The Money Blog

In last two weeks there have been many rumors and speculations in the media about the safety of Kaupthing Edge. And I have been bombarded by questions from worried savers whether to take theirs savings out of the bank. So after conducting my research and investigation into this matter, I can now boldly and confidently say Kaupthing Edge is safe and savings are protected.

WHY?
Because Kaupthing Edge is a full member of the UK Financial Services Compensation Scheme so savings are protected (up to £35,000) the same as any other UK Bank. As funds are held with Kaupthing Singer & Friedlander Ltd (KSF) which is independently rated and regulated to Kaupthing Bank which means Kaupthing Edge is in essence the same as any other UK Bank (Singer & Friedlander being an old British merchant Bank so the scheme carries over). As KSF does not white label any other deposits (such as AA Savings and Halifax running under the same compensation so you are only covered once) it can be argued they provide better protection than other Banks!

Also
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.

Novation Clause
13. I see in the terms and conditions that my deposit might, in the future, be with Kaupthing Bank, and not Kaupthing Singer & Friedlander Ltd. What would this mean for me?

We have no intention of moving your deposit to Kaupthing Bank, and though in the unlikely event that we were to do so, we would give you at least 30 days notification.

If this did happen you would remain a Kaupthing Edge customer and your account number, details and call centre contacts would not change. Your money would remain safe, and protected up to exactly the same amount as the UK Financial Services Compensation Scheme (which currently pays up to £35,000). The only material difference to you would be the structure of the compensation itself, which would be provided by two schemes (sometimes referred to as a passport scheme):

* the first level of protection is provided under the Icelandic Depositors’ and Investors’ Guarantee Fund. The maximum protection under this scheme is 100% of the first €20,887 (or the sterling equivalent) of your total deposits held with us.

* The second level of protection is provided by the UK Financial Services Compensation Scheme. This scheme “tops-up” your protection so that the protection under both schemes is equal to 100% of the first £35,000 of your total deposits held with us.

* Under EU law compensation for any losses incurred due to the failure of a bank should be paid within three months - regardless of whether it is through a passport scheme or the UK Financial Services Compensation Scheme.

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

Bank of England policymakers have decided for the second month running to leave British interest rates at 5% in august. The Bank of England‘s 9 member monetary policy committee voted 7-2 to maintain the level of borrowing costs on August 7.
Policymaker Tim Besley urged the Bank of England to lift borrowing costs to 5.25 percent while David blanchflower voted for a quarter-point cut.
The three-way split was identical to last month monetary policy committee’s voting pattern, when it was also decided by a majority vote to leave rates at 5.00 percent amid slowing economic growth and soaring inflation.
“The tone of the (August) discussion confirms that the interest rate debate remains finely balanced for now,” said Capital Economics analyst Jonathan Loynes.
“Accordingly, there is little here to suggest that other members are about to join Blanchflower in voting for a cut in the very near future. Nonetheless, with inflation close to a peak and the economy heading towards recession, we still think rates could be falling by year-end and will eventually drop much further than the markets expect,” Loynes added.
British annual inflation grew at the fastest pace for 16 years in July, to a level of 4.4 percent, as food prices surged, official data revealed on August 12, following the central bank’s latest decision on rates.
The Bank of England last week warned that British inflation was set to rise sharply to around 5.0 percent this year, before declining rapidly toward the government’s target of 2.0 percent from early 2009.