Kaupthing Edge – the failed bank that is continuing provide great rates for its customers

Published on 31 October 2008 in , , , , , ,

The recent banking crisis has caused me a few issues here and there. I am, after all, a HBOS shareholder and one stupid enough to take part in their recent rights issue (ouch!). I also happened to have most of my life savings, such as they are, in a certain Icelandic bank which went belly up (wowser!) Oh and in my attempt to diversify my savings portfolio, I invested a little extra money in a second Icelandic-but-UK-regulated bank which was promptly deemed to be in default and sold to the Dutch.

Yes, if you want rock solid financial advise, there is only one man to see! And then promptly ignore like your life is reliant on it!

Still, lets not let my dubious financial planning get in the way of a semi-decent blog post, especially I’ve been a very interested watcher of what’s actually happened to Kaupthing Edge since it was flogged off to ING Direct.

Much of the press around Kaupthing Edge’s demise and subsequent transfer of accounts has been around the matter of attempted withdrawals which didn’t go anywhere, and how long it’s taken to sort that mess out. In my usual high quality financial way, I didn’t try to take any money out before Kaupthing went belly up and was blissfully unaware of any problems until suddenly my small amount of cash suddenly went to a country closer to home.

So I was unaffected by all the subsequent problems, and I’ve been using my Kaupthing Edge account pretty much as normal. And indeed have been transferring money into the account, as ING Direct have had bigger issues to fry than start changing interest rates for their new customers.

Kaupthing Edge homepage on 31 October 2008

What ING have done is remove the Kaupthing Edge logo from the website homepage (it appears in plenty of other places), and removed all links inviting people to apply for new accounts.

And that’s about it.

Once you get into the online banking section, it seems barely touched since prior to Kaupthing’s demise.

Kaupthing Edge login screen, on 31 October 2008

The pre-login screen still tells you what is now a blatant lie – that savings are held with Kaupthing Singer & Friedlander (they’re not – they’re with ING), that Kaupthing Edge is UK regulated (actually since the UK government put KSF in administration, it’s now regulated by the Netherlands), and that savings are protected up to £50,000 (also no longer true – and for the positive. The Netherlands bank scheme protects to €100,000 – roughly £79,000).

From an account point of view, interest rates have also not been touched. ING’s normal rate is now 4.25% since the October interest rate drop by the Bank of England. Meanwhile in Kaupthing Edge land, the interest rate is 6.5% – completely unaffected by the fact that the Bank of England dropped interest rates by 0.5%. In fact if you still have a Kaupthing Edge account, now is really the time to pile some money in because the interest rates continue to be amongst the best in the market.

Frankly this laxity on the side of ING Direct does rather surprise me. Whilst I appreciate that the problems they’ve inherited about missing payments have been taking most of the time, I still expected them to rather promptly pass on interest rate decreases to their new customers – especially given the rather substantial rate difference between their existing customers and their “new” ones.

I didn’t expect ING to suddenly start dropping interest rates dramatically – presuming they’d want to at least keep some of their new customers – and if you suddenly drop your interest rates by 2% overnight, you aren’t going to do that – however the slowness to pass on Bank of England rate decreases is rather intriguing.

But what’s more intriguing is the continued availability of Kaupthing Edge’s fixed rate deals to existing customers.

The fixed rate deals were something I’d been especially interested in seeing what ING would do. They always required a minimum of £1,000 to open (max £5m apparently! No, my savings aren’t that expensive) and could be opened via the online banking system.

Interestingly the link to open new fixed term accounts never went anywhere following the ING takeover, and I did wonder exactly what would happen if I hit the link. Not having had a spare £1,000 that I felt comfortable being untouched for 12 months, I didn’t dare trying it. Until today anyway.

What changed my mind was the prospect of my Icesave money being slowly returned to me throughout November – like many, I’d expected it to appear after Christmas – and whilst Icesave’s demise meant I don’t have a huge amount of petty cash, I did decide I had £1,000 to do a bit of a fixed term savings account experiment.

And so, I logged into Kaupthing Edge’s website, hit the “Buy Term Desposit” link and promptly found that I could invest my money at a whopping 7.15% if I just stashed it away for 12 months.

Fixed term rates at Kaupthing Edge

A few clicks and the new account was automatically created and transferred, which surprised me – I kept expecting some kind of “Sorry, this ain’t happening” screen at each step of the process, but clearly not. Indeed, if I’d been prepared to lock it away for 36 months, I could have got 7.67%.

Either way, given interest rates look set to keep on falling, failed bank Kaupthing Edge seems to continue to be delivering. ING have already stated that fixed term deposits will be honoured by the bank (this was on a “latest news” page on their website, but has since been removed) however I was still surprised to find them not quickly finding a way to disable new fixed term deposits.

Of course it hasn’t been that long since Kaupthing Edge’s accounts were moved to the control of ING, and this could explain much of what’s going on.

One possible explanation is that ING don’t have much control over the online banking infrastructure, which could explain why fixed term deposits haven’t been cancelled (there’s still time to pass on the Bank of England interest rate decrease after all). And what ING will do with its new customers really remains to be seen. I for one will be watching their moves carefully – whilst recognising that for now, their new “subsidiary” still offers top notch rates for its existing customers.

One final interesting side effect of the Kaupthing Edge saga is perhaps less noticeable, but no less interesting. And it refers to a domain name – kaupthingedge.com.

As someone who never seems to be able to remember URLs correctly, I landed on this page a fair few times. And prior to the recent crisis, it listed around 13 different countries where you could open Kaupthing Edge accounts.

KaupthingEdge.com as of 31 October 2008

Right now it lists just two – the UK and the Isle of Man. Both run by Kaupthing Singer & Friedlander, Kaupthing’s UK subsidiary.

A simple whois shows the domain was registered and owned by Kaupthing in Iceland. However the now UK centric-ness of the domain may be down to the fact that the UK operation, whilst publicly using the kaupthingedge.co.uk domain, used kaupthingedge.com for its online banking operation.

But it’s interesting that in the midst of a major banking crisis, a host of customers being transferred between different banks and a new owner who is seemingly unable to alter products and interest rates, someone still found the time to effectively delete 11 other Kaupthing Edge operations from a global website…

Update: 12 November 2008 – it appears that whilst the Kaupthing Edge accounts were transfered to ING Direct, the actual online banking system wasn’t – as such, a new account was not opened with ING (“trading as” Kaupthing Egde) but with Edge’s former parent company who are in administration and unable to open new deposits. Read You never opened an account, you know for more information

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