Tuesday, 7 October 2008

ICEsave has gone down

It's been an eventful morning! For a few hours now customers of ICEsave, the internet-only bank owned by Landsbanki of Iceland, have been reporting their website wouldn't let them log in.

By lunch time the Icelandic government had announced that Landsbanki had been put into receivership, the directors all sacked, and savers with ICEsave would probably be looking at applying for compensation from the combination of the Icelandic scheme and the British scheme. I hope they don't need their money too soon; I can't see this being fast.

There seem be quite a few people around who decided at the tail end of last week, or even yesterday (Monday) to get their savings out of ICEsave and have done the transfer electronically, only to find the money has gone from ICEsave but not yet appeared in their nominated UK account. I don't know if these transactions will complete normally but clearly now is not a good time to be between two stools.

There now follows my opinion on how British people should protect themselves from the banking crisis:

1. Only bank with British banks with a High Street presence. Avoid internet-only banks; there's reason they pay higher interest and it's not a good one.

2. If you have more than £50,000 in savings spread it across several banks so that none holds more than the compensation limit of £50,000. Be careful you don't inadvertantly open accounts with different banks in the same group - you would only get one lump of compensation.

3. Don't put your savings in the same bank as you've got a mortgage with; your compensation if the bank failed would be offset against your mortgage. The same goes for any other debt, overdraft or borrowing.

4. The safest banks in the UK are thought to be HSBC and LloydsTSB. Longer term savings may also be put in NS&I bonds.

5. Even if you have less than £50,000 savings (and that's most people!) use a minimum of two different banks. Never put all your eggs in one bank.

6. Keep a lot of money in cash, in ten and twenty pound notes. In the 1929 Great Depression there was a "banking holiday" which lasted a week, designed to stop people withdrawing money from banks. You need to be able to survive a few weeks without access to any bank account. Remember, when the herd panics the ATMs will be empty before you know it.

7. Keep a month's worth of canned food in the house; ideally food that can be consumed uncooked.

I sincerely hope these precautions will never be called upon, but if they are you will be better placed than almost everyone else.

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