- This topic has 38 replies, 15 voices, and was last updated 14 years, 7 months ago by
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I would spread the risk in any country now. In Spain we only ever kept enough in the bank to cover Utility bills after hearing so many horror stories about problems. One friend whose salary was paid into her spanish bank went one day to find her account was frozen! An embargo had been placed on it for a plot of land she didn’t even own! It took months to sort out which left her to deal standing orders unpaid and her months salary plus balance frozen. At no point was she informed about this until she tried to get money out.
Renewals such as car insurance will be taken out without notification even if you aren’t going to renew!
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The IMF has told Spain to take “urgent and decisive measures” I suspect the whole system is crumbling.
Another set of bank merges here
http://www.diariosur.es/rc/20100524/economia/caja-mediterraneo-fusion-201005241907.html
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Personally I think the situation is dire and I am amazed that the Spanish banking system has not come under a greater spotlight.
Pundits always keep saying that Spainish banks have been more prudent lenders. That might be the case but they have lent on properties that, when this is all over will have seen well over 50% fall in value. In addition a huge number of Spanish workers have lost their jobs.
Spanish banks may have been less exposed to the original toxic debt, but now they have a good dose of their own.
Walk up any Spanish high street and you see literally 20 or 30 banks!!! I know for El Ejido, the main street has at least 20. I counted them a few years ago. This is a huge cost base for the banks.
I think we are seeing the start of a major Euro crisis and Spain is going to be the main contributor to it.
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@Claire wrote:
Also, how safe do you think it is to have largish deposits with Santander? Do you think it would be prudent to spread the risk and place some with say, Lloyds?
You should definitely spread the accounts around, different countries if possible. The question is whether countries can now provide protection for bank deposits.
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Watched a programme on TV. In China they are scrambling to buy gold to such an extent that large cash and carry type shops have opened to supply demand. Looked like the first day of the sales at Harrods 😆 Problem with gold bars is you can’t spend your holidays in them 😉
I am always wary of following the masses. I have just bought a small amount of BA shares whilst low for a gamble and for fun. Going to see what happens in a year or two.
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@Claire wrote:
Charlie, you once asked what was the best currency to buy and I said “buy gold”. You ignored that advice then!! 😉 I can’t (be bothered to 🙂 ) find that post. ..I’m sure you will.
I put ‘gold’ in the search engine and only a few posts came up. Your advice of “buy gold” wasn’t one of them. 😕
Anyway, we’re out of Euros and in Swiss Francs – and more than happy so far. 🙂
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@katy wrote:
Problem with gold bars is you can’t spend your holidays in them 😉
You can always sell one and have a nice holiday somewhere, anywhere of your choosing.
Sure beats all the maintenance, community charges and taxes – and being restricted to returning to the same place over and over.
I would never put money abroad in a ‘holiday home’ now, only for permanent living/retirement. For me personally it just doesn’t make financial (or holidaying) sense any more.
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Charlie et al, according to the Times today Greece has a taken on a new meaning for Sovereign Debt. Apparantly Greeks are literally buying British Gold Sovereigns at 273 eu with 700 a day coming out of Greek Banks, on the B market they’re paying 300 eu each for them.
Newsnight last night warned that the bail-out of Cajasur in Spain could be the tip of an iceberg, even saying it might be a Lehman Bros scenario in Spain.
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@Rocker wrote:
I’ve always tried to play it safe, the biggest Spanish bank in Spain for my every day spending, while keeping two separate UK accounts , RBS and the Abbey. I now find that they’re all owned by the same bank . . .
And as such you are only covered up to 50K (or whatever) for all three accounts instead of 50K per account.
@Claire wrote:
Peter,
As I understand it, private funds are covered by indemnity, but company funds are not. So although Santander give good interest rates compared to UK banks, could it be like the Icelandic Bank and be vulnerable? The amount of money I am talking about is considerably higher than £50,000.Is it company funds? In that case you would become a creditor and be repaid a %age from which ever bank went bust – around 80% in the KSFIoM case I believe, it takes years though.
What ever; spread it around and spread the risk. Apparently, National Savings are are well protected.
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@peterhun wrote:
@Rocker wrote:
I’ve always tried to play it safe, the biggest Spanish bank in Spain for my every day spending, while keeping two separate UK accounts , RBS and the Abbey. I now find that they’re all owned by the same bank . . .
And as such you are only covered up to 50K (or whatever) for all three accounts instead of 50K per account.
@Claire wrote:
Peter,
As I understand it, private funds are covered by indemnity, but company funds are not. So although Santander give good interest rates compared to UK banks, could it be like the Icelandic Bank and be vulnerable? The amount of money I am talking about is considerably higher than £50,000.Is it company funds? In that case you would become a creditor and be repaid a %age from which ever bank went bust – around 80% in the KSFIoM case I believe, it takes years though.
