Icesave- Martin is wrong.

Meltdown_2

chris1 wrote: »

As I said previously, the response was from the FSCS not from Icesave, and applies to all the 'passport' schemes.

So you asked them about ALL the 'passport' schemes?

I wrote "Thank you. Just to clarify, if you had say £10,000 (less than 20887 Euro) in Icesave and the home state compensation scheme did NOT honour the deposit protection, am I right in thinking that the FSCS would NOT pay ANY compensation?"

And the FSCS wrote "I confirm that you are correct to say that if the amount held with Ice save is less than the Euro 20,887.00, you would not be entitled to make a claim to the FSCS."

I must admit I was shocked to hear that, I had thought the FSCS would have covered the whole amount if Iceland didn't, but apparently not.

I don't know why you were shocked. What the FSCS reply states (and did it have a human signature on it, or was it from an automatic email reply system?) is that you are not entitled to make a claim to the FSCS if the amount of your deposits with the bank falls within the figure that is supposed to be covered by another scheme.
That is simply a restatement of the rules of these things.

You asked whether, under a particular set of circumstances, were you right in thinking that the FSCS would take a particular course of action. They didn't actually answer that question - though I know you think they did (and I suppose I can understand why). Please re-read that reply paragraph carefully. It does not say the FSCS wouldn't pay you. It doesn't say they will, either.

As regards whether you would get the money from someone other than the Icelanders, the matter is no longer a straightforward one. But then it isn't for ANY large bank.
In my view, the only answer the FSCS could now reasonably give to the question you posed is "we don't know - that would probably be up to the respective governments to decide".
That sort of an answer equally applies to most of the major UK banks - now that the £4B cap is in place (though there would only be one government involved).

I would just add that it does seem much more likely that the Icelandic government would engineer a takeover of any "defaulting" icelandic bank by another one from there (ensuring that 100% of deposits are safe) than that they would allow one of their banks to fail completely. And I cannot see any major Icelandic bank failing, anyway.

Just my view, others are obviously entitled to disagree. But I don't know how certain any of us can be (about almost anything related to banking) now.

... OK, it's certain that the banks will continue to try to make as much money out of us as they can ...

Optimist

I wonder how many who have moved their money out of Icesave are aware that the compensation scheme is per institution, and they may not be autherised in there own right. So if you have moved your money into something like Birmingham midshires which is a part of BOS and you had the max with both institutions. You only get the one lot of compensation if they go bust

fizzbang

I have been using this site for a while now and only just reading the forum and am shocked to see why people are harping on about whether the Iceland compensation scheme will pay up in the event of and bank going bust. It is all about perception and customer confidence and in my opinion I think the Icelandic scheme is quite good.

For example, in the case of Icesave (Landsbanki) going bust, it does not have to rely on a cash call from other Icelandic banks (like the UK has to) as their scheme has a pot of cash ready, but the fact that there is an agreement with other countries to help (Nordic states) makes it (or should if there weren't all this scaremongering) more customer confidence friendly.

The state of the Icelandic economy compared to the UKs is better, the liquidity of Icesave is better than most UK banks. I just think that people keep harping on about the compensation scheme when the thing you should look at is the stability and liquidity of the bank.

home_alone

fizzbang wrote: »

I have been using this site for a while now and only just reading the forum and am shocked to see why people are harping on about whether the Iceland compensation scheme will pay up in the event of and bank going bust. It is all about perception and customer confidence and in my opinion I think the Icelandic scheme is quite good.

For example, in the case of Icesave (Landsbanki) going bust, it does not have to rely on a cash call from other Icelandic banks (like the UK has to) as their scheme has a pot of cash ready, but the fact that there is an agreement with other countries to help (Nordic states) makes it (or should if there weren't all this scaremongering) more customer confidence friendly.

The state of the Icelandic economy compared to the UKs is better, the liquidity of Icesave is better than most UK banks. I just think that people keep harping on about the compensation scheme when the thing you should look at is the stability and liquidity of the bank.

