Now guess what other bank I used…

Published on 9 October 2008 in , , , , ,

They say a week is a long time in politics. Maybe they should add a new one – a week is a long time in banking during a credit crunch.

Two days on and Icesave is still proclaiming that We hope to provide you with more information shortly although BBC News now has a piece saying that details of how to claim compensation will be available tomorrow.

If only that was the end of the saga.

A few months ago I decided I needed to spread the risk on my accounts so opened another account with… you guessed it… Kaupthing Edge!

That’s the same Kaupthing Edge whose UK operations were yesterday declared in default, and the savings book swiftly flogged off to ING Direct.

I didn’t have a huge amount of money with Kaupthing Edge, but at least what little there is isn’t stuck in a compensation queue.

Unlike Icesave, Kaupthing Edge UK was fully regulated in the UK – which is one reason why I felt reasonably happy to leave my money in there after Icesave shut the doors. The UK Treasury has had a bit of practise handling failing banks, and its handling of such situations is now swift and to the point. The fact that it was all a done deal by the time the public knew was happening, shows that they were well prepared.

One thing that did cross my mind was, with the UK operation gone, how long would Kaupthing itself manage to survive in Iceland given that the whole of it’s UK operation was it’s second biggest earner outside Iceland.

The answer was… not very long. Their press release this morning stated that:

the Financial Services Authority in the UK transferred Kaupthing Edge from the bank’s subsidiary, Kaupthing Singer & Friedlander. Kaupthing Singer & Friedlander was subsequently placed into administration and Kaupthing Bank’s creditors pointed out that this situation represented an event of default according to the parent company’s loan agreements and was therefore a technical default. It did not matter that the parent company had sufficient liquidity and its position was solid.

Kaupthing Press Release: 9 October 2008

It’s like a house of cards. One bit is removed, and the whole thing crumbles. Kaupthing has now handed itself over to the Icelandic Financial Supervisory.

Back in the UK, it’s three banks down (Icesave’s owner Landsbanki also owned the oddly named Heritable bank which was fully UK regulated, and its savings book taken off to ING Direct as well) and the week’s not even over. As I wait for my compensation forms to get the cash, I can’t help but hope that next week is a little calmer.


  • Kirk says:

    It’s all very very silly now.
    But, yes. At least the government have the hang of “save the money, then announce it” now.
    All we need to do is shut the press up for a while and the credit crunch would be over!

  • Andrew Bowden says:

    It doesn’t help when the press aren’t even consistent in their message. BBC News had been reporting that Alistair Darling was going to protect Icesave savings. Yet 48 hours later, I was still seeing new articles – one on the Telegraph – telling people they’d lose anything over £50,000! Feeding yet more worry.
    As I remarked to Catherine in the pub, so much of this is self-fulfilling prophecy. One person panics, and stops doing things like lending, or spending. That worry spreads to two other people. Who spread it to four people. Who spread it to eight people.
    And before you know it, the whole economy is up the spout, people are losing their jobs and banks are closing left right and centre.
    And all because one person panics…

  • William says:

    I could write thousands of words on this. But yes, inaccurate reporting all over the place. There came a point, quite early on this week, when I realised I knew far more about the story and had researched it more thoroughly than most of the “journalists” reporting on it. So I just stopped watching the news bulletins and got my information from BBC Parliament, the treasury website and the FSCS. Also, “independent financial advisors” – how qualified are they really?
    I’m actually a big defender of the way Iceland have handled this. Their citizens are in a far worse situation than we are, and their PM has to protect his own country first. His reaction has been far calmer, measured and eloquent than our own government. It does also seem that the other Nordic countries have let them down with regards to the reciprocal arrangement they were supposed to have for compensation scheme.
    Perhaps the one mistake they made was first nationalising Glitnir without doing anything about the other two banks. You only have to look at the forums on various personal finance sites to see that as soon as that was announced UK savers started a run on Icesave. There must have been all sorts of alarms going off and a lot of people nervously watching screens in Reykjavík on Sunday night.
    Interesting how broadly worded this new anti-terror legislation is that it can be applied to something which has nothing whatsoever to do with terrorism.
    Oh and I had/have money in both banks too.. I suspect we’ll have a long wait for the Icesave money, what with all the arguing about who will pay for it, but at least ING looks relatively secure now – by authorising/arranging the sale of the deposits our government has effectively guaranteed them, even if the money would legally have to come from the Dutch compensation scheme.