What ever; spread it around and spread the risk. Apparently, National Savings are are well protected.
I’m working on it (being tied to Santander with three accounts). The trouble is that Barclays and Deutsche Bank in Spain are not really the same as back in their own countries, but i’m checking them out.
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RBS isn’t owned by Santander so each of those has their own indeminity in the UK. Also it isn’t as straightforward as £50K per banking group either; it depends on their FSA licensing arrangements.
Here is a link to a very useful table of FSA licensing arrangements that will help anyone who wants to keep their UK savings as safe as possible.
http://www.thisismoney.co.uk/savings-and-banking/article.html?in_article_id=440726&in_page_id=7
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RBS were just doing what bankers did in those days, they just did it spectacularly badly and left the bill to us, i.e. no moral hazard. I don’t think government ownership of the banks is a good idea, look at the Spanish Cajas for example. The Nationwide might be a more stable model to follow. I believe the our new government is keen to encourage this type of enterprise, although finding and getting to the correct scale of operation might be a problem, our old banks are so very large.
Dit
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This article gets quite technical but it outlines how the BoS is planning to force the banks to make their bad debt provisioning more realistic.
I wonder if we’ll now see a flood of properties coming onto the market?
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@brianc_li wrote:
This article gets quite technical but it outlines how the BoS is planning to force the banks to make their bad debt provisioning more realistic.
I wonder if we’ll now see a flood of properties coming onto the market?
Basically, yes.
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I’ve had concerns about Santander for some while now although people often say they are safe as they are so large in Banking terms. However they must have lots of bad debts in Spain (sub prime exposure) but they also have big problems in South America, if you include their over-expansion in the UK as well they could be in for more trouble. How involved are they with other Global Banks?
I would not have all my eggs in their basket right now.
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@brianc_li wrote:
I wonder if we’ll now see a flood of properties coming onto the market?
Can see similarities with the Japan ‘lost decade’ in the early nineties, in as much as the real killer for Japanese banks was defaults on loans made to property developers. Surplus stock from the boom meant house prices gradually dropping to about 60% from peak after five years or so.
Even if nothing further is developed in Spain, it’ll still take at least five years to clear the existing property overhang on current projections that also mirrors Japan’s.
With most buyers sitting tight, awaiting the euro issues to be sorted, and the market bottoming out, who in their right mind is going to buy this flood of stock in the foreseeable anyway?
Interesting contribution I noticed from a Spanish poster on that FT site…offering one solution..hell its a mess..
¿Optimism? Have a look at burbuja.info to get a sampling of what many Spaniards think about the state of the Economy. More and more people are convinced that the only way out of this is leaving the euro so that we can have our own currency and print out a few Trillion neopesetas to pay our debt, public and private (that’s what the UK is doing, after all). We will get back into the euro in a few years with a clean slate and a much lower effective exchange rate, which will make wonders for our exports and get us rid of all those empty apartment blocks. French, German and Dutch banks will be taken care of by the ECB (the process already started two weeks ago with the QE). But this won’t be funny for the UK banks…not to say British homeowners in the costas.
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I think the spanish are living in cloud cuckoo land if they believe that they can leave the eurozone, print trillions of pesatas to get them out of trouble and then pop back into eurozone at some later date.
At the moment they are between a rock and a hard place. If it was that easy to leave the eurozone they would have done so already because they know that their economy is suffering badly by being in it. They also know that the consequences of leaving may be as equally disasterous and perhaps more unpredictable. They should never have adopted the euro and the same applies to Greece.
Richard
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Is there any prospect, that in the future, this will all be seen to have been a good thing?
Is there a prospect that Greece, Spain, and the other lamentable notables, will actually now over a number of years finally get their economies and countries into the sort of order that is commonplace and practice in Northern Europe?
Might this not in hindsight be seen; as a difficult period of adjustment that they all had to overcome and then run their governments not on the Mediterranean basis but on the Northern basis in the future.
We have all asked for change in Spain, for a more Northern mindset, are we now getting it, are not they and others literally going to be beaten up by Germany and France until they literally get their act together.
In the long run, is this not what people have wanted for quite some time? And an inevitable outcome? And it might be a cruel hard lesson that they cannot just devalue, go off and print pesetas and believe that will solve all their problems, I trust the UK with quantitative easing but I wouldn’t trust Spain.
They wanted Europe, the Euro and to be all grown up well they got it!
(Jeeze, and I always wanted the UK to join the euro too)
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@Chris McCarthy wrote:
Is there a prospect that Greece, Spain, and the other lamentable notables, will actually now over a number of years finally get their economies and countries into the sort of order that is commonplace and practice in Northern Europe?
How will they do that while being in the ‘straightjacket’ of the Euro and EU-controlled interest rates? Greece is just about coping with repaying the exhorbitant interest rates (pushed for by Germany) on their loan – forget the loan itself.
