Germany gives 100% deposit protection

[NoddY]

http://news.bbc.co.uk/1/hi/business/7653317.stm

Helmut follows Paddy in which the State effectively underwrites the whole banking system.

If the banking system is 'so important' then why wasn't it nationalised to start with?

[AtW]

"Chancellor Merkel said 'irresponsible' managers should be held accountable"

A lot of people will go to jail very soon, certainly in the USA. That's 100 times bigger than Enron.

[NoddY]

"Chancellor Merkel said 'irresponsible' managers should be held accountable"

A lot of people will go to jail very soon, certainly in the USA. That's 100 times bigger than Enron.

I'll believe that when I see it.

Interestingly this scenario might lead to a situation where states are in competition with each other for capital inflows - based on their sovereign credit rating. Britain should do well out of this - primarily because it leads the world in screwing the taxpayer.

[HairyArsedBloke]

Ya gotta larf!

This sort of action could break the euro currency if not the whole of the EU. Bring it on

[NoddY]

Ya gotta larf!

This sort of action could break the euro currency if not the whole of the EU. Bring it on

I don't see how. In fact if Britain doesn't offer a similar guarantee quickly I see large flows of capital leaving the UK in search of a safer harbour.

[AtW]

I'll believe that when I see it.

This will happen in the USA first - maybe last too as criminals in the City got used to getting away. The good thing is that a lot of them will implicated in what they did on behalf of US banks, so good thing there is extradiction treaty between UK and USA.

Britain should do well out of this - primarily because it leads the world in screwing the taxpayer.

UK has no choice.

Frankly it was idiotic that only fixed amount of money is protected in banks - it should have always been 100% - if it's insurance based then a percentage of total deposits should have been used. I wonder if bankers got away with only using a %-tage of up to £35k in this country.

I predict Sarbanes-Oxley act will be used first to jail those scumbags - the fact that junk sub-prime morgages were packaged as AAA debt and then resold is going to be a solid reason for jailing all key people who were involved.

[bored]

The problem with 100% protection is that it encourages banks to gamble with the deposits, since they no longer compete on safety but only on the interest rate. This means that irresponsible banks that are able to offer higher interest rates will drive out responsible banks. Even a 95% protection would give some incentive for people to think about the security of their deposits and not just about the returns that they get.

I really hope that this doesn't happen in the UK.

[AtW]

The problem with 100% protection is that it encourages banks to gamble with the deposits

No it doesn't encourage it more than current deposit scheme that insures 100% of deposits up to a certain number - if bank collapses it does not matter anyway as the bank itself won't get copensated from the scheme.

What encouraged banks to gamble was lax legislation allowing high leverage derivatives and unchecked investments into property as the result of reckless lending which was result of Greenspan's low rate policy. I've always been pretty dubious about people who lauded Greenspan, it seems to me now clearly that he is one of the key people who are responsible for reckless behavior of banks.

3% of UK depositors who are not fully covered by £50k limit are likely to represent huge amount of money - possibly 50% of all deposits, so if they take money out to Germany (better than Ireland) then UK banks will be shafted big time.

[oracleslave]

This will happen in the USA first - maybe last too as criminals in the City got used to getting away. The good thing is that a lot of them will implicated in what they did on behalf of US banks, so good thing there is extradiction treaty between UK and USA.

I predict Sarbanes-Oxley act will be used first to jail those scumbags - the fact that junk sub-prime morgages were packaged as AAA debt and then resold is going to be a solid reason for jailing all key people who were involved.

Would be interesting to watch from the sidelines if this did happen. Can't see it occurring though

[bored]

No it doesn't encourage it more than current deposit scheme that insures 100% of deposits up to a certain number - if bank collapses it does not matter anyway as the bank itself won't get copensated from the scheme.

What encouraged banks to gamble was lax legislation allowing high leverage derivatives and unchecked investments into property as the result of reckless lending which was result of Greenspan's low rate policy. I've always been pretty dubious about people who lauded Greenspan, it seems to me now clearly that he is one of the key people who are responsible for reckless behavior of banks.

3% of UK depositors who are not fully covered by £50k limit are likely to represent huge amount of money - possibly 50% of all deposits, so if they take money out to Germany (better than Ireland) then UK banks will be shafted big time.

You don't understand - banks compete between each other. If bank B offers a higher interest rate than bank A, then people would put their deposits into bank B rather than bank A. If people know their money is 100% safe, they will no longer care about how dodgy the bank is. Dodgy banks will be able to offer higher interest rates, because they'll find some loopholes in the regulations (there always will be)/purchase some derivatives with hidden leverage etc, and honest banks will be unable to compete.