Are Kaupthing and Icesave too risky?

leet_first

Read a number of articles recently talking about the increased risk of most of the Icelandic banks especially Kaupthing and Landsbanki (Icesave).
Including this taken from moneysupermarket.com
Although I know that they are both covered by the guarantee scheme for the first £35k in each finanical institution, if they were to fail you obviously wouldn't get any interest.
Am I being over cautious? What we haven't yet seen as well is how long it might take to receive compensation in the event of a major bank failing..
I am interested in people's views.

nilrem_2

I don't wish to offend but it would have been better if you had done a search first TBH and added your comments to the numerous Icelandic bank safety threads! Well that's my view anyway.

IMHO people are getting just a little bored with the continual "Are Icelandic banks safe" posts,

stevedb11

nilrem wrote: »

I don't wish to offend but it would have been better if you had done a search first TBH and added your comments to the numerous Icelandic bank safety threads! Well that's my view anyway.

IMHO people are getting just a little bored with the continual "Are Icelandic banks safe" posts,

Well said Nilrem :T

ianmr65

Newest to oldest
http://forums.moneysavingexpert.com/showthread.html?t=806373&highlight=iceland
http://forums.moneysavingexpert.com/showthread.html?t=852981&highlight=iceland
http://forums.moneysavingexpert.com/showthread.html?t=857021&highlight=iceland
http://forums.moneysavingexpert.com/showthread.html?t=834605&highlight=iceland
http://forums.moneysavingexpert.com/showthread.html?t=847519&highlight=iceland
http://forums.moneysavingexpert.com/showthread.html?t=831895&highlight=iceland
http://forums.moneysavingexpert.com/showthread.html?t=834073&highlight=iceland
http://forums.moneysavingexpert.com/showthread.html?t=777309&highlight=iceland

and will stop you looking up threads about frozen food, and kerry katona :rotfl: :rotfl:

Rafter

leet_first,

Good point about the lost interest. Hadn't thought about it that way.

If you put £35,000 in Kaupthing at 6.5% you would be hoping to earn £1820 in interest over 12 months after 20% tax.

Inflation at about 4% (RPI) will cost you £1,400 so in real terms you will make £420 on your savings.

Now if Kaupthing did default and you got your money back from the guarantee scheme you would lose £1400 in real terms as a result of inflation.

Alternatively if you invested in a 'safer' UK bank that isn't having to pay so much for wholesale money you might earn only 5.75% in interest.

After tax that would be £1610 or £210 less than Kaupthing.

So the risk you are taking is that you might lose £1400 in real terms if Kaupthing did have to use the guarantee scheme, but if they don't you might earn about £210 more in interest over the next 12 months if you have £35,000 to save.

Personally I wouldn't invest with Kaupthing, just as I wouldn't invest in shares in a company that wasn't doing so well. At least with Savings, the 'share price' can't go down. But there is still a risk you won't earn any interest.

A secondary consideration is that UK banks and Building societies could do with all the cash they can get to stop our own economy and mortgage market going down the pan. Sending our savings overseas isn't going to help that problem.

Looking at it another way our children and grand children will have to pay more for their mortgages or wait longer to get on the housing ladder as a result of their parents and grand parents investing in Iceland rather than the UK!

R.

nilrem_2

Rafter wrote: »

A secondary consideration is that UK banks and Building societies could do with all the cash they can get to stop our own economy and mortgage market going down the pan. Sending our savings overseas isn't going to help that problem.

Lol That is a little joke isn't it?
AFAIAA some of the problems with UK banks is that they have been investing UK savers cash overseas but now we have to feel guilty if we save with banks based abroad, TBH I am all for helping the UK but I don't see that it is up to me to prop up the UK banks; who have been making huge profits over the years and have been paying me 'paltry' interest!

Rafter

nilrem,

It was said tongue in cheek yes.

Whatever you think of the banks, their greed, their poor investment decisions etc, more than the amount saved with banks each year in the UK is leant out to UK homebuyers and UK companies as mortgages and loans.

Take away those loans and there is no way that house prices can rise or that many companies can grow.

Doesn't sound too rosy. Agree that each individual cannot make much difference, but the £6 Billion we have invested in Icelandic banks is quite a few mortgages.

R.

PS. Think about all the estate agents who might lose their jobs too.

chesky369

......if they were to fail you obviously wouldn't get any interest........

I really hate to add to this thread, since the subject has been done to death and I do hope the OP has taken ianmr's links and used them, however, it isn't as simple as stated above. If the interest is gained and in the account, it is your balance, so you would get it. It has been covered before in one of the many many threads before.

earlgrey_3

chesky369 wrote: »

If the interest is gained and in the account, it is your balance, so you would get it.

Which may be a very good reason to opt for monthly interest if offered rather than having to wait a year to get it added to the balance.

For me, I've done the arithmetic and though there may be a case for investing less than £35K, I'd want a lot more of a premium on the return than they're offering for anything more than that. Unfortunately it's undeniable that the chances of another bank falling over somewhere in the world in the next few months are substantial and those countries currently experiencing economic difficulties such as Iceland must be the most suspect.

(And would agree this subject has been done to death, even Daily Mail readers must be getting sick of it. - caveat emptor.)

Griffboy

Can anybody get an update on this as it was a month ago? I must say, all this gloom is making me wobbly.

1. Kaupthing 833.3
2. Kazkommerts 766.7
3. Glitnir Bank 757.5
4. IKB 612.4
5. Landsbanki 604.6
6. Banca Italease 397.0
7. VTB Bank 332.5
8. Anglo Irish Bank 322.7
9. HBOS 236.7
10. Sberbank 221.3
11. West LB 212.5
12. UBS 209.0
13. Natixis 205.0
14. Bank of Ireland 202.5
15. Allied Irish Banks 195.8
16. Dexia 195.0
17. RBS 191.7
Source: Bloomberg (17/03/08)

chesky369

No..........................................