N&G News
Icelandic Banks
Kaupthing Edge & Heritable Bank have been forced to transfer over £3 billion of savings deposits to ING in a move to protect retail customers, backed with cash from the Treasury and the FSCS. The UK assets of Icesave's parent company Landsbanki have also been frozen, and Iceland has today closed its stockmarkets until Monday. These accounts were continually publicised as best buys, but there was a reason for these banks offering such high deposit rates - they were desperate for the funds. These banks had immensley high Credit Default Swap (CDS) rates (a measure of the insurance risk of a corporate default) for many months before these events, and because of this we advised clients to avoid these banks. These events highlight the need to diversify deposits and to take into account financial security, not just the headline rates.