4 ms·

This is the important point: 'It's where the customers went, UK customers. Freely." If you go to a foreign bank for tax, interest or other benefits you are exe

by netcan 13y ago

This is the important point: 'It's where the customers went, UK customers. Freely." If you go to a foreign bank for tax, interest or other benefits you are exercising a high degree of financial autonomy, choosing a banking system to be a part of. It's not a default decision by someone who needed somewhere to deposit their £438 per week salary. I really don't think you can make the same argument about guaranteeing deposits in these cases, especially without a (low) cap of £10,000 or so. The Bank of England bailout transferred money from future middle class workers in the UK to wealthy and upper-middle class people, maybe 2 generations apart. I think it was immoral.

walshemj 13y ago
Not going to go down to well with a UK pensioner who lost their savings. And UK tax payers like my self who are effectively bailing out Icelandic debts.
- arethuza 13y ago
  Not really - we are bailing out people from the UK who chose to deposit their money in an Icelandic bank to get higher returns ignoring the fact that higher returns almost certainly implies higher risk. If someone is daft enough to deposit their cash abroad to get higher returns without doing enough due diligence as to where they are depositing their money that's their problem - not mine or any other taxpayers.
  - netcan 13y ago
    to add to that, it is important that they be held accountable for the outcomes of that decision. There are 2 options: (1)depositors are guaranteed by taxpayers (2)depositors are not guaranteed by taxpayers. The EU is trying to implement a 3rd option: banks never lose depositors' deposits. The 3rd option is nonsensical. At some point banks will fail. The market works better when the decision maker has skin in the game but there will still be failures and we (nations and individuals including pensioners cannot be shielded from reality completely.
  - walshemj 13y ago
    No the problem is that Iceland collectively ignored its responsibilities - for which I and other UK tax payers picked up the bill. So if a UK scammer tricked your parents or grand parents out of say 50% of their life savings you'd tell them you where stupid and deserved it?
    - arethuza 13y ago
      If it was a scam then the relevant people who worked in the UK for that bank should be in jail for fraud.
blibble 13y ago
icesave heavily advertised in the UK and had a UK based operation. they were supposedly also beholden to the EU depositor protection scheme, if they weren't then most depositors wouldn't have touched icesave. on the eve of the crisis the Icelandic politicians told the UK that they would pay out to UK depositors, then after the UK had paid out they changed their mind. no one could have predicted that the day before the collapse the Icelandic parliament would withdraw their promise
- levosmetalo 13y ago
  Icelandic legal system does not operate under a common law system, so promise is just that, a promise and nothing more. If they have actually signed a contract, a guarantee or passed a law, that would be another topic.
josephlord 13y ago
Icesave was a UK arm of the Icelandic bank. They were regulated by the UK's FSA and included in the UK's compensation scheme (FSCS). I checked before I put my ISA with them. I believe at the time deposits upto £60,000 were covered (the limit is now something like £80,000 or £100.000). As part of the EU scheme I think the intention was for local compensation schemes to pay out to consumers and reclaim from the bank's home countries if the bank failed. Obviously this part didn't happen (and possibly could never have happened) but if the FSCS did not list Icesave I would not have invested. My due diligence was checking the bank was properly covered by the UK scheme and that I did not have more money in it than was covered by the UK's compensation scheme. A case can be made that those investing more than the scheme should have lost money (not necessarily just for Icelandic banks but also for the UK banks that were bailed out) or that FSCS should not have committed to compensate but they did so they really did need to pay out.
- netcan 13y ago
  I don't really know the specifics, but at face value its sounds like the UK's FSA is the one that failed here (and got stuck with the bill). Did the Icelandic government ever agree to this liability? Was their ability to meet it ever looked in to?
  - Ergomane 13y ago
    Iceland was not obliged to ensure payment of a minimum compensation to the depositors. See the EFTA court ruling at http://www.eftacourt.int/uploads/tx_nvcases/16_11_Judgment_EN.pdf http://www.eftacourt.int/uploads/tx_nvcases/16_11_Judgment_E...
  - josephlord 13y ago
    > Did the Icelandic government ever agree to this liability? I believe it was part of some European agreement for open access to financial markets but I don't know the details. So I think that the answer is probably: Yes. Edit: I've upvoted a sibling post with the judgment on the case. I haven't read it all but it seems clear to me that the rules were complicated and there were good reasons to believe that Iceland had such a liability. >Was their ability to meet it ever looked in to? Obviously not sufficiently. It may be that it was looked into initially when it was small and manageable but no-one said stop when the Icelandic banks grew beyond the ability of their government to rescue. Of course if you withdraw cover you can trigger the bank run that brings down the system. With hindsight you know that you should have stepped in to restrict opening of accounts before the risky position was reached. Edit2 to add: Agree that FSA were at fault. My post was to explain the extent to which it was not an exotic foreign investment but a normal option available to regular customers and with the normal bank compensation scheme in place.

