Are your savings safe? article discussion

withnell

tsmlion wrote: »

Ok.......now we are getting somewhere. You have downgraded the guarantee of all financial institutions to an implied one rather than a real one. In the circumstances, I'll definitely stick with the Govt one.

Having moved the goalposts towards a new argument of length of guarantee, I'm sure I read the guarantee at the time and it specifically included any future interest payments under the terms of each contract. Therefore I'm thinking fixed term products will be guaranteed for the their length.

You sign a contract with Northern Rock, which happens to currently be owned by the government, and happens to currently enjoy 100% protection.

You've signed no contract directly with the governement, so that 100% guarantee can be pulled whenever they want. There is no way that once NR goes back into private ownership that the 100% will remain, for competition reasons

MarkyMarkD

Thanks for that. Whilst I find it pretty unbelievable that the Government is continuing what was unfair - but at least being paid for - in the period before NR was nationalised, I can't disagree with your info.

So, fill your boots with Northern Rock bonds - even though you can get better rates elsewhere - if you believe the government will just let other banks and building society customers lose their money. Which they won't.

stv1x

tsmlion wrote: »

Here's what the Treasury said at the time of issuing the guarantee:-



"These arrangements will cover all retail deposits including future interest payments, movements of funds between accounts and term deposits for the duration of their term."



I think the case rests.

Not so fast. This is still inconclusive.

If the above statement read "These arrangements will cover all retail deposits including future interest payments, movements of funds between accounts and term deposits for the duration of their term even if we sell NR to a third party during the term of the bond." then I would agree with your conclusion.

Unless their statement deals with the specific contingency of what happens when NR is sold, something I believe they are unlikely to do as it would just make the process of selling NR that more difficult, then their original statement is effectively worthless.

LongTermLurker

stv1x wrote: »

Not so fast. This is still inconclusive.

If the above statement read "These arrangements will cover all retail deposits including future interest payments, movements of funds between accounts and term deposits for the duration of their term even if we sell NR to a third party during the term of the bond." then I would agree with your conclusion.

Unless their statement deals with the specific contingency of what happens when NR is sold, something I believe they are unlikely to do as it would just make the process of selling NR that more difficult, then their original statement is effectively worthless.

Sorry, I think you're trying to find something that isn't there.

Unless there's an explicit exclusion in the terms, then there has to be an implicit inclusion.

"These arrangements will cover all ... term deposits for the duration of their term"

What are you questioning?

MarkyMarkD

Whilst I would like to agree with stv1x, I think LongTermLurker is correct. The terms of the guarantee do not have any expiry date - ludicrous though that is - so Northern Rock are making hay while the sun shines.

jack_spratt_2

I may just be way wide of the mark mainly because I have not read through the thread fully !! but at the moment Northern rock is 100% guaranteed by the goverment .
The government is wanting to sell the bank at the earliest opportunity and providing you have £50,000 or less and the purchasing financial institution is a member of the FSA compensation scheme you will have that protection .

But what if the company who purchases the bank does belong to the FSA compensation scheme ?? they can buy the bank and at a later date withdraw from it just like the post office (bank of Ireland) did to existing customers!!( I know the Bank of Ireland used the excuse that the Irish scheme provided better protection than the FSA one)
At the onset of there investment they were covered by the FSA later this was removed and was covered by the Irish scheme which made many people extremely nervous.

Northern Rock have been pushing the stepped bond (5 years) this is a long time to commit to an institution if you are uncertain who the future owner is .I would not hesitate to do a 1 Year bond but over that I would have my doubts

Have I missed something ???

stv1x

LongTermLurker wrote: »

Sorry, I think you're trying to find something that isn't there.

Yes, absolutely. What isn't there is a guarantee that should NR be sold then in excess of £50k will be safe and backed by the government. Please show me another institution outside of government owned that guarantees 100% of your money. You are making the assumption that the government will still play a part in guaranteeing savers that are NOT saving in an institute owned by them when/if NR are sold. I'd expect an innocuous letter to drop on the door mat at that point from the new owners stating that deposits will only be covered by the standard £50k compensation scheme.

LongTermLurker wrote: »

Unless there's an explicit exclusion in the terms, then there has to be an implicit inclusion.

What are you questioning?

I am questioning the undertaking by the new owner of NR to underwrite all deposits made whilst in governments hands. Think pre government ownership. NR had the standard £50k cover which changed when the government took over. You are assuming, incorrectly in my opinion, that this will not change when it reverts back into private hands. Your implicit inclusion/exclusion argument is, imho, irrelevant in the scenario of new owners who will be able to make it up as they go along if they so wish.

stv1x

jack_spratt wrote: »

Northern Rock have been pushing the stepped bond (5 years) this is a long time to commit to an institution if you are uncertain who the future owner is .I would not hesitate to do a 1 Year bond but over that I would have my doubts

Have I missed something ???

Actually, you're more exposed with their 1 year bond as all others do not carry the same terms of strictly no withdrawals. You will however take a 180 day hit on loss of interest for withdrawals that are made for the 5 year bond.

jack_spratt_2

I understand what you are saying stv1x but its down to everyone's attitude to the risk !!
For a bond which is a year with the fact the bank has not been sold yet could make you open for maybe 6 months !!

6 months interest lose is quite punitive especially as other financial institutions offering similar rates with just 90 days lose of interest .

The truth of the matter is nobody knows when it will be sold or who it will be sold to

LongTermLurker

jack_spratt wrote: »

The government is wanting to sell the bank at the earliest opportunity and providing you have £50,000 or less and the purchasing financial institution is a member of the FSA compensation scheme you will have that protection .

But what if the company who purchases the bank does belong to the FSA compensation scheme ?? they can buy the bank and at a later date withdraw from it just like the post office (bank of Ireland) did to existing customers!!( I know the Bank of Ireland used the excuse that the Irish scheme provided better protection than the FSA one)
At the onset of there investment they were covered by the FSA later this was removed and was covered by the Irish scheme which made many people extremely nervous.

Have I missed something ???

To offer banking services in the UK you have to be either FSCS registered (nothing to do with the FSA) or opt for the "Passport Scheme". If it's a UK institution they have to join FSCS - only European banks can opt for the Passport Scheme. If the institution is part of FSCS then you have the FSCS cover at the time (currently £50,000).

If they are in the Passport Scheme, you need to claim as much as that foreign entity covers you for through the foreign scheme and then claim the balance up to £50,000 from FSCS. This means that if a foreign scheme pays you nothing, then the FSCS cover you for the remaining £50,000 that you're entitled to. There was no real need for people to feel nervous.