Potential Bank Bail In

[BananaMan]

I have saved a lot of money towards a house, to the point where the deposit i'll put down would be around 50%.

However with prices still rising there is being absolutely no value in the area of Dorset/Hampshire i am looking, thus i cant see myself buying in the next year.

My thinking is the only thing that will see house prices fall will at the same time cause huge damage to the banking system thus a possible need for a Cypriot style bail in.

Now am i just being over paranoid and this will not happen in Britain as our central bank can print as much as the banks need or could it.

Im also thinking if this was to happen whichever party was in power at the time would die a death, thus another reason for it not too.

[BananaMan]

Bump to get opinions!

[workingpoor]

I'm in the same position and although below the £85k deposit guarantee I still fear a savings grab at some point.

I don't trust the deposit guarantee never have, it could take years before you get refunded.

Been thinking about moving my capital into a supermarket account bugger all interest but not getting any meaningful interest from the bank anyway just figure a supermarket account would be outside the realms of a bank deposit savings grab in event of a Cypriot style bail in.

Too risky to keep cash in the home I was looking at a safe deposit box somewhere but I don't think they're secure either.

Could maybe buy gold bars but have to pay for storage could result in a negative real term loss esp if gold falls further, in reality tho in the event of a big bank bail in gold should go up. Hmmm

(This is not advice)

Welcome to HPC new member

Edited December 30, 2013 by workingpoor

[BananaMan]

Surely the supermarket banks are in no way connected to the actual supermarket though ... Im going to split it into several accounts.

But is there a need for a bail in as we have QE which is just the same as a bail in but a slower way of doing it.

[MARTINX9]

Surely the supermarket banks are in no way connected to the actual supermarket though ... Im going to split it into several accounts.

But is there a need for a bail in as we have QE which is just the same as a bail in but a slower way of doing it.

Tesco bank is independent - but Sainsburys bank is a joint venture with Lloyds so hardly independent.

In reality if there is a bail in it will apply to all UK banks - supermarket or not.

Maybe the best bets might be the small local building societies - but of course most of them deposit your savings in one of the big banks.

No real protection - unless you know someone who can tip you off.

Only solution is to spread the cash about - and hope they don't target small balances!

[zugzwang]

A house price crash won't happen without a run on sterling, gilts or equities. All three should provide good shorting opportunities just as they did in 2008, the banks especially.

[oracle]

I have saved a lot of money towards a house, to the point where the deposit i'll put down would be around 50%.

However with prices still rising there is being absolutely no value in the area of Dorset/Hampshire i am looking, thus i cant see myself buying in the next year.

My thinking is the only thing that will see house prices fall will at the same time cause huge damage to the banking system thus a possible need for a Cypriot style bail in.

Now am i just being over paranoid and this will not happen in Britain as our central bank can print as much as the banks need or could it.

Im also thinking if this was to happen whichever party was in power at the time would die a death, thus another reason for it not too.

...erm, not really, but cyprus as a test bed has actually been a catastrophic failure, and set of some quite nasty geopolitical tensions the original "muggers" rather would not have been raised.( ie russia's genetic and historic ties to the greeks and cypriots)

....bearing in mind now the brits and the yanks,and the ruskies are quite sympathetic toward the greek/cypriot situation...the EU frankly dare not risk the wrath of both combined.

if they were to attempt such a feat, then we will finish the job.

no more rebuilds..it will basically be genocide.20000 nukes(plus whatever has been developed since then, dropped similtaneously on the major power centres- rome and frankfurt initially)...there will be no survivors.

the best the EU can hope for out of this mess is to go back to being a trading bloc, not an attempted empire.

Edited December 30, 2013 by oracle

[underscored]

I don't see a HPC. Not without a complete change of the political guard. http://www.rollingstone.com/politics/blogs/taibblog/outrageous-hsbc-settlement-proves-the-drug-war-is-a-joke-20121213

The financial system is untouchable currently and will be bailed out again when it all blows up the next time (sovereign debt crisis).

[ManVsRecession]

I'm not sure but I don't think the Cyprus bail in affected business accounts. Investigate first obviously, but you could form a Ltd company and lend your money to it.

Alternatively a suitably hedged trading position would do the job. ( long stock / short calls etc). Depends on knowing what you're doing though.

Personally, if I had half a houseworth of cash sitting there, I'd open a US based stock/options/bond account, use most of it buying safe near-dated bonds and roll them over as they mature, and keep 5% or so aside to buy 2015 or 2016 calls in profitable tech stock, in the event of a big crash.

As I say, you'd need to know what you're doing, but just throwing some options out there.

This is pretty good book to learn about the basics of bonds. ( real ones, not those "savings bonds" that banks offer).

http://www.amazon.co.uk/First-Steps-Bonds-Successful-Strategies/dp/0273656570/ref=sr_1_1/275-9196062-9164618?s=books&ie=UTF8&qid=1388447556&sr=1-1&keywords=first+steps+in+bonds

edit: I also agree it won't happen here.. we can just print the stuff. ( though again, I'd still hedge in some way.. I learned my lesson in 2009.

