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Cyprus Bankruptcy Contagion Financial Armageddon Risk, Santander Down for Maintenance?

Personal_Finance / Credit Crisis 2013 Mar 24, 2013 - 06:49 PM GMT

By: Nadeem_Walayat

Personal_Finance

Whilst Cyprus's banking system remains frozen and teetering on the brink of collapse with it's politicians literally battling to meet an eye popping deadline to agree to the terms of a euro-zone bailout, the consequences of failure should not be construed as just being limited to Cyprus as the whole euro-zone and even the whole of world's banking system is at risk.


For several years I have been advocating that individuals have a plan of action in place to implement at times of heightened risks of financial armageddon - 03 Dec 2011 - How to Protect Your Bank Deposits, Savings From Euro-zone Collapse Financial Armageddon

In which respect I enacted my emergency Financial Armageddon plan last week, where the the focus was to move funds from high risk euro-zone banks to low risk wholly UK owned banks. Everything went smoothly apart form one transaction of early Friday afternoon for £16,000 which has gone awol! The transaction was supposed to leave Santander early Friday afternoon and arrive at a small UK private bank in about 2 hours time (Faster Payment service). Whilst logging in later in the afternoon I could see that the transaction had been marked as having left Santander but there was no sign of arrival of funds at the destination bank.

Now well over 48 hours later the funds have still not arrived, further more attempting to log into Santander since late Friday has resulted in the following maintenance message.

Whilst Santander states it is scheduled maintenance, however there was NO prior warning of maintenance nor does it explain the fact that funds that were supposed to take a couple of hours to arrive have still not arrived well over 48 hours later. I guess all will be revealed early Monday when either the opening shots of Financial Armageddon have been averted or not.

This illustrates the risks that the whole banking sector poses in that when it shuts down it will be in an instant, and then it will be too late to draw your funds out so you really need to act well before Financial Armageddon strikes. And certainly d not pay attention to any soothing words out of the Bank of England as illustrated by the fact that one of the last statements out of the central bank of Cyprus prior to freezing the banking system was that depositors money was safe in Cypriot banks.

In the meantime here is a reminder of list of actions you need to take in the case of Financial Armageddon as I last wrote in December 2011. Ensure you are subscribed to my always FREE newsletter to for my next in-depth analysis of the current crisis and what you need to do to protect your wealth.

03 Dec 2011 - How to Protect Your Bank Deposits, Savings From Euro-zone Collapse Financial Armageddon

Steps You Need to Take Now !

The following are my updated lists of tasks you need to do to protect your deposits because you are NOT being paid to carry the REAL RISK OF LOSS OF FUNDS ON DEPOSIT!

1. Ensure that you have at least 2 current accounts across banking groups and at least one with a safer bank such as HSBC.

2. Next make a list of all of your deposit / bank accounts, with the amounts on deposit.

3. Now group your accounts by banking sector group (see list here as a guide).

4. If you are anywhere near the £85k limit with any banking group then move those excess funds immediately! and Especially if it is a Eurozone bank

5. Small banks and building societies are at greater risk than larger banks and building societies because the government is the larger banks such as HBOS pose a greater risk to the financial system and economy so the government will be more reluctant to let them fail, but that does not mean they will actually cover deposits beyond £85k in the event of a collapse, so you still need to limit exposure to £85k

6. Consider transferring funds to your spouse so as utilise their compensation limit across banking groups, so you can double your compensation coverage by opening an account for your spouse with each bank.

7. Ensure you have procedures in place so that you can at short notice transfer funds from high risk banks to lower risk banks so as to limit the fallout from any banking system crisis. For instance open an NS&I Direct Saver account NOW (pays 1.75% gross), then use this during an unfolding sovereign debt crisis event to transfer your cash to as this is the safest deposit account available for UK depositors (Max £2mill, Min £1). Again do this now as you may not be able to do so during a debt crisis event due to high demand for the account. This is an imperative - NS&I is the safest bank in the UK, use it for short-term insurance - NOW!

Instant Access Savings Accounts with Lower Risk banks

  • NS&I - 1.75% - Government 100% Guarantee
  • Tesco - 2.90% (includes 1.65% bonus for 12 months)
  • HSBC - 0.75% (includes 0.5% bonus if you do not withdraw in a calendar month)

Higher Risk banks

  • Barclays - 1.25% (includes 0.35% bonus when you do not withdraw in a month).
  • SMILE (Co-op) 0.25%

Extreme High Risk Banks

  • Santander - 3.1% (includes 2.6% bonus for 12 months) - Euro-zone Bank
  • ING Direct - 3% (includes a 2.46% bonus if you do not withdraw in a month) - Euro-zone Bank
  • Halifax Online Saver - 2.8% (includes 2.7% bonus for 12months).

All accounts pay significantly less than current CPI Inflation of 5%.

8. Do not have ANY savings are fixed deposit exposure to banks that do not fall under the UK Financials Services Compensation Scheme.

9. Avoid exposure to Euro-zone banks and at the very least PIIGS banks, that is Greece, Ireland, Spain, Portugal and Italy as these are at the most risk of going bust thus triggering a lengthy process for savers having to wait for compensation. Remember that if Spain comes under pressure following perhaps Ireland and Portugal joining Greece, then the risks posed to the likes of Santander depositors will also significantly rise.

10. Keep enough in cash to cover at least 1 months expenditure, (I keep 2 months worth of cash).

11. Utilise instant transfer accounts between spouses, i.e. if you have accounts with the Halifax then you can instantly transfer funds between one another, therefore during a crisis you can instantly reduce the exposure if one person is above the £85k compensation limit at that time.

Source and Comments: http://www.marketoracle.co.uk/Article39629.html

Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2013 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of four ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series.that can be downloaded for Free.

The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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