@Chris McCarthy wrote:
….they and others literally going to be beaten up by Germany and France until they literally get their act together.
With the EU failing to ‘beat up’ Spain about anything until now, including threats over land grab where Spain simply gave them the two fingers, that would be a sight for sore eyes if it ever happened.
What’s it like in Cloud Cuckooland Chris? 😆
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@charlie wrote:
What’s it like in Cloud Cuckooland Chris? 😆
I was just wondering… if someone wiser than I could comment, whether possibly; all this pain and distress would ultimately, three, five, ten years down the road, have become a real benefit in turning Europe into a more cohesive, economic, legislative whole.
Thought someone wiser than I could perhaps see something positive out of this in the future.
But it seems not. 🙁
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When the Euro was 1st created I thought it sort of made some sense, one currency for all, cut out all the commissions on exchange etc.
Recently though I heard someone on TV talking about it differently and obviously I hadn’t considered this point. That is ‘how on earth could 15 countries (with more wishing to join), all different cultures, Northern Europeans plus Southern Europeans, a bit like Babel (talking in tongues), some more corrupt than others etc even possibly be able to have one currency and all controlled from Brussels (or Germany)’
Said like that, it just seemed madness, imagine the Eurozone when Turkey joins as well! How could it all converge into one, yet with individuality retained?
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Angie – I think I posted once before how I met a young trainee Swiss banker back in the early 90’s who said in his opinion he couldn’t see how the euro could work with such a diverse group of countries all with differing economies requiring different needs at different times. One currency, one interest rate, total control by the EU.
He said how thankful he was that Switzerland stayed out of it, I bet he’s even more thankful now. -
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I also feel that there are deep structural problems in Spain and Greece, which will take years to resolve and in the meantime the gap between them and more modern economies will grow larger. In the past they have managed to disguise their problems by simply devaluing their currencies. But this is no longer an option. Something will have to give but I’m not sure what and also unsure of who else they will take down with them.
I don’t know how true it is but I was reading a post on another web site quoting someone in the Greek public sector who admitted that he/she only puts in a three hour day and that others don’t even bother to show up, their colleagues just mark entry and exit for them. Another quoting an hospital having 20 gardeners on its payroll but with no garden. If true these are deep endemic problems that are not going to be resolved easily without a significant change in the culture of the country .
In Spain the government is currently trying to reduce statutory redundancy payments from 45 days per year to 33! How can any economy function efficiently with these sort of artificial barriers to employment ? When I read an article the other week about a troubled bank setting aside funds of nearly 200,000 euros per person for redundancy payments I thought I had misread the figure. However, on reflection these figures were probably correct. The other reoccuring theme that I read on various spanish forums is the red tape involved in setting up businesses and the associated taxes of running them. Little wonder that the Spanish economy is stalling. Yet the government seems to be pinning its hopes on some sort of recovery.
Again I think their economy is dysfunctional and like Greece will need a significant change in culture before it is able to compete in the eurozone let alone world market.You may rightly detect from my aforementioned comments that I am sceptical about either country being able to adapt to the north european business model, which in itself may be falling behind the dynamic and emerging economies of the far east.
Richard
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There was a TV show a year or so back following the fortunes of some Brits that had started a new life in Spain. One guy had set up or was setting up a cafe/restaurant and he need some work associated with a water supply signed off before he could open. The trouble was the inspector from the council was on Holiday for 2 weeks so nothing could be done during this period.
Now this his is livelihood and it’s put on hold while an official is on holiday. A few days is acceptable, 2 weeks!! I am sure if it had been a 4 week holiday, he would have been told he has to wait 4 weeks.
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@charlie wrote:
Angie – I think I posted once before how I met a young trainee Swiss banker back in the early 90’s who said in his opinion he couldn’t see how the euro could work with such a diverse group of countries all with differing economies requiring different needs at different times. One currency, one interest rate, total control by the EU.
He said how thankful he was that Switzerland stayed out of it, I bet he’s even more thankful now.The Euro project is a political one, economists – from all countries – have said for decades that it would not work without financial union as well. The failure of the Euro at its first test was predicted becuase of this and its why the UK and other countries have refused to join. The only way it could succeed is if the northern countries pay for the southern countries debt and corruption and I suspect this will never happen.
So the next best choice is for Germany, NL etc to leave the Euro. Their currency would rocket, the Euro plunge and the over valuation and non-competitiveness of the southern countries would be solved at a stroke. Germany could rejoin at a higher rate (now with even less nation debt as the DM would have appreciated against the Euro denominated debt) as its economy would probably still fit the Maastricht Treaty (Whereas none of the PIIGS could ever manage it against, now that the fiddles have been exposed).
The fundamental problem with the PIIGs economy would not be solved in the long term, but maybe they could have another 15 years to make another attempt.
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