Northern Rock bailed out by Bank of England
- Thread starter Sim Two
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pidgbeag
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I had terrible problems getting out my money - i was lucky to get on line on the 1st night and made my withdrawal. I saw the entry under the "pending transactions" section when processed. like everyone else , i was then locked out for 2 weeks or so. I finally got back on and there was no record of my withdrawal on sept 13. I requesrted the withdrawal again and nothing happened. Got on for a 3rd time and requested the payment only this time they disabled the same day payment capability so i had to wait for 4-5 days for money to arrive. anyway, glad to see the back of them - all my money is out and back in first active which is part of RBS and has the highest credit rating of any bank in ireland. will take security over a small % higher in rate anytime!
My mother went into their office last week. No queue and no hassle getting her money out by cheque into her hand. I suggested that she not bother as there was a large element of mass hysteria about the whole thing, her money (even under the original UK CB deposit protection scheme) was guaranteed and she did not need it right now anyway but she was happier to withdraw it but keep the account open in case she wants to use it again.
Clubman
I'm delighted your mother got her money out as did many others who were hardly hysterical. Saver behaviour is referred to as rational and not irrational.
How familiar are people with the FSCS scheme in the UK ? Did they even know a deposit guarantee existed. I doubt it given the posts on this thread. But they will be from now on.
Deposit guarantees aside what really matters is access to savings in the event of the closure of a bank. People cannot afford to have their savings locked up.
By the way. The guarantee operates as a call on the balance sheet of very other bank contributing or partcipating in a deposit insurance scheme. The UK and IR schemes are ex post funded that is they are funded with small amounts up front but have a call on other banks if they run out of funds. This is how the "guarantee" operates. They also have liquidity lines they can call on, secured under government sovereign debt status. But none of them could ever hope to deal with a catastrophic failure which means that ultimately governments have to step in and literally print money. In the NR case the GBP33.5k limit didn't work nor did communication of the guarantee. The catastrophic scenario loomed large and government reacted rationally.
"Funding arrangements are critical to the design and operation of an effective deposit insurance system and the maintenance of public confidence. An effective deposit insurance system should include the mechanisms necessary to ensure that adequate funds are available to reimburse depositors promptly if an insured [bank] fails and to cover the system’s operating expenses. Inadequate funding can delay the resolution of failed banks and significantly increase costs. The design of a deposit insurance system’s funding arrangements also will affect when and by whom the costs of deposit insurance are bourne. Funding for a deposit insurance system can be arranged on an ex-ante or an ex-post basis, or through a combination of these approaches. Whether one method is preferred over another will depend, in part, on how the advantages and disadvantages associated with each approach are viewed in the context of the deposit insurance system’s design and public-policy objectives." source FDIC
I'm delighted your mother got her money out as did many others who were hardly hysterical. Saver behaviour is referred to as rational and not irrational.
How familiar are people with the FSCS scheme in the UK ? Did they even know a deposit guarantee existed. I doubt it given the posts on this thread. But they will be from now on.
Deposit guarantees aside what really matters is access to savings in the event of the closure of a bank. People cannot afford to have their savings locked up.
By the way. The guarantee operates as a call on the balance sheet of very other bank contributing or partcipating in a deposit insurance scheme. The UK and IR schemes are ex post funded that is they are funded with small amounts up front but have a call on other banks if they run out of funds. This is how the "guarantee" operates. They also have liquidity lines they can call on, secured under government sovereign debt status. But none of them could ever hope to deal with a catastrophic failure which means that ultimately governments have to step in and literally print money. In the NR case the GBP33.5k limit didn't work nor did communication of the guarantee. The catastrophic scenario loomed large and government reacted rationally.
"Funding arrangements are critical to the design and operation of an effective deposit insurance system and the maintenance of public confidence. An effective deposit insurance system should include the mechanisms necessary to ensure that adequate funds are available to reimburse depositors promptly if an insured [bank] fails and to cover the system’s operating expenses. Inadequate funding can delay the resolution of failed banks and significantly increase costs. The design of a deposit insurance system’s funding arrangements also will affect when and by whom the costs of deposit insurance are bourne. Funding for a deposit insurance system can be arranged on an ex-ante or an ex-post basis, or through a combination of these approaches. Whether one method is preferred over another will depend, in part, on how the advantages and disadvantages associated with each approach are viewed in the context of the deposit insurance system’s design and public-policy objectives." source FDIC
Good to hear that things are back to normal. That sounds just like my typical experience with NR since they launched the Demand Online account back in 2004. Make transfer on day 1, money arrives in account day 3. The only exception was of course during the last few weeks. Put a transfer through on the 17th Sept and it arrived in current account on the 28th Sept. I didn't ring anyone, get annoyed about it, or moan about the length of time taken, because I understood these were exceptional circumstances and my previous experience had always been positive.
