Are your savings safe? article discussion

LongTermLurker

stv1x wrote: »

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.

Sorry, I'm confused. There's no need for the new owners to underwrite the government's guarantee when they take over because the government have guaranteed it already - even MMD sees what I'm getting at there. They have already said that as long as you hold a FTD with NR (assuming it has this cover when you take it out) then you will be covered by the same terms for the duration.

I'm not saying that the new owners will keep offering cover over and above the FSCS level (I think I made that clear further up the page - it will undoubtedly harmonise with the FSCS cover of the day), but if you have one now and it's sold tomorrow, it doesn't matter if the new owners fail to provide infinite cover because the old owners have said they will give you infinite cover for the duration of the Term - the government has underwritten the future new owners, not the other way round!

I'll put it another way - I think when it's sold there will be two sets of terms - new deposits will be covered up to the FSCS limits by FSCS but existing Term Deposits, possibly only those with no-exit clauses, will be fully covered by the government until they mature - that's what's implied.

MarkyMarkD

LTL is quite right. The unlimited government guarantee was issued BEFORE NR was nationalised. But at that time, NR was (at least theoretically) paying for the guarantee in order to avoid "a run on the bank".

The guarantee remained in place when NR was nationalised, and the wording at that time did not state that it would end when NR was re-privatised - possibly because they didn't believe it would ever happen, and possibly just because they are incompetent.

Clearly it should NOT continue indefinitely, because it is unfair on other financial services providers for any institution which is not government owned - or which may not always be government owned - to have a 100% and unlimited government guarantee. But I cannot dispute the logic of what others are saying.

jack_spratt_2

LongTermLurker wrote: »

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.

Yes I was aware of the passport scheme it is documented in detail on the how safe is your savings page !!
But the extract below does raise some doubts and you may end up relying on this Government and if anything does happen it may not be the same Government we have at present and may have a different agenda .( I am not suggesting that any Government will let a Bank collapse)

I am just trying to make a point that until the bank is sold all we can do is speculate .

Many people got very edgy with bank of Ireland /post office scenario


It’s the passport scheme that caused the problem with Icesave; after nationalising its parent bank, the Icelandic government signalled it was not going to honour this EEA agreement, and thus left UK savers in the cold, until the UK government stepped in. Whether that can happen again is anyone's guess, and either way most of the banks in the scheme come from bigger countries.

LongTermLurker

MarkyMarkD wrote: »

LTL is quite right. The unlimited government guarantee was issued BEFORE NR was nationalised. But at that time, NR was (at least theoretically) paying for the guarantee in order to avoid "a run on the bank".

The guarantee remained in place when NR was nationalised, and the wording at that time did not state that it would end when NR was re-privatised - possibly because they didn't believe it would ever happen, and possibly just because they are incompetent.

Clearly it should NOT continue indefinitely, because it is unfair on other financial services providers for any institution which is not government owned - or which may not always be government owned - to have a 100% and unlimited government guarantee. But I cannot dispute the logic of what others are saying.

Exactly - fully agree.

stv1x

LongTermLurker wrote: »

I'll put it another way - I think when it's sold there will be two sets of terms - new deposits will be covered up to the FSCS limits by FSCS but existing Term Deposits, possibly only those with no-exit clauses, will be fully covered by the government until they mature - that's what's implied.

LTL, the facts are at best ambiguous and you are relying on too many assumptions on who will cover what at the point NR passes to new owners. I think we need to refer back to the statement

"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" (incidentally, do we have a source for that statement?)

....and cross reference that with the terms written in black and white on NR's web-site

"Payments under the Scheme are limited to 100% of the first £50,000 of a depositor's total deposits with the bank. The Scheme limit relates to each depositor for their combined deposits held with Northern Rock and not for each account. This means that each account holder in a joint account would be eligible for compensation up to the maximum limit of £50,000 each"
http://www.northernrock.co.uk/legal/#security

'Implied' isn't actually factual when the above written terms of deposit is taken into account. The fact is that these terms have not altered since the day the government took ownership of NR which would suggest that a two tier system of terms as you suggest is neither implied, likely or indeed required.

