UK Bank Compensation now cut to £75k

[dabhand]

Due to the strength of the Pound against the Euro, the maximum compensation, if a bank goes bust, is being reduced to £75,000 (from £85k).

The actual compensation level if €100k, but the GBP reduction is taking place from 1st January 2016, rather than the normal change date of 3rd July 2015, to allow depositors to take action, if needed. It is recalculated every five years based on the Euro/Gbp rate on that day.

So, all you high net worth worriers, take note and act accordingly

http://www.bbc.com/news/business-33384284

[topt]

Thanks - that is going to upset a lot of people with fixed rate accounts.

[KittenKong]

75K is a ridiculously small amount for banks in a developed country, and also equally ridiculous that the cover should be the same in large countries as in tin-pot places like Cyprus or Malta or Iceland.

They should be putting the UK cap up rather than reducing it.

[Suradit69]

75K is a ridiculously small amount for banks in a developed country, and also equally ridiculous that the cover should be the same in large countries as in tin-pot places like Cyprus or Malta or Iceland.

They should be putting the UK cap up rather than reducing it.

"...in tin-pot places like Cyprus or Malta or Iceland."

Interesting that in a ranking of countries by GDP (PPP) per capita, whether by the IMF, World Bank or CIA, the tin-pot Iceland comes in ahead of UK

https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita

[KittenKong]

"...in tin-pot places like Cyprus or Malta or Iceland."

Interesting that in a ranking of countries by GDP (PPP) per capita, whether by the IMF, World Bank or CIA, the tin-pot Iceland comes in ahead of UK

https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita

"Per capita" because hardly anyone lives there. At the peak of its glory (haha) Iceland had as many inhabitants as a medium-sized UK town, and external debt exceeding 7 times its entire GDP. They are only solvent today because they reneged on much of the debt and left other countries to sort out the problem, which doesn't make them very trustworthy in my eyes.

Currently Iceland's near neighbours in the league table of countries by total GDP are Cambodia and Senegal. Would I be in a hurry to deposit money in either of those countries? The xxxx I would.

[VBF]

75K is a ridiculously small amount for banks in a developed country, and also equally ridiculous that the cover should be the same in large countries as in tin-pot places like Cyprus or Malta or Iceland.

They should be putting the UK cap up rather than reducing it.

I quite agree KK - another bit of EU nonsense!

However, do remember that it's £75K per institution

So, for example if you had £85K in Natwest and moved £11K to HSBC it will still all be covered (this gives room for £1K of interest to be added to the Natwest account.)

However, be careful that they really are different institutions eg RBS and Natwest are covered by the same banking licence so moving between those two would not achieve anything.

This link, though possibly out of date explains it

Having said all that, it's mighty inconvenient and if you happen to be outside UK, opening new accounts is not always easy. Come to think of it, it's not that easy inside UK!

Edited July 4, 2015 by VBF

[regedit]

Disappointing but still better than the 50,000 it was before 2011 and the level that it stuck at on those offshore islands (unless they now decide to reduce as well !).

[Chivas]

75K is a ridiculously small amount for banks in a developed country, and also equally ridiculous that the cover should be the same in large countries as in tin-pot places like Cyprus or Malta or Iceland.

They should be putting the UK cap up rather than reducing it.

Having said all that, it's mighty inconvenient and if you happen to be outside UK, opening new accounts is not always easy. Come to think of it, it's not that easy inside UK!

Perfectly easy if you only want a Deposit Account

[VBF]

75K is a ridiculously small amount for banks in a developed country, and also equally ridiculous that the cover should be the same in large countries as in tin-pot places like Cyprus or Malta or Iceland.

They should be putting the UK cap up rather than reducing it.

Having said all that, it's mighty inconvenient and if you happen to be outside UK, opening new accounts is not always easy. Come to think of it, it's not that easy inside UK!

Perfectly easy if you only want a Deposit Account

What I mean is that banks these days are forced to go through all the "know your customer" nonsense for any new customer. If you're in the UK and on the Electoral Register, that usually suffices but if you're outside it becomes a tiresome process.

