Martins Joned the scare-mongers camp

Meltdown_2

KeithEssex wrote: »

It would be interesting to see what percentage of the banking systems deposits are covered by the £35,000 limit ... I haven't seen a figure anywhere yet but I suspect that 90% of people would be under it.

It was recently in the region of 97 to 98%, according to the official consultation documents emanating from Treasury/BoE/FSA

Presumably the extra undertaking would not be as significant as the original undertaking because the number of people would be small as a percentage of the total savers.

Exactly!

ManAtHome

Meltdown wrote: »

If you have extracted from them a total backing of deposits (up to £35K) for all banks registered with FSCS, then it might be seen as a small advance

Blimey, can't remember Paxo getting any of them to actually answer a question - they all seem to operate on the low-life "no comment" principle (in their case the "prepared, not necessarily relevent" responses).

What would have been useful should HSBC turn their toes up, would be a promise to issue free guns and ammo...

Ian_W

Come on guys, wake up and smell the coffee!

The FSCS is only relevant to Credit Unions, smaller Building Societies and smaller Banks like Ruffer or London Scottish [please note examples of size rather than flakiness!], for anything bigger it was never designed to work and neither will it ever be required to. It's a sop to comfort Joe Public that their savings are safe.

Banking is a supreme, perhaps the ultimate, act of faith. You're allowing an institution to look after your savings, your earnings, pay your bills and so on, whether you're an individual or a company. If an HSBC or LTSB got in deep trouble NO GOVERNMENT could allow it to fail. If it did it would mean an end to commerce/business as we know it. If a "biggy" was allowed to fail [which is the only time to FSCS comes into play] why would you trust any of the others, Barclays, HBOS etc, to hold your money. Moreover all the co's that banked with it would be bust with resultant inability to pay staff and other co's who supply them, co's relying on DD payments would be in serious trouble. Govt and local govt would immediately suffer massive revenue losses and so on. And that's from just one of the biggies going T#ts-up!

The damage to the UK economy would be so massive that it couldn't be allowed to happen. If a Government couldn't stop it happening, forget your FSCS it would be completely worthless and it would be down to the bunker with your AK47 time.

The fact is I am very proud of the journalism here, both the discovery and that by doing the programme we've now gained confirmation that the government will back up the scheme - something that didn't exist in the past.

Martin, though I usually hang on your ever word - the Govt can back it because it couldn't let it happen in the first place and if it couldn't stop it happening the consequences would be so dire that no-one would give a monkey's cuss they didn't honour their pledge to you!

I didn't watch the programme because the "puff" for it was so stupidly sensationalist [Fairpack, not a financial institution anyway, Bear Sterns, a US investment bank and NR - remind me how much the FSCS paid out on that one?] that a repeat of Amanda Lamb in the sun was far more appealing!

bristolleedsfan

Ulfar wrote: »

Come on people, its been obvious that the compensation scheme was inadequate.

Why do you think the Government nationalized Northern Rock.

What Martin failed to push Yvette Cooper on is how the government is going to back the scheme.

How are they going to provide the funds for the scheme.

Where are they going to borrow the funds from, are they just going to get the BOE to print more money.

.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/05/11/cnfscs111.xml

Treasury would bail out any top lender in crisis

The taxpayer will have to bail out savers if any of the country's top 25 lenders runs into a Northern Rock-style crisis, the Treasury has admitted.

New details have emerged that show the Financial Services Compensation Scheme (FSCS) can call on a maximum of just £4bn from banks and insurers in the event of a collapse. However, each of the top 25 banks and building societies has customer deposits far in excess of £4bn. HBOS, Britain's largest deposit taker, had £111bn last year, papers from the Financial Services Authority show.

Under the revised FSCS rules, which were changed in the wake of the run on Northern Rock last year, customers are fully protected for the first £35,000 deposited at each separate institution. A consultation has since been launched to determine the best way of funding the scheme and to establish whether to increase the level of protection.