Edited December 31, 2013 by ManVsRecession

[Venger]

A house price crash won't happen without a run on sterling, gilts or equities. All three should provide good shorting opportunities just as they did in 2008, the banks especially.

Reminder to self; when more awake, check what happened with main bank shares in the last real crash, 89-95, when banks were not catastrophically under-capitalised.. (as they were in 2007) given in 2014, the banks may be better 'capitalised' today with QE/FLS money backing them.

Although capital can't be printed. Only markets can create capital by valuing assets above liabilities.

[Bloo Loo]

Reminder to self; when more awake, check what happened with main bank shares in the last real crash, 89-95, when banks were not catastrophically under-capitalised.. (as they were in 2007) given in 2014, the banks may be better 'capitalised' today with QE/FLS money backing them.

Although capital can't be printed. Only markets can create capital by valuing assets above liabilities.

QE funds are liabilities that produce liquidity and raise asset prices

[John51]

I have saved a lot of money towards a house, to the point where the deposit i'll put down would be around 50%.

However with prices still rising there is being absolutely no value in the area of Dorset/Hampshire i am looking, thus i cant see myself buying in the next year.

My thinking is the only thing that will see house prices fall will at the same time cause huge damage to the banking system thus a possible need for a Cypriot style bail in.

Now am i just being over paranoid and this will not happen in Britain as our central bank can print as much as the banks need or could it.

Im also thinking if this was to happen whichever party was in power at the time would die a death, thus another reason for it not too.

In your position I would say that there is an extra value to buying, over and above what most would deem 'value' in the asking price. As in your savings can't be touched if those saving are converted to home equity. Depends on what you're paying in rent now. If a repayment mortgage on the 50% to 60% owed is much less than your current rent, then to me it's a no brainer, jump right in.

If tshtf and savings get wiped, you've escaped that and are in a better position than many debt slaves. If house prices fall, you've missed an opportunity to buy cheaper.

Right now you are risking most of your savings (worst case scenario) against paying less for a house further down the line (likely(?) scenario.)

[19 year mortgage 8itch]

In your position I would say that there is an extra value to buying, over and above what most would deem 'value' in the asking price. As in your savings can't be touched if those saving are converted to home equity. Depends on what you're paying in rent now. If a repayment mortgage on the 50% to 60% owed is much less than your current rent, then to me it's a no brainer, jump right in.

If tshtf and savings get wiped, you've escaped that and are in a better position than many debt slaves. If house prices fall, you've missed an opportunity to buy cheaper.

Right now you are risking most of your savings (worst case scenario) against paying less for a house further down the line (likely(?) scenario.)

Ah, the "Dive right in, the water's lovely" approach.

Sweet.

Edited December 31, 2013 by 7 Year Itch

[Billy soy]

I hope that answers all your questions BananaMan. Total War it is.

That escalated quickly.

[Bloo Loo]

Ah, the "Dive right in, the water's lovely" approach.

Sweet.

the last bail in was 10% for those with over 100K euros.

If your house falls 10% you lose 20% of your "equity" and still owe 50% of the original value. This is the part of leverage people often dont get...course, its called leverage because the gains are just as Spectacular.

A total wipe out is not a bail in...its a wipe out.

[disenfranchised]

Tesco bank is independent - but Sainsburys bank is a joint venture with Lloyds so hardly independent.

In reality if there is a bail in it will apply to all UK banks - supermarket or not.

Both Sainsburys and Tesco banks are full independent members of the UK Payments Council and operate under their own banking licenses. I believe Sainsburys are currently in the process of buying the 50% stake Lloyds holds via HBOS, so it will be completely independent of them shortly.

Agree with you on the bail-in though.

A couple of the high street banks I have worked with have an offshore banking arm that manages accounts opened in places like the Isle of Man. I know in at least one case, this offshore division is a seperate legal entity to their mainstream UK based retail banking operation; I doubt deposits held in the IOM would be part of a bail-in.

The UK deposit guarantee scheme doesn't apply - they have their own scheme. IOM is so legally seperate from the UK that I had to get a work permit dispensation from the IOM Government just to fly over there for a couple of days for some meetings.

I'm not an expert on such things, but food for thought for perhaps?

Edited December 31, 2013 by disenfranchised

[Ah-so]

Reminder to self; when more awake, check what happened with main bank shares in the last real crash, 89-95, when banks were not catastrophically under-capitalised.. (as they were in 2007) given in 2014, the banks may be better 'capitalised' today with QE/FLS money backing them.

Although capital can't be printed. Only markets can create capital by valuing assets above liabilities.

Banks are better capitalised but it has nothing to do with QE. Banks have had to raise capital by rights issues or retaining dividends.

