Martins Joned the scare-mongers camp

Aegis

Ulfar wrote: »

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.

"Past performance is no guarantee of future performance. The value of your investment may go up or down". Words like these are used with every stock-market investment, and they are there for a reason. People investing in any single stock are exposing themselves to a large capital risk, and should consider diversification. It's tragic that a lot of people went in and bought shares with almost no background reading, but the saying "caveat emptor" (buyer beware) must apply to shareholders. It's their responsibility to research thoroughly before buying in, and had they done so they might have realised how far outside their risk profile they were investing.

The vast majority of consumers are not prepared to directly hold equities. It's something with no protection against downturn, nor is there a compensation scheme in place for if the company of your choice has problems. With the huge publicity at the time about the credit crisis, the shareholders should have bailed long before the company was nationalised if they had taken even a little interest in their holdings.

It's a lesson that's learned every few years, forgotten a few years later, then relearned when the next company goes bust. It's the nature of the beast, and the only ways to get around the problem are either to diversify sufficiently that a single company going bust barely affects your portfolio, or to follow the news and all available reports and to get out when the first sign of this sort of thing appears. I suppose a possible third option would be to set a rising limit order on all trades, but that's getting even more complicated.

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

Then there would be no need for the any compensation scheme to get involved, and the company would probably be wound up. Of course, the Treasury and taxpayers don't want to see that happen because NRK owes so much money that they actually need to see the company working in such a way that it can repay.


In short, the compensation schemes are supposed to be in place to protect those who have put money into what should be a very safe deposit account. It's not there to protect employment (which is almost never guaranteed), nor is it there to protect investors.

ianmr65

RayWolfe wrote: »

A very fair point that I, as a viewer would have no knowledge of because you didn't tell us. So, if I've maligned your journalistic integrity, I apologise.

Let me then ask this: If you had the knowledge of the inadequacy of the scheme three weeks ago, why did you - the consumers champion - not tell us via the site or newsletter. Surly a journalist with integrity (contradiction in terms?) having discovered such an critical flaw would want the world to know, regardless of the fact that they were being paid to make a television program which might have less impact were the contents to be pre-announced ... wait a moment, the contents were pre-announced. Sunday Times TV critics choice "ML looks at how secure our money REALY is, examining the fine print of the ......."


Ray

Ok now Martin's fessed up we can get real.

Their have always been a fair number of people on here and other sites saying the FSCS scheme is a joke. I happened to agree then and do so now. You only had, like Saint Mel, to crunch the numbers to see they did not add up- £96bn (well over the nhs budget) vs £4bn
The only reason people like me have been promulgating the fantasy is to stop the less well informed amongst us from worrying,

Realistically there is no way that HMG could cover the deposits following the collapse of any large bank in the UK, esp those like HSBC that are truly international. Despite the b@ll@cks about all deposits being covered that they trotted out when they realised who Martin was, and who the programes audience were.

The bottom line is that they can try to prevent a collapse.. and issue denials about emergency funding, change the law so such funding is not made public. and wade in with support.

I fail to understand the thinking behind 'a large bank could not be allowed to fail' How can you save an institution with upwards of £200bn - a trillion + in assets, if all the asset holders want their money back? We gonna stop treating people on the NHS, stop paying pensions. Print an extra £200bn... ???

So if say HBOS were really to hit the rocks, there is little anyone could do bar beg HSBC to buy them.

Welcome to the new world order.

Now i've been promoting icelandic banks for a while. Because i think that notwitstanding the attacks a collapse of the banking system in iceland is rather less likely than the collapse of a large bank here. And they are better placed to withstand the banking crisis.

The ability of iceland to fight off the attacks with a concerted effort, betwen regulators, central banks, banks, and the goverment puts the UK's shamblolic approach to shame. The fact that iceland has no exposure to sub prime, has a strong ecomomy, and has a coherant banking structure makes it a great deal safer, than a lot of the so called banks here.

