Bank Deposit Protection Scheme

[oldmanxfella]

So what is your recommendation for depositors?

• Belgian banks look shaky
  
• German banks look shaky
  
• UK Banks look shaky and government dithering
  
• Manx deposit protection scheme looks shaky
  
• Channel Islands have no guarantee
  
• Irish banks have 100% guarantee but Irish goverment will have to take over the UK to pay it
  
• EU arguing amongst themselves over what to do
  
• US banks disappearing almost daily
  
• Japanese banks look the best capitalised
  

 

Its a very fair point. However, a guarantee is only as good as the ability of the guarantor to pay it. In the case of Ireland its clearly not in a position to so its hubris designed to bring a raft of cash into a faltering system. I wouldn't be chucking mine in on top is all that I was saying.

 

You mentioned Japan and missed China off the list and in an ideal world I'd be looking east.

 

Lets not forget its the Chinese who will be paying for America's bail out plan bill because America already needs $2bn a day of foreign investment just to keep afloat and as China has $3 trillion of foreign currency reserves in Dollars its not really the US taxpayers who will be paying for this fuck up. They'll just be paying China back over the next 50 years or so.

[Mutley]

2. As the amounts in deposits held by the Irish Banks is at least twice and more likely three time the Gross National product (the amount Eire Ltd earns per annum in income) how on earth can it meet any obligations under the guarantee?

 

Your right its a joke. The guarantee is nearly three times Irelands GDP - even the AIB admits that on its own website

 

http://www.aibcorporate.ie/servlet/Satelli...d=1214389012508

 

Technically Ireland can't afford to guarantee anything as if something goes wrong its economy is totally and completely bust.

 

But what's the chances of all 6 banks going under at the same time? Pretty slim I'd say.

[manshimajin]

Its a very fair point. However, a guarantee is only as good as the ability of the guarantor to pay it. In the case of Ireland its clearly not in a position to so its hubris designed to bring a raft of cash into a faltering system. I wouldn't be chucking mine in on top is all that I was saying.

Neither would I - but in reality the whole banking system is based on trust rather than liquidity. If the Irish Government's move creates a sense of trust that prevents customers from panicking then it is successful and its pre-emptive move (allegedly on Anglo Irish Bank) will have been a winning gamble - but I accept that it is a gamble.

 

If one takes a guess at the loan books of both the Irish and British banks it could be the source of a few bad nights sleep - both countries are now riding on the back of years of irresponsible bank lending to developers and to home buyers. I suspect that whilst the latter will get the media attention it is the former that is the elephant in the room in both legislatures.

 

Whilst the UK is in a poor state Ireland is most probably, as a small economy, much worse off as the average income to home price ratio is higher there than the UK. But both are incredibly inflated compared with long term trends - thus bad debts, negative equity and falling value of the security held by the banks are big issues.

 

On the radio the other day it was mentioned that Lloyd/HBOS will have a deposit to loan ratio of about 60:100 and that the other UK big banks are in the range 80 to 90:100. The problem is that noone knows the quality the loans side of the equation. Haven't heard the ratio for Ireland (and would probably be scared if I did) - B&B was supposed to be about 45:100 if I recall correctly. Obviously the FSA have been doing the job their paid to do very well.

[pongo]

On the radio the other day it was mentioned that Lloyd/HBOS will have a deposit to loan ratio of about 60:100 and that the other UK big banks are in the range 80 to 90:100. The problem is that noone knows the quality the loans side of the equation. Haven't heard the ratio for Ireland (and would probably be scared if I did) - B&B was supposed to be about 45:100 if I recall correctly. Obviously the FSA have been doing the job their paid to do very well.

 

Nationalisation by stealth - Robert Peston

 

Bank of England figures show that at the end of last year, there was a £625bn gap between the money lent by our banks and what they took in from conventional deposits.

 

That gap shows their dependence on wholesale markets - which have seized up and are very difficult for our banks to tap.

 

And, to be clear, this dependence on wholesale markets was a problem of the banks' recent making, because as recently as the beginning of 2001 the funding gap was zero.

[oldmanxfella]

But what's the chances of all 6 banks going under at the same time? Pretty slim I'd say.

 

Well 2 banks in the UK have already completely failed so your a third of the way there if that counts as a benchmark. Is a further bank going to go in the UK? Possibly. By that measure the Irish Banking system is not immune and six remains an outside possibility. Half of Docklands was being funded by various Irish banks at one stage - they had big balls when it came to property so I can imagine huge writedowns in the not too distant future.

[Dunroamin]

Best thread for long time and not disparaging comments! Wonderful!

[Mutley]

Somebody asked what I thought was a really stupid question on one of these threads - something like "why should we expect depositing money in a bank to be risk free?" I suppose in essence we're not depositors really but lenders. We lend our hard earned cash to the banks and get interest as payment for the loan. So I suppose really the buck stops with us and not the bank as you would expect. However most people would not see it that way. They would have seen the bank as a SAFE haven for their cash and would never expect their money to be at any risk. Ironically the doddery old geezer who talks to his cat, who has "never trusted banks" and who keeps his money under the mattress might actually have the last laugh.

