End of the world update: time to buy tins and shotguns?

So, when I said “don’t bother switching banks,” what I actually meant was “don’t bother switching banks unless your bank, instead of falling under the UK compensation scheme, falls under the compensation scheme of a small, rainy, historically very poor island which crazily overexpanded over the last five years and has absolutely no chance of meeting its bailout obligations if things go wrong”.

Sorry, Icesave investors. On the plus side, my point about the daftness of transferring money to Irish banks is made rather conclusively.

Oh, and while I’m clarifying – I’m in the lucky position where my savings (just about) go over the protected limit, and I’ve had them split between several accounts to diversify risk even before the current crisis started. While I think it’s likely that a crash – especially if it’s of a real bank, rather than ultra-high-interest online chancers – will bring full protection, it might not, so get transferring now if you’ve still got over £50k with one institution.

Relatedly, Seth Freedman has a piece in the Guardian, wondering why people who chose to sign up for ultra-high interest rates with a ropey over-leveraged bank should be bailed out at the expense of the poor and the prudent – and he has a good point. It’s fair for the government to fully compensate savers in banks that a reasonable person would see as ‘safe’ [*], but hard to justify going over the clearly stated FSCS limits for people who’re choosing to gain an extra 2% interest in exchange for investing in, say, the First Bank of Nigeria rather than Lloyds TSB.

Looking to the longer term, and today’s liquidity-for-shares UK bank nationalisation announcement, my dad has a piece up on Liberal Conspiracy arguing that liquidity bail-outs are a terrible idea, as the crisis would otherwise be an excellent opportunity to get rid of the parasitical bastards at the major investment banks and end the toll they’ve exacted on the global economy ever since the Depression. If my dad were Mark Steel, that’d be unsurprising; since he’s been a stockbroker for 30 years and is currently head of investment banking for a broking firm, it’s a little more interesting…

[*] there’s a difference between savers in Northern Rock or HBOS, and Icesave or First Bank of Nigeria here. Northern Rock was originally a safe, conservative institution that made itself unsafe without most of its customers noticing, while HBOS did something similar (with less ineptitude and worse luck). On the other hand, Landsbanki was a foreign investment bank that nobody in the UK had ever heard of, and that was massively over-extended when Icesave started – and FBN is actually a reasonably good institution by local standards that appears to be holding up well, but hello! it’s a fucking Nigerian bank!

Update 8/10: Darling has copped out slightly. Rightly, he’s agreed to pay the €20,000 that the Icelandic government should have covered to Icesave savers; and rightly, he’s frozen Landsbanki’s remaining UK assets in the hope of recovering some money to offset against the compensation. Wrongly, he’s also covering deposits over £50k, which should have been written off to “if you’re that stupid then you don’t deserve to have 2x the average annual wage in cash”. Still, it’s more evidence for my “put the deposits in whatever goddamn bank you choose and you’re still safe” theory…

4 thoughts on “End of the world update: time to buy tins and shotguns?

  1. let's just hope the message gets through. I'm sick of hearing people on the morning train ringing their friends and telling them how they moved all their money out of xxx and into YYY because of some twattery by Robert Peston or the daily express

  2. "so get transferring now if you’ve still got over £50k with one institution."

    About six months ago, I hadn't a clue about what happened to your savings if a bank failed. But since that time, unless you've been living under a rock, it must have been pretty hard not to notice that banks have been failing, and that this figure of 35k (recently increased to 50k) keep being talked about. At some point, stupid people deserve what they get, don't they (compare John's post above about councils).

    That said, all my money (sadly less than the insured figure) is with Bradford and Bingley, and I did think about Kaupthing Edge, but dismissed it mainly for the (then, seemingly illogical) reason that it clearly just an internet site attached to a foreign bank. Still, even if I had done this, I'd now just be a customer of ING instead of Abbey.

    Still, First Bank of Nigeria? That's a joke right? Surely some reference to 419 scams? Surely…?

  3. I did actually panic enough to carry extra cash yesterday in case Something Went Wrong temporarily. (My money is in HSBC and ING Direct, which appears to have been an inspired non-decision.)

    But I wouldn't in a million years be able to put money in a Nigerian bank, because I wouldn't be able to overcome the sensation of giving all my money to someone who sends me e-mail…this may prove to be a nontrivial constraint on Nigerian economic development.

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