[Ah-so]

...erm, not really, but cyprus as a test bed has actually been a catastrophic failure, and set of some quite nasty geopolitical tensions the original "muggers" rather would not have been raised.( ie russia's genetic and historic ties to the greeks and cypriots)

....bearing in mind now the brits and the yanks,and the ruskies are quite sympathetic toward the greek/cypriot situation...the EU frankly dare not risk the wrath of both combined.

if they were to attempt such a feat, then we will finish the job.

no more rebuilds..it will basically be genocide.20000 nukes(plus whatever has been developed since then, dropped similtaneously on the major power centres- rome and frankfurt initially)...there will be no survivors.

the best the EU can hope for out of this mess is to go back to being a trading bloc, not an attempted empire.

Why was the Cyprus bail in a disaster? You do not state why, despite your "erm" and blabbering on about nukes.

I think it was a success and an excellent template for others to follow.

Legislation for bail in is just going through parliament so should be available for use soon. The Coop was also sorted out through a form of bail in.

Some other points relating to other posts:

- To the OP, spread your money around or go for National Savings.

- The supermarket banks are no safer than any other bank. I think they are reliant upon other banks' infrastructure anyway. They are white label accounts.

- The Cyprus bail in did affect business accounts as well as personal accounts.

Edited December 31, 2013 by Ah-so

[Executive Sadman]

A large portion of cypriot accounts had well over 100k euro in them, so the seizure was effective in reducing banks liabilities. Here the vast majority of accounts have under £85k in them so a similar seizure would be pointless. If we did go that route my guess is the fscs limit would mean nothing

[Bloo Loo]

Why was the Cyprus bail in a disaster? You do not state why, despite your "erm" and blabbering on about nukes.

I think it was a success and an excellent template for others to follow.

Legislation for bail in is just going through parliament so should be available for use soon. The Coop was also sorted out through a form of bail in.

Some other points relating to other posts:

- To the OP, spread your money around or go for National Savings.

- The supermarket banks are no safer than any other bank. I think they are reliant upon other banks' infrastructure anyway. They are white label accounts.

- The Cyprus bail in did affect business accounts as well as personal accounts.

Of course, closing the banks and making the errant execs redundant would have been a success too.

At the moment, instead of a 1 all draw, we have Bankers 1, savers 0

[bearwithasorehead]

...erm, not really, but cyprus as a test bed has actually been a catastrophic failure, and set of some quite nasty geopolitical tensions the original "muggers" rather would not have been raised.( ie russia's genetic and historic ties to the greeks and cypriots)

....bearing in mind now the brits and the yanks,and the ruskies are quite sympathetic toward the greek/cypriot situation...the EU frankly dare not risk the wrath of both combined.

if they were to attempt such a feat, then we will finish the job.

no more rebuilds..it will basically be genocide.20000 nukes(plus whatever has been developed since then, dropped similtaneously on the major power centres- rome and frankfurt initially)...there will be no survivors.

the best the EU can hope for out of this mess is to go back to being a trading bloc, not an attempted empire.

big lols. I love Oracle!

But to return to OP's predicament. Why not park some in trackers or decent divi-paying shares wrapped in an ISA?

[BananaMan]

Thanks for the responses, its another nobody really knows which is how the economy is these days.

Wouldnt want to buy shares as to me they look overpriced and im also of the opinion if i dont understand what im investing in the not too bother and i dont have the time to do research.

Ive a daughter who will be 4 shortly and will be starting school next Spetember, maybe if someone needs a quick cash sale then i'll be in a strong position, but from whats happened in the last 12 months to prices i see sellers holding out for the top whack.

I can get work abroad and emigrate but with a kid thats a ball ache and it still leaves the money lying around.

Im hoping the coalition falls apart soon as even the Labour Party will be better then this shambles!

Here is wishing Dave, Osborne and the gang an extremely unhappy New Year.

[John51]

Ah, the "Dive right in, the water's lovely" approach.

Sweet.

Do you not think the amount of cash held should influence a buying decision?

Taking on loads of debt for an 'overpriced' asset is folly sure enough but the OP won't be looking for a 90% mortgage. As I said, it depends on how much rent is currently being paid. If the mortgage is low enough compared to rent to handle an increase in interest rates, you still think an 'overpriced' house purchase is wrong?

[dances with sheeple]

Do you not think the amount of cash held should influence a buying decision?

Taking on loads of debt for an 'overpriced' asset is folly sure enough but the OP won't be looking for a 90% mortgage. As I said, it depends on how much rent is currently being paid. If the mortgage is low enough compared to rent to handle an increase in interest rates, you still think an 'overpriced' house purchase is wrong?

Buying an average house now would be the quickest way to vapourise your savings IMO. The bail-in is an outside chance IMO, at least in a form that actually dips depositors accounts, they can print it up no problem, a depositor involved bail- in in the UK would destroy belief in money faster than you can say Negative Equity.

[dryrot]

Thanks for the responses, its another nobody really knows which is how the economy is these days.

Wouldnt want to buy shares as to me they look overpriced and im also of the opinion if i dont understand what im investing in the not too bother and i dont have the time to do research.

I can understand but if u have cash sloshing around you should consider a simple shares ISA. Either a tracker or something like shell b stock. Not exciting but makes sense.

(Now watch RDSB crash :-) )

Edited January 1, 2014 by dryrot