We'll agree to differ on that point so.
Well my mother was familiar with it because (a) I told her and (b) because actually listens to the news and reads the newspaper both of which covered this issue.
Some people can. Of course the issues of potential loss of interest and having more on deposit than is guaranteed are relevant ones.
Again some might disagree with that analysis. Particularly in relation to how HM Government's handling of the affair should be judged.
Did you know before the run or did you find out after it had started ? I believe that most people didn't even know there was such a thing as a deposit insurance scheme until NR.
The UK government did what was required under the circumstances and prevented a contagious run. The real problem now is how to they roll back from a full guarantee. They seem to be considering 100k which would be a good thing for Irish savers as the government here may well have to match this figure to ensure a level playing field.
One thing is for sure most people will be more consious of guarntees from now on.
I knew about the IFSRA scheme. I was aware of the UK CB one but not the specifics of how much was guaranteed. It was the first thing that I checked when the NR thing started.
I recall a discussion on AAM some years back about the applicability of the FSCS scheme to NR's Irish depositors. I'm pretty sure I got email confirmation from the FSCS that the guarantee did indeed apply to Irish depositors.
Naah, they won't. They'll forget about this just like they forgot about bird flu, ebola, SARs, etc. Once the media stops reporting on it, no-one will much care.
Give it a year & ask someone (here even) have they bore in mind Deposit Guarantee Schemes for their savings. I think you're far more likely to see people paying heed to various interest rate caps (e.g. Rabo's €10000 @ 5%, 3.75% on balances thereafter) than guarantees.
http://business.timesonline.co.uk/t...ectors/banking_and_finance/article2602453.ece
THE world’s biggest bank, Citi, is planning to bail out Northern Rock by throwing a £10 billion lifeline to the stricken mortgage group. The deal is expected to be agreed within a week. It will send a powerful signal that Britain’s fifth-largest mortgage lender is on a more stable footing and able to raise funds in the wholesale markets...
THE world’s biggest bank, Citi, is planning to bail out Northern Rock by throwing a £10 billion lifeline to the stricken mortgage group. The deal is expected to be agreed within a week. It will send a powerful signal that Britain’s fifth-largest mortgage lender is on a more stable footing and able to raise funds in the wholesale markets...
Seems a reasonable approach to threats which pose a relatively insignificant risk to most people most of the time.
During the NR episode I believe that it was also confirmed that the UK deposit protection scheme also applied to Irish customers. In addition NR themselves confirm that the additional (HMG or UKCB?) guarantee of all deposits over and above the normal protection scheme does apply to Irish customers
This is correct the FSCS scheme applied as NR in Ireland was operating as a branch of the NR UK. In the same way Dutch provisions apply to Rabodirect . However ACCBank (a wholly owned subsidiary of RaboBank) is covered under Irish government provisions.
The amount of the guaranteed compensation is a matter of much debate as the amount should provide assurance to less sophisticated depositors. This is why in the UK there is talk of increasing the amount to 100k.
In the US which arguably has greater experience of the failure of retail deposit takers (Banks. Savings & Loans and Credit Unions) deposit takers must advertise where they are covered and also where the are not.
The explicit guarantee provided to all NR depositors is temporary.
But one shouldn't overegg the custard here. I insure my car not because I expect to have an accident but because I know that accidents can happen. Whether I have one or not is down to my driving ability or others driving ability. It would be imprudent of government not to insist that I have insurance and that it was of a certain value. After that it can only hope that I know how to drive safely. Of course it also looks to ensure that I do drive properly through rules of the road etc.
The amount of the guaranteed compensation is a matter of much debate as the amount should provide assurance to less sophisticated depositors. This is why in the UK there is talk of increasing the amount to 100k.
In the US which arguably has greater experience of the failure of retail deposit takers (Banks. Savings & Loans and Credit Unions) deposit takers must advertise where they are covered and also where the are not.
The explicit guarantee provided to all NR depositors is temporary.
But one shouldn't overegg the custard here. I insure my car not because I expect to have an accident but because I know that accidents can happen. Whether I have one or not is down to my driving ability or others driving ability. It would be imprudent of government not to insist that I have insurance and that it was of a certain value. After that it can only hope that I know how to drive safely. Of course it also looks to ensure that I do drive properly through rules of the road etc.
Put a transfer through on 17th Sept and still waiting. Was told after calling into office and phoning that it was eventually processed 01/10. NR account show funds have been transferred but still have not arrived in BOI account. NR assured us they would be in a/c last Friday at latest.
Maximus152
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NR = past history! Maybe if they will change into Citibank then I'll think about it...GeneralZod
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After they're taken over by a reasonably secure bank I'll move some funds back.