Fears are growing over the safety of the Icelandic banking system
Fears are growing over the safety of the Icelandic banking system after Glitnir, had to be bailed out by the government 2 days ago. The Government was force to take control of Glitnir as depositors fled the country’s third-largest bank.
This has be of particular concern for savers in the UK since the remaining Iceland’s big banks, Icesave and Kaupthing Edge, are also two of Britain’s most popular online savings providers and are showing signs of weakness.
Over the past 10 days, the CDS rate for both Kaupthing Edge and Icesave have rocketed when compared with their competitors such as Barclays and Alliance & Leicester. Shares of Kaupthing fell four per cent at one stage while those of Landsbanki (Icesave) were down five per cent.
Iceland is particularly sensitive to global volatility in the banking sector due to the rapid growth of its finance sector with its reliance on the international money-markets for funding instead of High Street savers’ cash. Glitnir failed partly due to the scarcity of money on these markets following the recent collapse of Lehman Brothers.
Kaupthing said in a statement it has enough cash to pay all of its obligations for ‘at least 360 days’ and increased the level of savers’ money in its coffers relative to its loan book by 8% to 44% between April and June. A statement released on Icesave’s website yesterday said it has a deposit to loans ratio of 63% and €8bn sitting in its coffers.
Savers in both banks shouldn’t worry since both banks are covered in the UK by the Financial Services Compensation Scheme up to the maximum limit of £35,000.
Source: http://www.thisislondon.co.uk