Totally agree, anyone who wants to discuss the ins and outs of banks going bust raise a new thread called "what happens when your bank goes bust" and leave icesave out of the title.

gary

ps646566

ianmr65 wrote: »

Alternatively.

One can imagine a scenario where a large mortgage specialist bank based in the UK goes belly up, finally hammered by it's exposure to the degenerating UK housing market, and the continuing and escalating credit crunch. Shortly followed by a second smaller mortgage bank.
The FCSC is well over the £4bn, compensation cap at about £50bn. The goverment and BoE are struggling to shore up the huge and global lack of confidence in the rest of the UK sector, badly damaged by the Northern Rock fiasco, and the goverments & FSA inabaility to manage what the rest of the world saw as a small local problem; Followed by the two latest cataclysimic collapses.
After several months' delay while the issue of whether the bank's are irredeemably insolvent is resolved, the FSA scheme has difficulty raising the funds from other banks (who are in deep trouble themselves). The whole thing drags on, and meanwhile the goverment will not act. The governor of the bank of England resigns. The chief executive of the FSA resigns, and the prime minsiter, a enfeebled and imbittered former shell of man is isolated. The cabinet's focus turns inwards, jockying for position and displaying a lack of focus, levels of procrastination, and political infighting that were previously unheard off since the Micheal Foot era.

Eventually a group of depositors threatens legal action against the FCSC, which then proposes to offer full compensation to £35,000. but Goverment/ BoE/ FSA-FSCS infighting and counter briefing have desended into all out war. So the Tresury lanches a counter claim to stop the compenstaion being paid.
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.
Foreign bank depositors line all through this is "We told you so, you should have invested outside the UK" The icelandic Government concerned for it's countries investment in the UK Retail market offers a line of cheap credit.

After seventeen months, UK depositors get 25% of what they are entitled to from the new Tory goverment, who have been forced to introduce austerity measures, following the run on the pound, and latest rise to 22% intrest rates, to counter the hyper-inflation threatning the nation. And also have to concentrate on quelling the growing civil unrest.
The investors also suffer total loss of interest payments for the whole period. One is quoted as saying 'to be honest i'm not sure why we're bothering by the time we get paid the money won't be worth anything anyway'

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."


Think i'm going over the top. Well perhaps: but the kondratieff downwave is about 20 years overdue. And all the factors are in place for a deep deep downturn here, and in the states.

Interesting. But I think the flaw in this hypothesis lies in the fact that any UK government which restricted FSCS payouts, indeed any which did not ensure they were paid in full even at the cost of underwriting it themselves, could expect to be out of office for a lifetime. This is surely why Brown jumped in to guarantee Northern Rock deposits almost immediately that their problems became public. The Tories have only barely been forgiven for so-called Black Wednesday sixteen years ago when interest rates shot through the roof for about three hours. Think what would be the future electoral prospects for a government which allowed small depositors to actually lose chunks of their savings. No UK government will dare to see the £35000 guarantee put at risk. Whereas some foreign governments may not be in a position to do so, and/or not care too much about depositors in their banks who are not their own nationals.

chris1

Meltdown wrote: »

What the FSCS reply states is that you are not entitled to make a claim to the FSCS if the amount of your deposits with the bank falls within the figure that is supposed to be covered by another scheme.

Hmmm, I'd have thought the words "I confirm that you are correct..." would indicate that it was correct, and I can't see them paying out without a claim(!) but still, what do I know? Why don't you do us all a favour and ask them yourself, post the answer here and then we'll all know for sure...

chris1

ps646566 wrote: »

... and/or not care too much about depositors in their banks who are not their own nationals.

