Kaupthing - too good to be true?

Lenfo

Offering 6.8% is obviously going to attract customers, but how safe are these Icelandic banks? Does offering such a high rate suggest desperation in them needing to bring money in to the bank?

I hope I'm not breaking any rules quoting another website, but here goes...
On: http://www.thisismoney.co.uk/investing-and-markets/article.html?in_article_id=433257&in_page_id=3 they discuss banks CDS points rating which is a sort of measure of how risky the market thinks a bank is.
A further article: http://www.thisismoney.co.uk/ask-an-expert/savings/article.html?in_article_id=430852&in_page_id=111 is entitled "Could Kaupthing Edge be the next Rock"

Barclays, Lloyds, HSBC have between 120-150 CDS which seems to be the "safe as houses" category, whereas Bear Stearns (just before the crisis) was rated at 720. To quote the site: "Iceland's biggest bank, Landsbanki, is priced at 610 points while that for Kaupthing is priced at a hair-raising 856."

So should I be wary of putting my money into Kaupthing and forego the attractive interest rate and go for a safer, say, Bradford & Bingley offering 6.4%?

Aegis

Kaupthing's basically been at the centre of a smear campaign against Icelanding banks lately. Personally I doubt there's an awful lot to any of them.

I have an account with them, and will happily keep my money there.

Lavendyr

Try a search for "Iceland" on these forums first, OP - this topic is discussed at great length elsewhere.

And I wouldn't say B&B are any safer than anyone else. Lower rates doesn't always mean safer, just as higher rates don't necessarily mean riskier.

Wolf_Man

Very happy with my account there

[Deleted User]

Ditto, nothing wrong with the service I've had opening an Easy Saver with IceSave, very prompt, easy to sign up, easy to log in and view my account.

[Deleted User]

K A U P ... T H I N G..... You make my heart sing....... You make every.... thing.... grooooovy......:whistle: (Good anthem I reckon!)

Anyway....

I think it's nothing more than a massive conspiracy. At the end of the day, these banks wouldn't be aloud to operate in the UK if they were as risky as many are making out; and the FSCS wouldn't touch them with a bargepole. Both icesave and Kaupthing are covered upto £35K the same as any UK bank; and both have subscribed to the banking code of good practice. In my opinion, the icelandic government would not allow any of its banks to fail; it would be too damaging for their image.

As the saying about risk goes.... Don't be afraid to go out on a limb.... that's where the fruit is.;)

Goldfinger.

ianmr65

Lenfo wrote: »

Barclays, Lloyds, HSBC have between 120-150 CDS which seems to be the "safe as houses"
Say Bradford & Bingley offering 6.4%?

A safe as house cds spread is 16, which is what the US federal reserve is.
50 is standard for banks. a cds of 150 means you have to pay $150,000 to insure every $10,000,000 of debt, so is far from ok as it adds 1.5% to the rate.
The fact is that the cds market is basically frozen, as banks arn't lending to each other anyway,
Hedge funds have been said to be widening the cds spread, on certain banks, including the icelandics, in an effort to start share and currency slides, and depositor runs.
This is all in the ft. the daily mail articles are garbage.
B & B are in the !!!!!!. They are rumoured to be about make a rights issue, as they are said to have run out of funding.
If you want a safe bet go for northern rock. 100% safe whilst goverment owned.

Lenfo

Deleted_User wrote: »

these banks wouldn't be allowed to operate in the UK if they were as risky as many are making out

So how come the Northern Rock situation was 'allowed'?

chesky369

"So should I be wary of putting my money into Kaupthing and forego the attractive interest rate and go for a safer, say, Bradford & Bingley offering 6.4%?"

do what you like. You ask a question, you get six replies basically saying the same thing. If you want any more info. go look under Icelandic banks threads previously.

ianmr65

chesky369 wrote: »

do what you like. You ask a question, you get six replies basically saying the same thing. If you want any more info. go look under Icelandic banks threads previously.

well said Chesky :T :T :T

Lenfo

Well I never! How rude!! I ask a simple question, get a few decent opinions and now get flamed.

IanMR: thanks for your first reply, it was useful and informative. I'm not here to ARGUE, I'm here to get people's opinions, and possibly some discussion on why Kaup couldn't potentially go the same way as Northern Rock.

Thanks to the posters of replies 2 through 7 for your views. I'll go and trawl the Icelandic thread. I did a search for 'Kaupthing' and didn't get back much, so I did try.

If this is how you turn on new members asking a reasonable on-topic question I'm amazed there's anyone here.