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Expat Investor : December 2008
NEWS The savings dilemma – where is my money safe now? Offshoreonline.ORG, a UK regulated specialist expatriate broker offering advice on UK mortgages, pensions and savings for UK expatriates, reports. Just when you thought the $700 billion US bank bailout plan might signal the beginning of the end of the banking crisis that has swept the US, UK and Far East, along comes the European banking crisis to pour fuel on the flames of uncertainty. These are difficult times for expatriates looking for a safe place for their savings. Solid names such as the huge HBOS Group seem to fall without warning, and with Bradford and Bingley following Northern Rock, at least in part, into the arms of government, none of the building societies which converted into banks remain as independent entities. Of equal concern for savers is the sudden fall from grace of the new wave of Icelandic banks such as Kaupthing and Landsbanki, names which have dominated the best buy tables over the past 12 months, but banks whose futures now look decidedly uncertain. UK regulated financial advisors serving the expatriate and offshore savings market are once again urging savers to spread their risk and also to look carefully at how banks and their subsidiaries are structured. At present, the first £50,000 of any deposit per qualifying institution is guaranteed by the UK government’s Financial Services Compensation Scheme for onshore savings accounts. Savers need to look beyond this to see whether subsidiary groups have separate membership of the onshore savings scheme, though. Depositors with funds in NatWest and Royal Bank of Scotland onshore would qualify for two separate rounds of compensation, but there are many other examples where the holding company just has one licence, irrespective of the number of bank brands it owns. These onshore UK rules do not apply offshore to banks and subsidiaries of building societies. The Isle of Man has a deposit protection scheme which has been upgraded to match the UK £50,000 guarantee, and savers are also offered undertakings and guarantees issued by the parent organisations. On Jersey and Guernsey, no centralised deposit guarantee system exists at present. Tim Harvey, managing director of specialist expatriate advisers Offshoreonline.org comments, “For many years now, the subsidiary bank companies operating in the Channel Islands in particular have benefited from either a formal guarantee issued by the parent, or, more recently, an undertaking issued by the parent to stand behind the liabilities of their subsidiary. This is bank code which means the owners of the subsidiaries fully expect to stand behind their Channel Islands operations, insofar as they are allowed to say so without falling foul of UK onshore rules.” Amongst the building society subsidiaries, whilst local operating companies will be responsible to the local regulator, in the UK the parent is also overseen by the Building Societies Association (BSA), which has a long and good track record of looking after savers’ interests. In the unlikely event that a parent Society gets into trouble, the BSA will move quickly to find a merger partner, and because there are no shareholders to lobby and consult, this is usually a swift and efficient process. The recent experience of Derbyshire Building Society is a good example. This was recently forced to merge with the bigger Nationwide in the UK with very little disturbance to ordinary savers’ or borrower’s lives. Building Society subsidiaries generally have a very good reputation as a result. Typical of such organisations is Skipton Guernsey in the Channel Islands. So how can savers judge which organisations are safe and which are not? It is certainly true that few financial organisations seem to have been immune from the recent turmoil which has engulfed the world’s credit markets, but not all organisations have been affected in a similar manner. Some, in fact, have done very well out of other organisations’ difficulties. At the root of the problem is the so-called sub-prime mortgage crisis. Subprime is a lending term used to describe mortgage customers who pose a greater risk in lending terms to banks, perhaps by having no deposit or irregular income patterns. Many of the banks and financial companies who have experienced difficulties have had a significant Continued on page 4 IF YOU LIVE ANDWORK ABROAD DISCOVER OFFSHORE Colorado, USA 39º N Sidemen, Bali 8º S Taking a Sunday stroll takes on a new dimension when you’re living and working abroad. Best International Bank Group Your finances could also take on a new dimension if you discover the benefits of offshore banking with HSBC Bank International, including the exclusive opportunities that our Premier service provides. Discover your financial potential with an award-winning offshore bank. Call +44 (0) 1534 616111 Click www.offshore.hsbc.com/discover Issued by HSBC Bank International. HSBC Bank International is a trading name of HSBC Bank International Limited. HSBC Bank International Limited is regulated by the Jersey Financial Services Commission for Banking, General Insurance Mediation, Collective Investment Schemes and Investment Business. Licensed by the Guernsey Financial Services Commission for Banking, Collective Investment Schemes and Investment Business and licensed by the Isle of Man Financial Supervision Commission for Banking and Investment Business. Deposits and investments made with non UK members of the HSBC Group do not benefit from the protection provided under the Financial Services and Markets Act 2000, including the Financial Services Compensation Scheme. As at 31 December 2007, its paid up capital and reserves amounted to £203.1million. Copies of latest audited accounts are available on request from HSBC Bank International Limited, HSBC House, Esplanade, St Helier, Jersey JE1 1HS. Communications may be monitored and/or recorded for security and service improvement purposes. Approved for issue in the UK by HSBC Bank plc, 8 Canada Square, London E14 5HQ. © HSBC International Limited. 2008. All Rights Reserved. MC7297AC11603 Fast Facts 10001 December 2008 ? EXPAT INVESTOR 3
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