[NeverSure]

I don't recall much of governments paying out on that insurance. Usually they look for alternatives that keep the bank running. Of course the first people to lose their money are the stockholders who own the capital and retained earnings. It's simply a belly up business decision.

Losses could occur if the bank couldn't collect on loans which are loans of the depositors' money. Those loans are assets on the bank's books and if the value of the assets won't cover the deposits the bank is upside down.

There shouldn't be a loss of all of the depositors' money as there should still be something collectible in those loans. What usually happens is that the bank is sold or given to a bigger, better capitalized bank, the depositors become customers of that bank and lose nothing. The insurance might pay the new bank something to increase it's capital which might be cheaper than closing the first bank and paying depositors.

Anything could happen but if the banking situation was so bad that big depositors were losing big money I'd wonder about the overall health of the government itself, as in Greece.

Cheers

[alanrchase]

Thanks - that is going to upset a lot of people with fixed rate accounts.

Why?

[topt]

I don't recall much of governments paying out on that insurance. Usually they look for alternatives that keep the bank running. Of course the first people to lose their money are the stockholders who own the capital and retained earnings. It's simply a belly up business decision.

Losses could occur if the bank couldn't collect on loans which are loans of the depositors' money. Those loans are assets on the bank's books and if the value of the assets won't cover the deposits the bank is upside down.

There shouldn't be a loss of all of the depositors' money as there should still be something collectible in those loans. What usually happens is that the bank is sold or given to a bigger, better capitalized bank, the depositors become customers of that bank and lose nothing. The insurance might pay the new bank something to increase it's capital which might be cheaper than closing the first bank and paying depositors.

Anything could happen but if the banking situation was so bad that big depositors were losing big money I'd wonder about the overall health of the government itself, as in Greece.

Cheers

I don't recall much of governments paying out on that insurance.

They did under the Iceland bank collapse - https://en.wikipedia.org/wiki/Icesave_dispute

Icesave in UK and The Netherlands

Because no immediate repayment was expected by any Icelandic institutions/authorities, the Dutch and British states covered these account losses in full.

Same link re Kaupthing Edge bank -

In Finland[21] and Norway,[22] the local financial supervisors took over Kaupthing's operations and guaranteed deposits. In Austria, a private agreement was reached between the Austrian authorities and Kaupthing's receivers, with accounts being transferred to other banks.[20] In Germany there were serious problems with deposit insurance – identical to those suffered by Icesave depositors in the UK and the Netherlands. In this case, German authorities quickly seized all assets and deposits in Germany before the Icelandic managers were able to move them, thus preventing them from being transferred to Iceland or other offshore accounts.[23] German depositors started to get their capital back on 22 June 2009, but lost accrued interest

[topt]

Thanks - that is going to upset a lot of people with fixed rate accounts.

Why?

Because many people who have a lot of cash in fixed rate accounts were recommended to keep each account/group below the 85k level at which they would be refunded should the financial institution go down. If that is fixed then they would have to leave it in and take the risk or lose interest (if they were allowed to withdraw) before rebalancing their money to be below the new lower level.

You could argue the risk may be small but Northern Rock went down not that long ago and there are a lot of new smaller "challenger" banks and building societies who could be vulnerable.

[alanrchase]

Thanks - that is going to upset a lot of people with fixed rate accounts.

Why?

Because many people who have a lot of cash in fixed rate accounts were recommended to keep each account/group below the 85k level at which they would be refunded should the financial institution go down. If that is fixed then they would have to leave it in and take the risk or lose interest (if they were allowed to withdraw) before rebalancing their money to be below the new lower level.

You could argue the risk may be small but Northern Rock went down not that long ago and there are a lot of new smaller "challenger" banks and building societies who could be vulnerable.

I do happen to have money in 5 year fixed interest above the guaranteed amount. I am not loosing sleep over it.

[VBF]

Thanks - that is going to upset a lot of people with fixed rate accounts.

Why?

