protection against banks going bust / investment advice

darenmatthews

I have recently received an inheritance and have deposited £101,000 in Nationwide.

I heard on Newsnight today that there is a 20 percent chance that ANY UK bank can go bust.

Should I deposit this money in a number of banks? I think I heard that deposits are guaranteed but only up to 35K

Is there a better way of investing this money, given that I may need to use it as a deposit on a new house in say, 1 year from now.

Thanks in anticipation for help

Riq

Good old Newsnight, scaremongering at it's best. Trevor McDonald over at the Tonight Programme would be proud.

If Nationwide go bust I will eat my shoe.

If it makes you feel any better than spread it across banks, but personally I wouldn't bother.

Aegis

If you're really worried, I'd suggest having a look at Northern Rock or NS&I. Both of them are covered in full by the Treasury at the moment, so you're as close to 100% protected against institution failure as you're likely to see!

I think the 20% statistic is a load of rubbish. If nothing else it's misleading people into thinking that the big UK banks have a high chance of going bust, where in actual fact it's more likely to be the small specialised lenders who have liquidity trouble while the big boys carry on doing what they do.

tradetime

There would be no harm in spreading it across a few different banks, you would only need 3 accounts to ensure that all your money was guaranteed under the fscs, or you could put it all in Northern Rock if the government is still guaranteeing all deposits there.

ianmr65

Nationwide are not a bank, they are a building society.

The twenty percent figure prolly comes from the weighted average for CDS spreads for uk banks which are between 100 and 400 at the momement so 200 on average, i guess.

That means it cost's between £100k, and £400k per £10m to insure against the risk of these banks defaulting over the next 5 years.

This is along way from saying there is a 20% chance of their defaulting, especiallly as the CDSs market is basically frozen, cos of counter party fears, and the swaps are traded, and choped up : and so the spreads are becoming increasingly meaningless.
Credit swaps trading at well over 1000 and with deposit requirments up front, are 'said' to have a 50% chance, over 5 years, by this discredited (no pun intended) methodology. So heaven knows where newsnight got 20% from.

Consider GE are trading at a cds of 170, and the US fed is trading at cds of 16!! Now the likely hood of the US fed ever defaulting being as it prints all the money, is the same as Elvis being discovered alive, and working at my local chippy: and GE is less likely to default, than the fed.

That's not to say that some banks aren't safer than others.
Northern Rock, HSBC are very safe.
Lloyds, Barclays, and RBS are pretty safe.

The rest start to look a bit more shaky. Especially those with high exposure to the UK mortgage market.

Building societies have complely different rules, regarding liquidity, and asset holding, and wholesale funding, so are in the main pretty safe.

ffacoffipawb

Riq wrote: »

If Nationwide go bust I will eat my shoe.

Are you Heather Mills?

Riq

No, but even though she is psycho, I still would :lipsrseal

chris1

darenmatthews wrote: »

Should I deposit this money in a number of banks? I think I heard that deposits are guaranteed but only up to 35K

Is there a better way of investing this money, given that I may need to use it as a deposit on a new house in say, 1 year from now.

If you need it in that time frame stick to bank / building society deposits, and to be on the safe side put £35K in two other banks/ building socs. That way you'll have nothing to worry about (below the FSCS limit and your eggs won't all be in the same basket) and you'll probably benefit by finding two other providers with better interest rates.

HTH

tawse57

With 100K you have the luxury of spreading your risk around - why not choose 5 building societies and put 20K in each or even pick 10 and put 10K in each. That way you spread the risk, sleep better at night and are doing OK with regards to interest.

Consider putting 50K into 6 month fixed bonds and 50K into 12 month fixed bonds

HBOS, B&B, ING and Leeds all do decent 6 month bonds.

Nationwide, Co-op, Newcastle Building Society and others do decent 12 month bonds.

I personally would not put money into a non-UK bank with the exception of ING above.