Open Letter

Open Letter

 

I am writing this special article, although not related to the prophetic field, because there is something that does not seem right to me in this chaos of speculations concerning the protection of current accounts. There is a strange silence (or near-silence) around the protection of the savings in the banks. For example, in the UK the first £50,000  are guaranteed for every person and for every financial group. In practice you must not have more than 50,000 in your account and you should be protected. Chancellor Darling and Mr. Brown affirmed that 98% of accounts are in this range.

Very well! It's OK, but who guarantees the sums?
Answer:

The FSCS: http://www.fscs.org.uk/

How is financed this association?
Read the prospect from their handbook:

“FSCS is funded by levies on firms authorized by the FSA. FSCS's costs are made up of management expenses and compensation payments.
Under to new funding system that started on 1 April 2008, for the purposes of funding FSCS compensation costs, the five FSCS levy is split into broad classes:
deposits,
life and pensions,
general insurance,
investments,
and home finance.
With the exception of the deposits class, each broad class is divided into two sub-classes based on provider/intermediation activities. Each of the “sub-classes” is made up of firms which are providers or intermediaries and engage in similar styles of business with similar types of customer.
The sub-classes are based on the activities to firm undertakes (and are aligned to their FSA permissions). To firm could be allocated to one or more sub-classes according to the activities that it undertakes.

Thresholds

Each firm's contribution is calculated on the tariff base applicable to the relevant sub-class. Each firm contributes proportionally. To threshold for each sub-class is set by the FSA by reference to what to particular sub-class or class (taken as to whole) can be expected to afford in to year. The threshold sets the maximum that FSCS can levy for compensation in any one year. The model operates on the basis that to sub-class will meet the compensation claims from defaults in that sub-class up to the threshold. Ounces to sub-class reaches its annual threshold, the other sub-class in that broad class will be required to contribute to any further compensation costs up the threshold for the class as to whole. To layer of cross-subsidy is then available from the general retail pool, through which firms in the other broad classes support any other broad class which has reached its overall threshold, up to the overall limit of £4.03bn "

Well, it seems that the banks are insured by... themselves… So, if one bank default, the funds gather by the association is used to repay the accounts of the bank defaulted, but what happens if ten banks default together? I bet that FSCS will collapse.

Another point is about how much they have in their pocket? Read:

“overall limit is £4.03bn "

With 4.03 billions I don't think the FSCS could repay anything but the fat wages of their managers…

Unfortunately is not all, what  Mr. Brown and Mr. Darling (more I'm writing and more they remind me another famous couple: Stan Laurel and Oliver Hardy) affirmed that 98% of our deposit are safe. But...
What about if you have a mortgage of at least 50,000 £ and a deposit of 50.000 £?

Well the bank defaulted will use the subtraction rule: 50,000 less 50,000 = you get NIL, so in that case you  repay your mortgage with your saving… So most of us won't get anything from the protection. Is it a isolate case?

How many mortgages there are in UK?
Well, first of all look at the picture on the page: our mortgage debts are nearly equal to the balances in our saving accounts, so why did
the pair not tell us how many accounts are really protected by the new £50.000 rule?

Are they just incompetents or professional liars?

In the first case, they have to go NOW before it will be too late, in the second scenario they should be seen as traitors of public interest and charged as such.

I am not an expert, so please ask your bank or your MP whether I have got it wrong and why. I shall then be delighted to correct this page.

Meanwhile be prudent with your money!

P.S.
And I did not talk about the trust funds, life insurances, pension funds etc…