Because many people who have a lot of cash in fixed rate accounts were recommended to keep each account/group below the 85k level at which they would be refunded should the financial institution go down. If that is fixed then they would have to leave it in and take the risk or lose interest (if they were allowed to withdraw) before rebalancing their money to be below the new lower level.

You could argue the risk may be small but Northern Rock went down not that long ago and there are a lot of new smaller "challenger" banks and building societies who could be vulnerable.

I do happen to have money in 5 year fixed interest above the guaranteed amount. I am not loosing sleep over it.

That, of course is your choice, but this is like an insurance policy. Usually insurance is optional but when one needs it is when one regrets not having it!

The announcement merely informs us that our level of insurance is changing and, should we wish to maintain it. we need to take action.

I still think it's dammed annoying, but it is what it is!

[alanrchase]

Thanks - that is going to upset a lot of people with fixed rate accounts.

Why?

Because many people who have a lot of cash in fixed rate accounts were recommended to keep each account/group below the 85k level at which they would be refunded should the financial institution go down. If that is fixed then they would have to leave it in and take the risk or lose interest (if they were allowed to withdraw) before rebalancing their money to be below the new lower level.

You could argue the risk may be small but Northern Rock went down not that long ago and there are a lot of new smaller "challenger" banks and building societies who could be vulnerable.

I do happen to have money in 5 year fixed interest above the guaranteed amount. I am not loosing sleep over it.

That, of course is your choice, but this is like an insurance policy. Usually insurance is optional but when one needs it is when one regrets not having it!

The announcement merely informs us that our level of insurance is changing and, should we wish to maintain it. we need to take action.

I still think it's dammed annoying, but it is what it is!

Agreed. Did not realize it was linked to the Euro. Perhaps it isn't? Can't be ars*d to open all those accounts with different banks to cover various eventualities. My stupidity? Maybe tomorrow I will be crying in my beer.

[topt]

Agreed. Did not realize it was linked to the Euro. Perhaps it isn't? Can't be ars*d to open all those accounts with different banks to cover various eventualities. My stupidity? Maybe tomorrow I will be crying in my beer.

Everybody has a different attitude to risk. As the Thai's say - Up to you!

[alanrchase]

Agreed. Did not realize it was linked to the Euro. Perhaps it isn't? Can't be ars*d to open all those accounts with different banks to cover various eventualities. My stupidity? Maybe tomorrow I will be crying in my beer.

Everybody has a different attitude to risk. As the Thai's say - Up to you!

I was just going to give you a "like". Interested on what investments you consider high risk? No spare cash at the moment so can't take advantage. Not trolling, just curious.

[topt]

Agreed. Did not realize it was linked to the Euro. Perhaps it isn't? Can't be ars*d to open all those accounts with different banks to cover various eventualities. My stupidity? Maybe tomorrow I will be crying in my beer.

Everybody has a different attitude to risk. As the Thai's say - Up to you!

I was just going to give you a "like". Interested on what investments you consider high risk? No spare cash at the moment so can't take advantage. Not trolling, just curious.

One example would be High Yield Sovereign or Corporate bonds from specific countries - think Venezuela and Ukraine as examples.

[alanrchase]

Agreed. Did not realize it was linked to the Euro. Perhaps it isn't? Can't be ars*d to open all those accounts with different banks to cover various eventualities. My stupidity? Maybe tomorrow I will be crying in my beer.

Everybody has a different attitude to risk. As the Thai's say - Up to you!

I was just going to give you a "like". Interested on what investments you consider high risk? No spare cash at the moment so can't take advantage. Not trolling, just curious.

One example would be High Yield Sovereign or Corporate bonds from specific countries - think Venezuela and Ukraine as examples.

Thanks. Investments to me are a shade serious, no longer working. It is a minefield out there. Topic of the day is Greece I suppose.

[i claudius]

Its all thanks to the E.U or Europe usless as i like to call it ,i am not European i am British ,and before all other nationalities start i think most countrys over the channel are ok ,its just the club i dont want to be in ,no problem with being friends with any of its members