Saving/Investing Money in Northern Cyprus 19% interest

AskThePuma

My father has been given some information about investing money into Credit West Bank Northern Cyprus. He has a friend doing this and it looks to be 19% a year compound interest with 8% tax due on this interest.

The type of account is an YTL High Interest Savings account – There is also another bank offering 18.5% Iktisatbank.
:money:
Apparently you can get a bank guarantee on your money up to £10000.


Has anybody heard of these accounts, does anyone have any experience of investing in Northern Cyprus.

I’m edging on the cautious side, but if it is all above board and low risk then a fantastic return.


Please only comment if you have any information – I know the saying if it seems too good to be true then it probably is, but maybe we can gather some information together and check this out.

Admin’s – maybe something for you to check out – I have email contact details of individuals from these banks.

Many Thanks

Atp

Stompa

Try doing a search on this forum for 'Turkish' - you'll find out why it's not a good idea.

meester

Tell your friend to take his money out before the Turkish lira goes bust.

AskThePuma

Thanks had a read but nothing of any worthwhile material. Why would the Turkish Lira go bust.

This is something that people have invested in and are making substantial returns.

Anyone with any experiences?

MoneySavingExpert - fancy looking into this?

meester

AskThePuma wrote: »

Thanks had a read but nothing of any worthwhile material. Why would the Turkish Lira go bust.

This is something that people have invested in and are making substantial returns.

Anyone with any experiences?

MoneySavingExpert - fancy looking into this?

From Wikipedia:

1966 — 1 U.S. dollar = 9 lira
1980 — 1 U.S. dollar = 90 lira
1988 — 1 U.S. dollar = 1,300 lira
1995 — 1 U.S. dollar = 45,000 lira
1996 — 1 U.S. dollar = 107,000 lira
2001 — 1 U.S. dollar = 1,650,000 lira

There are numerous other examples of other foreign currencies doing this. There is a reason why interest rates are so high!!!! It is a big flashing warning, a danger sign, you are at risk of the entire value of your capital being destroyed. There is no such thing as risk-free return. High returns mean high risks.

You can lose 80-90% of your capital in the matter of a few weeks.

Here's what happened Indonesia (several times in fact), where rates reached 65%.

10/07/1997 2,433 rupiah to one dollar
09/12/1997 4,540 rp to 1 US$ (you've lost half your capital at this point)
23/01/1998 14,954 rp to 1 US$
17/06/1998 16,475 rp to 1 US$ (85% of your money gone)

Dozens of banks went bust.

AskThePuma

Thanks Meester - Now I can see it presented in that way makes a lot of sense.

Thanks for in the info -

meester

The answer is here, at #9 (though most people reading don't seem to understand the significance of the fact)

http://www.cyprus44.com/forums/1529.asp

" Inflation here is around 20%,"

In other words money is falling in value by 20% each year. Given 20% inflation in Cyprus and 3-4% here, you would expect a 15% or more drop in the value of the lira relative to the pound over the next year. Reducing the real return to about 3%, with a high risk of bank default, or economic crisis in Turkey.

caliston

Minor nitpick: this thread is talking about inflation in Northern Cyprus. In the Republic of Cyprus (Greek Cyprus) inflation was 2.4% in 2007:
http://www.pio.gov.cy/mof/cystat/statistics.nsf/prices_inflation_en/prices_inflation_en?OpenDocument
It adopted the Euro on 1st January 2008. The economies of the Greek and Turkish sides are very different.

Just in case anyone's confused by talk of 'Cyprus' here

glitterygert

We have an account with HSBC (nothing to do with HSBC here) in Northern Cyprus for the last five years,to open an account you need to own property, you cannot just walk in with your passport, our interest at the moment is 16.75%, but it has been 11.00% in the past, so far we have never had a problem, we use this account for things to buy for our apartment and holiday spends, originally we put in £15,000 it is now worth £23,000, depending on the exchange rate. As I say upto now touch wood no probs, also have a contingency plan, with my friend who lives there permanantly in case everything goes tits up.

ttoli

glitterygert wrote: »

We have an account with HSBC (nothing to do with HSBC here) in Northern Cyprus for the last five years,to open an account you need to own property, you cannot just walk in with your passport, our interest at the moment is 16.75%, but it has been 11.00% in the past, so far we have never had a problem, we use this account for things to buy for our apartment and holiday spends, originally we put in £15,000 it is now worth £23,000, depending on the exchange rate. As I say upto now touch wood no probs, also have a contingency plan, with my friend who lives there permanantly in case everything goes tits up.

A tenacy agreement will suffice, though interest rates have dropped they are still paying 16%!!, compounding the interest since i've been here, my initial deposit of £150k is doing v nicely,i live here so dont have the need to change back to sterling or euros(unless i go shopping in the South).

Jonbvn

ttoli wrote: »

A tenacy agreement will suffice, though interest rates have dropped they are still paying 16%!!, compounding the interest since i've been here, my initial deposit of £150k is doing v nicely,i live here so dont have the need to change back to sterling or euros(unless i go shopping in the South).

The question is what is your original £150k worth today?