Reply to: Banking Risk

[hugebrain]

What about government bonds. How would one invest company money in them? Is it all electronic or do you have to worry about losing the certificates and depositing coupon payments etc.?

[TheFaQQer]

So that would be the taxpayer's money, i.e. us. Well, those of us that pay taxes, that is....

Nationalisation by stealth.

[meridian]

Good news:

From the FT

"Alistair Darling, chancellor of the exchequer, announced on Monday that the government was stepping in ....

So that would be the taxpayer's money, i.e. us. Well, those of us that pay taxes, that is....

[max]

In light of the rather hysterical media coverage around Northern Rock and the resulting panic withdrawals, several threads on here and other websites have talked about the BoE(?) compensation schemes etc that safeguard your money.

However, I presume that is only protecting the consumer, and I'm sure I'm not the only one here with a significant sum languishing in my business accounts.

No matter how small the risk, it is not a pleasant thought that you could potentially lose those large sums you hadn't withdrawn just to prevent Hector getting his slice. So:
- what if Cater Allen / A.N. Other were to go under - is the money protected by BoE in any way?
- what steps can be taken to reduce or spread the risk.

Or should I just buy a load of gold and stick it under the bed?

Good news:

From the FT

"Alistair Darling, chancellor of the exchequer, announced on Monday that the government was stepping in to guarantee all of Northern Rock’s deposits. The Treasury said similar assurances would be available to customers of any other lender that ran into difficulty in the current turmoil.

The Financial Times has also learnt that the Treasury, the Bank of England and the Financial Services Authority have concluded that the current system for protecting savers, which only guarantees deposits up to £35,000, is inadequate. They have already begun a review of the system and are minded to opt for a US-style alternative, ringfencing depositors’ money in the event of a bank’s failure."

Apparently all deposits protected

[Gonzo]

Yes you could withdraw in cash. I would suggest a board meeting be held and minuted though given the sums involved. Cash however is susceptible to fire and theft to name but two. Where would you keep it?

Perhaps gold is the way to go?!

Cash is allowed but not advisable for most businesses.

Mrs Gonzo sorts out the AML and KYI documentation for companies setting up with her bank. She had to rush one through - a certain international airline had started a new route to an island in the Caribbean, but they didn't have any bank accounts there so all their money was held in cash in a safe at their office at the airport.

They were a bit worried about that

[max]

In light of the rather hysterical media coverage around Northern Rock and the resulting panic withdrawals, several threads on here and other websites have talked about the BoE(?) compensation schemes etc that safeguard your money.

However, I presume that is only protecting the consumer, and I'm sure I'm not the only one here with a significant sum languishing in my business accounts.

No matter how small the risk, it is not a pleasant thought that you could potentially lose those large sums you hadn't withdrawn just to prevent Hector getting his slice. So:
- what if Cater Allen / A.N. Other were to go under - is the money protected by BoE in any way?
- what steps can be taken to reduce or spread the risk.

Or should I just buy a load of gold and stick it under the bed?

You'd think the govt would have more regulation to protect business accounts, as the impact on banking failure would be magnified by subsequent business failures.

Probably thinking of a mystical fantasy world...but not been able to get details. Abbey/Carter Allen being both owned by Santander, doesn't fill me with great confidence.

[max]

No - first 2k is covered; next 33k is covered up to 90%, so the most you are guaranteed is 31700

Also...IIRC, the compensation covers only savings accounts, not current accounts.

Seems a bit harsh..but wouldn't suprise me.

I wonder what length of time is involved in compensation payout.

[Old Greg]

IIRC there is a limit to how much the company can loan it's directors, something like 5k each.

Hmmm - I thought you could loan more than that as long as it's on a 'commercial basis', but I know little enough about this so am probably wrong.

[r0bly0ns]

My emercgency back up plan would probably be to loan it to myself and put it in my personal NS&I account.

IIRC there is a limit to how much the company can loan it's directors, something like 5k each.

[TheFaQQer]

I thought the limit was per account, rather than per customer?

Nope - take that back.

If the account is in a joint name, though, you get double the protection, since it applies to each person.

[TheFaQQer]

also be careful with personal accounts since some of the sneakier banks operate under more than one name and still only give a guarantee on a total of £35K

I thought the limit was per account, rather than per customer?

[Old Greg]

My emercgency back up plan would probably be to loan it to myself and put it in my personal NS&I account.

[Crossroads]

Can businesses withdraw the money in Cash? I'm not sure. Would it still count as the company's money, or would the scum count it as a dividend or wages once it went from a bank account to currency?

Yes you could withdraw in cash. I would suggest a board meeting be held and minuted though given the sums involved. Cash however is susceptible to fire and theft to name but two. Where would you keep it?

Perhaps gold is the way to go?!

[hugebrain]

money

No the guarantee doesn't apply to business accounts, so we are in big trouble. (also be careful with personal accounts since some of the sneakier banks operate under more than one name and still only give a guarantee on a total of £35K)

Can businesses withdraw the money in Cash? I'm not sure. Would it still count as the company's money, or would the scum count it as a dividend or wages once it went from a bank account to currency?

[Old Greg]

No - first 2k is covered; next 33k is covered up to 90%, so the most you are guaranteed is 31700

Does this hold true for business deposits as well as personal deposits?