After questioning from Martin Lewis, the founder of MoneySavingExpert.com, the consumer rights website, on ITV's Tonight programme, Yvette Cooper, the chief secretary to the Treasury, said: "If there was not enough money from the FSCS, the Government would lend the FSCS the money to ensure that all savers got all of their £35,000 back in full.

Lewis said: "Having a maximum of £4bn is bonkers. If a big bank collapsed, that wouldn't be enough money to pay back £5,000 let alone £35,000 to all the savers. It does mean yet again the taxpayer would have to foot the bill to lend the money in the case of a bank collapsing.

The Treasury claimed it would recover any taxpayer money lent to the FSCS in subsequent years. At Northern Rock, £12.2bn of its £24bn of customer deposits was withdrawn after the Bank of England stepped in as lender of last resort.

Details of the shortfall may persuade the Treasury to introduce an element of upfront funding - a proposal included in the scheme consultation that is anathema to the banks. Investment bank UBS has estimated that the Treasury may require payments from the banking industry of £3bn a year for several years.

However, senior industry figures are understood to be aghast at the pre-funding proposal and have warned that additional costs from new demands on the banks were likely to be passed on to savers in the form of lower interest rates.

Banks also argue that no amount of funding could cover a run on deposits at any of the main high street banks, which each have £50bn or more in customer deposits, as it would be impractical to hold such a large amount of funds. One source added that only smaller deposit takers were at risk, saying: "The bigger you are the stronger you are."

Ulfar

So basically the government would borrow the money to pay, but that money has to be paid back by the tax payer.

With financial management like this we could end up on a very slippery slope.

As for banks whining that they don't want to pay further money upfront to this scheme well newsflash it's the banks that have caused this.

In no way was Martin scaremongering if anything he was understating the case.

For those of you who think that a large bank cannot go pop I have two words for you Northern Rock.

RayWolfe

Ian_W wrote: »

Banking is a supreme, perhaps the ultimate, act of faith. You're allowing an institution to look after your savings, your earnings, pay your bills and so on, whether you're an individual or a company. If an HSBC or LTSB got in deep trouble NO GOVERNMENT could allow it to fail. If it did it would mean an end to commerce/business as we know it.

How true.
There cannot be any other type of operation that takes your money, promises to give it back on demand, lends it out to others, and thus cannot possibly give it back on demand if everyone wants it back at the same time. We all know about scare stories but this current banking scare story beats most. Why do we allow ourselves to be so frightened of the dark?
If a major retail bank is allowed to go bust, western capitalism will end, that is why they will never be allowed to fail.
At least, up to 35K and probably all, you will not lose your money folks.

RayWolfe

Ulfar wrote: »

For those of you who think that a large bank cannot go pop I have two words for you Northern Rock.

NR was not a large bank.
It has not gone pop, it was rescued and no one lost a cent.

Ulfar

Northern Rock not a large bank, I think you will find they were definitely within the top 26. This means FSCS would have been unable to pay out to cover the savers hence the government had to step in.

As for no one having lost a cent, you are just flat wrong. What is the share price of Northern Rock at the moment, nothing thats what and shareholders have lost.
Not all of the shareholders are hedge funds, I personally feel very sorry for the staff who held shares and would have been encouraged not only by the bank but by the government to do so.

If you mean savers then you might be right, however what happens if all the savers still with Northern rock withdrew their money ?

RayWolfe

Of course I mean savers! You want the shareholders to be reimbursed as well? And all the staff to be employed? And the tea trolley to continue to go round? And the sun to continue to shine? And no one to die? And the price of the Daily Mail to remain at £0.0s.3d
What is this government doing about all this? Disgraceful!

Riq

Ulfar wrote: »

As for no one having lost a cent, you are just flat wrong. What is the share price of Northern Rock at the moment, nothing thats what and shareholders have lost.
Not all of the shareholders are hedge funds, I personally feel very sorry for the staff who held shares and would have been encouraged not only by the bank but by the government to do so.

Such is the risk of shares. That is economics.
Sometimes you win, sometimes you lose.