Are your savings safe? article discussion

arty4

no - it's better than that. read the icelandic fsa's statement in martin's article here: http://blog.moneysavingexpert.com/2008/04/01/icesave-how-safe-are-your-savings-facts-and-myths/

Meltdown_2

chris1 wrote: »

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?

No. It doesn't work like that.
And Turkey is not in the EEA!
(Edit: Well not unless you are talking about the European Environment Agency ... )

For EEA financial institutions as deposit-takers ('banks' in common parlance, though it would include building societies and credit unions in the UK), they have to operate a compensation scheme that at least meets the EU minimum levels of compensation.

Some EEA countries have national compensation schemes that are in operation for their own banks (using common parlance ).
These vary (quite widely) from country to country.
The Italian scheme seems to be the best.
No doubt some of the newer EU countries are only operating the EU minimum, but I don't know that for a fact, as yet. (I don't have any accounts with such banks. )

To account for these differences, the rules allow EEA banks operating in a different EEA country to their home one to decide for themselves which, of 3 options, they can choose.
They can either
a) register for the national scheme in that different country;
b) operate their own home scheme first, and then top-up to the level payable in the different country; or
c) just operate their home scheme (no top-up).

Banks do of course have to indicate clearly to potential (and actual) customers just what option they have chosen.

In the case of the Icelandic banks operating in the UK online (Kaupthing and Landsbanki), they have chosen different routes.

Kaupthing have chosen to operate their Kaupthing Edge accounts via their UK subsidiary Kaupthing Singer & Friedlander, and are fully signed up to the UK scheme. In essence, therefore, their depositor protection is the same as any UK bank.

Landsbanki Islands have chosen not to operate their Icesave accounts via their UK subsidiary Heritable Bank (which would remove a lot of flak, in my view ).
Instead, they take option (b) above, i.e they operate their own home scheme, plus top-up to UK levels. This gives you an "equivalence" to the UK scheme.
See here for Landsbanki's description.

Hope that helps.

ianmr65

baby_boomer wrote: »

Some current figures on the Icelandic economy from the Telegraph

Good post!!

baby_boomer wrote: »

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.

The icelandic banks and iceland are short of forign reserves. They were exposed to the European leveraged buy out market through companies like Bauer, and as such the BoI has insited they become more liquid.
As the credit market are frozen, and despite doing private credit deals, and despite the allegged artifical widening of the CDS spreads, they have entered the eyuropean retail savers markets to shore up that side of their balance sheets.
They have more than adequate liquidity and assets in Krona.

Incedentally the banks made £1.5bn from the recent fall, and subsequent rise in the Krona.

baby_boomer wrote: »

How far does this explain the interest rate policy of the Icelandic government?

Icelands economy has been over heating of late. they have zero budget defecit, but there current account defecit is too wide. And inflation is too high. Also the krona has been shorted, They are bringing thermo electric power stations and alluminium smelters on line fast to address their export markets, and so the current account defecit will come down soon.

baby_boomer wrote: »

Is it necessary for these high interest rates to continue?

Yes until the inflation problem is tackled.

baby_boomer wrote: »

Is it possible for these high interest rates to continue?

Iceland has one of the highest gdp's per head of population, and is very socially equitable, best eductaion for children ect.and is a rich country. Many people who live there are forigners helping build the plants and are non resident, and the residents are pretty finacially savvy.

The current intrest rate issue/ krona/ inflation issue, is not being helped by the alleged hedge fund speculators, who are in the process of being investigated and sued.

The FT say that the other nordic banks will intervene to help re-assure investors.

chris1

Meltdown wrote: »

For EEA financial institutions as deposit-takers they have to operate a compensation scheme that at least meets the EU minimum levels of compensation.

Does anyone know what these minimum EU levels are please?

Meltdown_2

Still 20,000 euros - it's been that since the 1994 Directive.

Perhaps this link is the best summary :
http://ec.europa.eu/internal_market/bank/docs/guarantee/report_en.pdf

Sorry it's so long, but it seems relatively easy to read compared with some others.
Table 1 on page 10 stands out for me.
2001 was the start of FSCS. The euro value of that scheme has been decreasing since then ...

Henwen

If I have a pension and savings with the same bank (or group of banks which count as one bank as shown in Martin's table) does the balance on the pension fund reduce the £35000 of protection available or are pensions subject to different rules?

This is so complicated!

Meltdown_2

Henwen wrote: »

If I have a pension and savings with the same bank (or group of banks which count as one bank as shown in Martin's table) does the balance on the pension fund reduce the £35000 of protection available or are pensions subject to different rules?

The £35,000 relates to deposits (savings) only.
There is a separate part of the scheme which relates to pensions.

Henwen

You're a star!

Meltdown_2

Maybe not ...

I was thinking in terms of insurance, etc as opposed to pensions.
Now I'm not so sure...
Ignore what I said until I check into it.
Sorry.

Meltdown_2

I think I've been up too long ... my mind is turning to mush ...
Yes, Henwen, see :
http://www.fscs.org.uk/consumer/key_facts/limitations_of_the_scheme/compensation_limits/
Pensions seems to come under the "long-term insurance" category and the compensation there is 100% of the first £2000 plus 90% of the remainder of the claim.