The Banking Crisis in the UK

The Influence of UK banking crisis

Banking 5The financial crisis has made amendments to the British law on deposit insurance. After the collapse with one of the country’s largest banks named Northern Rock, when thousands of angry depositors stormed the offices of a credit institution, the UK government announced new improvements. First of all, it is forever abolished the so-called 10 percent deductible, which the bank’s customers lost during return of the deposit, and provided customers with absolute guarantees on deposits in an amount not exceeding 35 thousand pounds.

And at the beginning of this fall the level of guarantees on bank deposits in the UK has been increased from 35 to 50 thousand pounds. Now in the case of the collapse of the bank its depositors will be paid the full amount of the deposit up to 50 thousand pounds. In practice, depositors of banks closed, for example, in October 2008, did not lose anything, because the UK government announced that the Ministry of Finance compensate them due to own expense, but not at the expense of the deposit insurance system.

Protection of Iceaver users

Recently, the UK had to once again resort to extraordinary measures. Now they did it in order to protect British depositors who put their money in accounts with Icelandic banks. The fact that residents of the United Kingdom of Icelandic banks were very popular confirmed by the moment that they have deposits of about 300 thousand Britons. But since the government of Iceland has failed to provide the British deposit guarantee, the authorities of the United Kingdom have used the Anti-Terrorism Act of 2001 and the “frozen” about 4 billion pounds (about $ 7.2 billion dollars) British contributions to the accounts of Icelandic bank Landsbanki , which owns a controlling stake in the Icelandic internet bank Icesave.

Icesave notified of termination of financial transactions, including cash payments on deposits, and credit cards which put thousands of Britons are facing the real threat of losing their savings. Some even became bankrupt as a consequence of the loss (see TBCS for more information). It should be noted that the authorities of the two countries are negotiating with a view to finding a way to provide a quick full protection of the depositors of the bank and its British affiliate.

Good banking advice

The saying about the need to keep the eggs in different baskets should be clear to all. Those who have the brains should clearly understand that anything can happen. Therefore, with savings it is better to distribute them in different financial institutions. If the bank for any reason will be insolvent and is declared bankrupt, each investor, having contributed to any of the banks can count on compensation for material losses. But nervous and fuss if suddenly the bank was bankrupt, will be much less than those who have entrusted their money to several credit institutions.