In fact David Oddsonn, Governor of Iceland's Central Bank (and ex-Prime Minister) in a TV interview said... that Iceland's banks were so sound... that failure was not likely... even so, Iceland's economy was so strong that it would not be too much for the State to swallow, if it would like to swallow it.
IF?!?

ianmr65

chris1 wrote: »

In fact David Oddsonn, Governor of Iceland's Central Bank (and ex-Prime Minister) in a TV interview said... that Iceland's banks were so sound... that failure was not likely... even so, Iceland's economy was so strong that it would not be too much for the State to swallow, if it would like to swallow it.
IF?!?

Indeed but he also said in the same interview, that he would expect the market to sort it out. This means, and has been made clear, that one of the other banks would take over the bank in trouble. The goverment would only step in once the market had had a chance to act.

Being as landsbanki,(icesave) was the state bank of iceland for some years, and has the safest assets. And as the banks are all interlinked, and there are only three banks - And they don't really compete with each other- and the goverment of iceland would be able to push this through with no difficulty - this would be fairly easy to manage.

I bet that the governor of the bank of england, and the chairman of the fed wished they had such a ready made, and easy to execute - rescue plans.

ianmr65

ps646566 wrote: »

Interesting. But I think the flaw in this hypothesis lies in the fact that any UK government which restricted FSCS payouts, indeed any which did not ensure they were paid in full even at the cost of underwriting it themselves, could expect to be out of office for a lifetime. This is surely why Brown jumped in to guarantee Northern Rock deposits almost immediately that their problems became public. The Tories have only barely been forgiven for so-called Black Wednesday sixteen years ago when interest rates shot through the roof for about three hours. Think what would be the future electoral prospects for a government which allowed small depositors to actually lose chunks of their savings. No UK government will dare to see the £35000 guarantee put at risk. Whereas some foreign governments may not be in a position to do so, and/or not care too much about depositors in their banks who are not their own nationals.

Well I suspect you're right but i think the same would apply to any goverment preciding over a 27% fall in house prices, which if you believe some experts we are about to see
(Officially 3% down and counting - and thats from banks with vested intrests, who massage the numbers - the realitic figure is closer to 10%)
Why do think Mr wobbley was so quick to re-assure today about the state of the economy, and the fall being a correction?
My point is not about what they would like to do, But what they could do.
A large bank failure, well over the $4.5bn would be incredibly difficult to manage, especially if that banks assets are, (as many are in the UK), linked to said housing market.
In general a banks assets and liabilites are pretty even. If thirty percent of the asset base or more is wiped. As might well happen if we have a property crash. That means that 30% of the liability base would fly out of the window with it. Especially during a collapse. Being as the smallest of the 5 big banks has an asset base equalling a quarter of the UKs gdp, that means at least 10% of the countries GDP is at risk, if only one of these banks goes down, and cannot be rescued.
Now i don't know any goverment that has 10% of it's gdp sitting around, waiting to pay out on a bank default.
I do know that the UK's budget defecit is huge, and it's ability to co-ordinate in a crisis, is suspect, and has been demonstated as such.
And it's ability to magic the funds out of the air, will almsot certainly depend on printing money.
The M5 money supply has doubled in the last two years, inflation is on the way up.
What do you think the outcome would be for said goverment if it resorted to printing it's way out of trouble. During a period of crashing house prices, fighting off hyper inflation, and forced intrest rate rises.
You remember the Weimer republic?
Spare 10 grand for a cup of tea?

ps646566 wrote: »

Whereas some foreign governments may not be in a position to do so, and/or not care too much about depositors in their banks who are not their own nationals.

Well certainly in Icelands case the bulk of the bank asset holders are icelandic citizens, or corporations. Having said this there are huge numbers on non resident europeans working there, And in Glintners case through Bauer, they own a large chunk of the UK retail high street. And have a great many property and financial intrests here.
I suspect that the view in iceland is that the non icelandic base is rather more important to them, than say the Abbey base is for the bank Santander.

chris1

ianmr65 wrote: »

I bet that the governor of the bank of england, and the chairman of the fed wished they had such a ready made, and easy to execute - rescue plans.

Don't we all...