by netcan 13y ago

walshemj 13y ago

Not going to go down to well with a UK pensioner who lost their savings. And UK tax payers like my self who are effectively bailing out Icelandic debts.

arethuza 13y ago
Not really - we are bailing out people from the UK who chose to deposit their money in an Icelandic bank to get higher returns ignoring the fact that higher returns almost certainly implies higher risk. If someone is daft enough to deposit their cash abroad to get higher returns without doing enough due diligence as to where they are depositing their money that's their problem - not mine or any other taxpayers.
- netcan 13y ago
  to add to that, it is important that they be held accountable for the outcomes of that decision. There are 2 options: (1)depositors are guaranteed by taxpayers (2)depositors are not guaranteed by taxpayers. The EU is trying to implement a 3rd option: banks never lose depositors' deposits. The 3rd option is nonsensical. At some point banks will fail. The market works better when the decision maker has skin in the game but there will still be failures and we (nations and individuals including pensioners cannot be shielded from reality completely.
- walshemj 13y ago
  No the problem is that Iceland collectively ignored its responsibilities - for which I and other UK tax payers picked up the bill. So if a UK scammer tricked your parents or grand parents out of say 50% of their life savings you'd tell them you where stupid and deserved it?
  - arethuza 13y ago
    If it was a scam then the relevant people who worked in the UK for that bank should be in jail for fraud.

blibble 13y ago

icesave heavily advertised in the UK and had a UK based operation. they were supposedly also beholden to the EU depositor protection scheme, if they weren't then most depositors wouldn't have touched icesave. on the eve of the crisis the Icelandic politicians told the UK that they would pay out to UK depositors, then after the UK had paid out they changed their mind. no one could have predicted that the day before the collapse the Icelandic parliament would withdraw their promise

levosmetalo 13y ago
Icelandic legal system does not operate under a common law system, so promise is just that, a promise and nothing more. If they have actually signed a contract, a guarantee or passed a law, that would be another topic.

josephlord 13y ago

Icesave was a UK arm of the Icelandic bank. They were regulated by the UK's FSA and included in the UK's compensation scheme (FSCS). I checked before I put my ISA with them. I believe at the time deposits upto £60,000 were covered (the limit is now something like £80,000 or £100.000). As part of the EU scheme I think the intention was for local compensation schemes to pay out to consumers and reclaim from the bank's home countries if the bank failed. Obviously this part didn't happen (and possibly could never have happened) but if the FSCS did not list Icesave I would not have invested. My due diligence was checking the bank was properly covered by the UK scheme and that I did not have more money in it than was covered by the UK's compensation scheme. A case can be made that those investing more than the scheme should have lost money (not necessarily just for Icelandic banks but also for the UK banks that were bailed out) or that FSCS should not have committed to compensate but they did so they really did need to pay out.

netcan 13y ago
I don't really know the specifics, but at face value its sounds like the UK's FSA is the one that failed here (and got stuck with the bill). Did the Icelandic government ever agree to this liability? Was their ability to meet it ever looked in to?
- Ergomane 13y ago
  Iceland was not obliged to ensure payment of a minimum compensation to the depositors. See the EFTA court ruling at http://www.eftacourt.int/uploads/tx_nvcases/16_11_Judgment_EN.pdf http://www.eftacourt.int/uploads/tx_nvcases/16_11_Judgment_E...
- josephlord 13y ago
  > Did the Icelandic government ever agree to this liability? I believe it was part of some European agreement for open access to financial markets but I don't know the details. So I think that the answer is probably: Yes. Edit: I've upvoted a sibling post with the judgment on the case. I haven't read it all but it seems clear to me that the rules were complicated and there were good reasons to believe that Iceland had such a liability. >Was their ability to meet it ever looked in to? Obviously not sufficiently. It may be that it was looked into initially when it was small and manageable but no-one said stop when the Icelandic banks grew beyond the ability of their government to rescue. Of course if you withdraw cover you can trigger the bank run that brings down the system. With hindsight you know that you should have stepped in to restrict opening of accounts before the risky position was reached. Edit2 to add: Agree that FSA were at fault. My post was to explain the extent to which it was not an exotic foreign investment but a normal option available to regular customers and with the normal bank compensation scheme in place.