You pays your money and you takes your choice.

nrsql

A bigger problem is how long it would take.
Say you had savings with a bank which got into trouble. OK your savings are probably safe but could you cope with the bank closing access to your funds for the time it takes to sort out.

baby_boomer

ianmr65 wrote: »

The only reason people like me have been promulgating the fantasy is to stop the less well informed amongst us from worrying

How reassuring :eek: Are you holding anything else back in the interests of the "greater good", IYHO.

Lavendyr

ianmr65 wrote: »

I fail to understand the thinking behind 'a large bank could not be allowed to fail' How can you save an institution with upwards of £200bn - a trillion + in assets, if all the asset holders want their money back? We gonna stop treating people on the NHS, stop paying pensions. print an extra £200bn... ???

The latter seems to be Gordon's choice, doesn't it... ;)

Ulfar

The point I was trying to make by highlighting the loss of shareholders was to highlight my disagreement with Raywolfe's comment that no one had lost money and that Northern Rock hadn't gone Pop.

I didn't even mention the staff that are now going to be out of a job, these staff members who will be the rank and file won't be getting a huge bonus when they go like a certain former staff member.

If Northern Rock didn't go pop then the government has stolen the shareholders assets with no justification.

When I asked what would happen if all the saver's still with Northern Rock nobody has convinced me the FSCS in place would be able to cover people's deposits.

Does anyone know how much is still on deposit with Northern Rock as savings ?

I agree with others that shareholders have to face the consequences, but why is it only Northern Rock shareholders. There are other banks out there with huge problems as well but they are now entitled to secret help from the Government.

Do we really think that banks holding rights issues isn't a serious state of affairs.

ianmr65

baby_boomer wrote: »

How reassuring :eek: Are you holding anything else back in the interests of the "greater good", IYHO.

Good question, difficult to answer. The fcsa is a good case in point. In theory everything will be ok. depositors will be protected, and now HMG have said that they will cover: everything is ok?

In practice the range of outcomes of a large UK bank failure goes from worrying to catastrophic!!

The range of outcomes from the current global economic and fiscal re-ordering again goes from worrying to catastrophic. So yeah i have some deeply worrying ideas about what might happen. based on history, and k-waves, the size of the bubbles, global warming, the rise of the eastern superpowers and generational cycles. But whether they will or not is impossible to say, and speculating in public is a mug's game.

You either get shouted down as a loony, or people agree but want to temper the more extreme scenarios to make themselves feel better.

still, intresting times!!

Jake'sGran

NikkiP wrote: »

I didnt see the programme but what I would say is check out the institution you are saving with. Ask them for their Financial Accounts.
If you wanted to borrow from the bank they ask for your Accounts. They are borrowing from you so ask to see their Accounts. Quite simple really.

I read an article yesterday (sorry, can't remember where but think it might have been a comparison bank account site) that said the banks in Scandinavian are probably in a worst state than any in Europe and mentioned Kaupthing Edge. I'd be interested in any comments about this.

ianmr65

Iceland's leading lenders come in from the cold


From the ft - today



..............But the eagerly-awaited publication of all three leading banks' first-quarter results in the past week has provided some solace, suggesting the Icelandic banking storm of 2008 may finally be blowing itself out.
Within the quarterly numbers lies some evidence that, by most internationally accepted measures, Iceland's banks are operationally sound, well-capitalised and more conventionally run than their reputations might indicate...


http://www.ft.com/cms/s/0/8436229a-1fbc-11dd-9216-000077b07658.html.

Lavendyr

Spot on ianmr65, thanks for posting that. Now let's hope that everyone will calm down a bit about Iceland. I'm honestly happier with my money there than in the UK, knowing that the Icelandic compensation scheme is a 'moneypot' scheme (i.e. the money is already set aside) and as such is probably more likely to pay out in the event of a problem than the FSCS.