the 35000 limit that a saver can recover, should a bank fail, includes any interest accrued, or would interest be paid on top of the 35000?

If not, then it would make sense to put less than 35000 into an account as you wouldn't want to save for months and then get no interest for all that time.

Can anyone enlighten me please?

chris1

earthlover wrote: »

Hi,

I was wondering if the 35000 limit that a saver can recover, should a bank fail, includes any interest accrued, or would interest be paid on top of the 35000?

If not, then it would make sense to put less than 35000 into an account as you wouldn't want to save for months and then get no interest for all that time.

Can anyone enlighten me please?

I'm pretty sure you wouldn't get anything over the £35K. It's not clear whether interest accrued (but not paid) would be covered at all.

earlgrey_3

Meltdown wrote: »

So just where exactly are your savings safe ...?

If you mean safest: NS&I or Northern Rock I'd have thought.

However for me the question is where offers the best risk/reward ratio and I'm afraid it certainly wouldn't be those banks that some on this board seem so desperate to defend at all costs.

FatherAbraham

Meaning it's possible (and there are various interpretations) you would still owe £115,000, the debt would probably be passed on, but you'd have no savings.

You know, the most useful thing this site could do is get the definitive answer to the question of whether one's offset savings above £35,000 are lost or offset against outstanding debt when the lender collapses. It probably depends on insolvency law.

At present, all we have is speculation -- and it's a rather important point.

Warmest regards,
FA

tanith

I just had a quick look but couldn't find answer... could someone tell me what would happen in this circumstance... I have several acc's with one bank... ie savings and current acc and ISA in my own name and similarly in joint names (not the ISA I hasten to add) with my husband. How would they calculate things in the event of my bank going under... I guess the whole of the savings in my name and half of the savings in joint names? thanks

chris1

tanith wrote: »

I just had a quick look but couldn't find answer... could someone tell me what would happen in this circumstance... I have several acc's with one bank... ie savings and current acc and ISA in my own name and similarly in joint names (not the ISA I hasten to add) with my husband. How would they calculate things in the event of my bank going under... I guess the whole of the savings in my name and half of the savings in joint names? thanks

Yes, up to a maximum of £35K per person.

baby_boomer

On the issue of what constitutes a high rate (as opposed to a bank that was struggling to raise cash) the following comment was interesting:

Telegraph

"Paul Calello, the chief executive of investment banking at Credit Suisse, indicated that the real rate charged between banks was often higher than Libor, which stands at 5.92 per cent - much higher than the Bank of England base rate of 5 per cent."

baby_boomer

Here's what the Mail has to say about compensation on Tuesday

It suggests keeping no more than £33K in an account, so that past, current and future interest doesn't breach the £35K FSCS limit and/or arranging for interest to be paid out monthly.

"The FSCS aims to pay within six months of a firm going bust. It could take longer, says the FSCS, if you have to go to a foreign bank first. Mark Sismey-Durrant, managing director of Icesave, said: 'Under the EU directive, there is not supposed to be any competitive difference between the UK scheme and the EEA [European Economic Area, including Iceland] scheme.'"

chris1

baby_boomer wrote: »

Here's what the Mail has to say about compensation on Tuesday

In an article linked to that at http://www.thisismoney.co.uk/saving-and-banking/article.html?in_article_id=436274&in_page_id=7 it says
"In Britain, 100% of deposits per person, per institution are covered up to £35,000. In the European Economic Area, which includes all EU members as well as countries such as Iceland and Turkey, minimum compensation for savers is only 90% of deposits up to a maximum of €20,000 (£15,800). "

Is this right, that it's only 90% for Iceland?

baby_boomer

Some current figures on the Icelandic economy from the Telegraph

Telegraph 13 April

Interest rates 15.5%
Inflation 8.7%
Krona has lost 25% against the Euro this year
Banks = 2/3 of the Icelandic stockmarket (which has fallen by 80% in nine months :eek: ).

Krona falls from 13.3 to 12.8 to the £ in the four months to April 2008

Presumably a bank which takes money from another country like the UK to lend at home doesn't want to see its currency fall as it will cost more to pay the money back. How far does this explain the interest rate policy of the Icelandic government? Is it necessary for these high interest rates to continue? Is it possible for these high interest rates to continue?