Icesave- Martin is wrong.

chris1

Lavendyr wrote: »

I read that as saying that the FSCS will top-up whatever the Icelandic scheme pays to £35k, so if the Icelandic scheme pays zero, you'll get the full £35k from the FSCS, if Iceland pays £5k, you get £30k from the FSCS and so on.

No, if the Icelandic scheme pays zero, you will receive zero for that part, the FSCS will not cover the first ~£15K (I specifically asked them).

chris1

Aegis wrote: »

How do you know that? My reading of the various explanations always seems to have phrases like "You are covered up to £35k by the FSCS (less any amount paid by the home country compensation scheme)", implying that they'll pay out whatever the home country of that bank doesn't, rather than what they might have paid out if they hadn't gone bust.

I specifically asked them in words of one syllable what would happen in that situation and they stated that if the Icelandic scheme did not pay they would NOT cover the first ~£15K.

ianmr65

chris1 wrote: »

No, if the Icelandic scheme pays zero, you will receive zero for that part, the FSCS will not cover the first ~£15K (I specifically asked them).

Got that in writing?. If so can we see the e-mail. Or was this just the interpretation a guy made when he answered the phone? Or your interpretation of his interpretation of what a (probably a very junior) employee said.

chris1

ianmr65 wrote: »

Got that in writing?. If so can we see the e-mail. Or was this just the interpretation a guy made when he answered the phone? Or your interpretation of his interpretation of what a (probably a very junior) employee said.

Don't be so rude. Yes, I have it in writing, a written answer to my written question, I'm not that stupid, and I am telling the truth. I was just trying to be helpful by answering the previous poster's question. Ask them yourself if you don't believe me, it's not a secret!

talana

I'm amazed this debate is still running!! And round and round in circles too.

I really don't understand the reason for all this speculation about what would happen if the Icelandic compensation scheme didn't pay out. You're speculating about such a remote possibility, there's really no genuine reason to think that they wouldn't.

They're no less likely to pay out than the FSCS.
And on that note, I'll butt out of this debate for good and leave you ladies and gents to it.

StevieJ

chris1 wrote: »

I specifically asked them in words of one syllable what would happen in that situation and they stated that if the Icelandic scheme did not pay they would NOT cover the first ~£15K.

So the email (part above) I (and a I guess manny other people) received from the Motley Fool is incorrect? I would have thought that they would have contacted the authorities before sending an email like that.

StevieJ

talana wrote: »

I'm amazed this debate is still running!! And round and round in circles too.

I really don't understand the reason for all this speculation about what would happen if the Icelandic compensation scheme didn't pay out. You're speculating about such a remote possibility, there's really no genuine reason to think that they wouldn't.

They're no less likely to pay out than the FSCS.
And on that note, I'll butt out of this debate for good and leave you ladies and gents to it.

Clarification of this point would I am sure put a lot of peoples mind at rest (or not depending on the answer).

chris1

StevieJ wrote: »

So the email (part above) I (and a I guess manny other people) received from the Motley Fool is incorrect? I would have thought that they would have contacted the authorities before sending an email like that.

Well, "incorrect" is a bit strong, as if the Icelandic scheme paid up you would have the same protection, the FSCS covering the next ~20K. However if the Icelandic scheme did NOT pay up, the FCSC would NOT step into their place and pay on their behalf. For example, if you had less than ~£15K and the Icelandic scheme did not pay you would not be able to make a claim to the FSCS and would receive nothing.

ps646566

What comes over from this discussion is that we don't really know.

If a bank in Iceland or Ireland fails will the national government be willing an able to do a Northern Rock ?

If not, then will their local compensation scheme be able to cover it all ?

If it does not, is it 100% certain that the UK FSCS will cover the whole £35000 ?

How long would all this take anyway, and would any interest be earned on the money during the process ?

I have not seen definitive and unchallengeable answers to any of these questions, and I suspect that in some cases there are no definitive answers because it has never been put to the test.

One can imagine a scenario where a bank based in a small country goes belly up. The local government equivocates over making deposit guarantees. After several months' delay while the issue of whether the bank is irredeemably insolvent is resolved, the local compensation scheme has difficulty raising the funds from other banks (who may be in trouble themselves). The whole thing drags on, and meanwhile the FSCS will not act, making noises about only settling at £35,000 less a notional amount that the foreign compensation scheme should be paying, even though it isn't. Eventually a group of depositors threatens legal action against the FCSC, which then proposes to offer full compensation to £35,000. But the UK banks who support the FSCS launch their own legal bid to stop that happening. The legal process drags on for more than a year, bouncing around between the courts. The aggrieved depositors then think in terms of going to European courts which muddies the waters further. HMG's line all through this is "We told you so, you should have invested with UK institutions." After seventeen months, UK depositors get 75% of what they are entitled to from the foreign compensation scheme, followed four months later by a make-up amount from the FSCS which still leaves them short of the missing 25%. They also suffer total loss of interest payments for the whole period. The legal actions continue, and the European Commission launches an enquiry into whether a pan_European compensation scheme should be implemented, with target introduction date 2015.

Is it worth the risk of something like that for a handful of percentage points on the interest rate ?

tradetime

talana wrote: »

I'm amazed this debate is still running!! And round and round in circles too.

I really don't understand the reason for all this speculation about what would happen if the Icelandic compensation scheme didn't pay out. You're speculating about such a remote possibility, there's really no genuine reason to think that they wouldn't.

They're no less likely to pay out than the FSCS.
And on that note, I'll butt out of this debate for good and leave you ladies and gents to it.

I quite agree, I have been watching the plethora of debate on this subject throughout countless threads now, it is somewhat amusing how fear creates such wide, boundless, and quite frankly pointless speculation based on countless "what if's" If a bank fails, there are provisions to pay depositors their money, and those will either work, or they won't, and no amount of speculation or conjecture will change that. That's maybe not a great deal of comfort to the many debating this topic round and round, but it is what it is.

To allow a bank to fail, any bank, is a very risky decision for any government because all banks survive on confidence. All banks are at risk since they are leveraged organisations and in the current climate hold many assests which, if required to be marked to market now are worth substantially less than their true value. Similarly, due to the current situation with everyone hoarding cash to offset writedowns, if forced to sell such assests, there are no buyers.

Sadly there are individuals out there, most notably amongst the hedge fund fraternity, who seek to profit hugely off the back of financial firms demises by aggressively shorting the stock and circulating rumour, there are a number of ongoing investigations around the world at the moment into this activity. Bear Stearns CEO Alan Schwartz noted in his testimony to the senate banking commission on Thursday that although one always expects rumour in times like these the scale and diversity of the rumours was odd, no sooner would they respond to a rumour that a new and different one would appear, and it became impossble to keep up with them. This type of debate simply aids and abets the unscrupulous. That said, I will not add any further to this type of debate.

To the poster who was counting the banks that have needed some sort of bailout (sorry can't remember who you are) you missed IKB, a German commercial bank which has been in the midst of a bailout for some months.