 

Who needs Vegas when you can gamble most of your life savings in the comfort of your local friendly bank.

[manshimajin]

Bank of England figures show that at the end of last year, there was a £625bn gap between the money lent by our banks and what they took in from conventional deposits.

 

That gap shows their dependence on wholesale markets - which have seized up and are very difficult for our banks to tap.

 

And, to be clear, this dependence on wholesale markets was a problem of the banks' recent making, because as recently as the beginning of 2001 the funding gap was zero.

Thanks. Frightening stuff. About 6 months or so ago read an article in The Economist about how banks had packaged up loans for securitisation in the USA. This was reporting research by one of the major US universities. Apparently it turned out that the ones banks sold on to their own subsidiaries were much higher quality then those they sold on to third parties. It seems little wonder that they have been so reluctant recently to lend to each other - they know how poor their own risk management has been and assume that the other banks are as bad as they are themselves.

 

Recently they have become quite shirty about the media 'undermining confidence in the banking sector'. In a 'confidence' business it is strange that the banks don't seem to understand that they have undermined confidence by their own behaviour. HSBC had a pamphlet in their bank recently that blamed it all on 'the US economy' - as if it was totally separate to the banking system.

 

Under normal circumstances a lot of senior bank executives (and Board members) would be fired for their poor control. Problem is who is there to replace them (or for Board appointments - who would take the risk)?

 

Not much comfort for the customer.

[Gladys]

An argument may be that the banking problem stems from a fundamental change in society. About 30 years' ago, the majority pf people were paid in cash, very few actually needed a bank account, in fact you were considered 'posh' if you had one. Payroll heists were common and cash became viewed as 'unsafe'. Increasingly, therefore, employers wanted to pay their employees through the safe banking system where money moved from account to account by paper. That sudden explosion of accounts necessitated banks to notch up their systems several gears to cope. The systems were fragile, implementation costly and not always successful. Then, following the volume came the opportunity for fraud in the common means of payment, the cheque. So the natural development is some form of confirmatory document and hence plastic. All this pointed towards even more sophisticated systems, but they were still vulnerable to cost prohibitors.

 

In addition, people wanted better access to their money which resulted in more and more ATMs, and other means of access, necessitating even more investment in systems. So much so that in the late 80's/early 90's there was a rash of banks 'buddying up' either formally through M&As or in contractual arrangements to spread the increasing cost of robust systems. They pushed for de-regulation to generate other income streams to try to offset those costs, which was reasonable and, in all reason, they were given that freedom.

 

Banking in less than 15 years had changed from the bespoke, avuncular, family advisor to nothing more than a high street retailer whose main end game is vying or canoodling with the other players, not the customer. And so we have the problem we have today.

[Snaipyr]

Best thread for long time and not disparaging comments! Wonderful!

 

Can I have a prize for starting it?

[Dunroamin]

http://www.telegraph.co.uk/finance/persona...h-accounts.html

...........................the perils of Irish accounts from an unbiased source......a UK Building Society spokesman!

[bluemonday]

Many of the banks were already shaky and one was rumoured to be at risk of serious trouble. So what has changed with the guarantee scheme? As I said you can't spray a turd with gold paint and fool everyone into thinking its solid gold. This makes no sense whatsoever. I won't be sticking my money in.

So what is your recommendation for depositors?

• Belgian banks look shaky
  
• German banks look shaky
  
• UK Banks look shaky and government dithering
  
• Manx deposit protection scheme looks shaky
  
• Channel Islands have no guarantee
  
• Irish banks have 100% guarantee but Irish goverment will have to take over the UK to pay it
  
• EU arguing amongst themselves over what to do
  
• US banks disappearing almost daily
  
• Japanese banks look the best capitalised
  

 

Weimar Republic here we come?

 

I'd avoid anything with an Icelandic connection.

They've got problems.

*Cue Kerry Katona jokes*

[Frances]

About 30 years' ago, the majority pf people were paid in cash, very few actually needed a bank account, in fact you were considered 'posh' if you had one.

There was a relatively low cost scheme - heavily used in continental Europe - the Giro system that allowed low cost money transfers , no overdrafts etc that would have satisfied the vast majority of banking needs - in Europe usually offered by the Post Office - it was another one of Thatcher + co's thefts from the British public along with the TSB that had offered low overhead savings for several generations.

[manshimajin]

Who needs Vegas when you can gamble most of your life savings in the comfort of your local friendly bank.

If you want to see how much the friendly bankers care for their clients just go into the 'arcade game' style black cavern known as the HSBC Branch in Douglas - it sends out a real message of 'little money - you're not important to us.'.

 

Of course HSBC are a global Bank that advertises iself as being very sensitive to local cultures - so perhaps its Branch is a reflection of how its senior management in the IOM perceive Manx culture?

[bluemonday]

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