You may feel that I am being pedantic in my desire for clarity but I can assure you that it is usurped only by my desire to avoid sleepless nights locked into a bond where the goalposts get moved.

jack_spratt_2

, the facts are at best ambiguous and you are relying on too many assumptions on who will cover what at the point NR passes to new owners.

'Implied' isn't actually factual when the above written terms of deposit is taken into account

I agree with the above comments

I am sorry if I harp on about the Post office /Bank of Ireland !! but there situation was that at the onset of there fixed term bonds they were covered under the UK compensation scheme !! but because of the Irish Governments guarantees and EU regulation they came out of the UK compensation scheme so customers had to rely on the Irish government.!! Investors putting money with them did so in good faith that it was UK government protected up the normal limits

Many people had sleepless nights at the time
Until we know to whom it is sold we can only speculate

MarkyMarkD

The source for the statements in quotes is the HM Treasury website: http://www.hm-treasury.gov.uk/press_104_07.htm. If you google it you will find it easily enough. It is not a flaky source!

The Bank of Ireland/Post Office situation is quite different. There was no up-front guarantee that anything would apply at any point in the future.

The reason NR refer only to the FSCS cover is because they are (pretending) to be fair to other providers by not claiming the benefit of the government guarantee. It would be far fairer if, in fact, that government guarantee was revoked for all future investments and the level playing field of the FSCS prevailed.

stv1x

MarkyMarkD wrote: »

The source for the statements in quotes is the HM Treasury website: http://www.hm-treasury.gov.uk/press_104_07.htm.

Thanks for that Mark. It's unfortunate that this statement, or a link to it, doesn't exist on NR's website under the terms and conditions for depositors in which case this debate wouldn't exist. I remain unconvinced. The terms in which money is deposited is unambiguous in it's statement that only £50k is covered although, to be fair, it's a moot point until such time NR is sold or the one year bonds mature boforehand.

As far as 'pretending to be fair to other providers' is concerned, is it any wonder that depositors have a total lack of belief in anything this government say when they play 'games' such as these!

LongTermLurker

jack_spratt wrote: »

I am sorry if I harp on about the Post office /Bank of Ireland !! but there situation was that at the onset of there fixed term bonds they were covered under the UK compensation scheme !! but because of the Irish Governments guarantees and EU regulation they came out of the UK compensation scheme so customers had to rely on the Irish government.!! Investors putting money with them did so in good faith that it was UK government protected up the normal limits

Actually, I seem to remember a big ooh-ar about "Irish banks are safer than UK banks because they have higher levels of protection... Quick, let's move all our money to Ireland" :rolleyes: - many customers chose to rely on the Irish government, foresaking FSCS and UK banks. Incidentally, in this respect, there's a distinct similarity in my sarcastic comment and Mark's thoughts about NR: just because a bank is given higher levels of protection doesn't mean your money's less safe elsewhere.

I agree that many will have seen the name "Post Office" and thought it was a UK institution. I would rather such built-in icons of British society weren't allowed to sell out to foreign companies, but there's nothing we can do about that, especially considering the modern view that EEC countries aren't "foreign" any more.

MarkyMarkD

stv1x wrote: »

Thanks for that Mark. It's unfortunate that this statement, or a link to it, doesn't exist on NR's website under the terms and conditions for depositors in which case this debate wouldn't exist. I remain unconvinced. The terms in which money is deposited is unambiguous in it's statement that only £50k is covered although, to be fair, it's a moot point until such time NR is sold or the one year bonds mature boforehand.

As far as 'pretending to be fair to other providers' is concerned, is it any wonder that depositors have a total lack of belief in anything this government say when they play 'games' such as these!

But the NR website is quite correct. The limit of the FSCS cover for NR, or any other provider, is £50k per investor.

But, just as like it did with Icesave, Dunfermline, Bradford & Bingley, and doubtless others in the future, the government will pick up the tab for anything over £50k.

As I've kept saying, the only difference for NR is that it's an explicit guarantee. The same IMPLICIT guarantee is there for any UK financial institution, so I don't know why people get so excited about (a) the £50,000 FSCS limit or (b) the NR 100% guarantee.

For the record, I would definitely invest more than £50k with one institution, if I had that much spare cash!