Posts Tagged ‘adventures in banking’

Dodged a bullet there

October 8th, 2008 by Reinder

Just weeks ago, I was contemplating opening a savings account at IceSave - for people outside the Netherlands who haven't been following along, IceSave is an online savings bank owned by the Icelandic bank Landsbanki, which offered over 5 1/2% interest rate on its mainstream savings account product. Ironically, this was prompted by a mailing from my regular bank, the Postbank, which suggested I upgrade to a different savings account from the low-yield one I was using.

Why didn't I do it? I read up. I read up about how the banking guarantee system worked, and found that while the savings account would be covered by the same guarantees that banks in the Netherlands offered, i.e. the first €20,000 would be fully guaranteed by them and then the second would be 90% covered by the Dutch Central bank, actually getting to that first 20K in case of a bank collapse would be cumbersome. I also learned that the bank didn't have its act together, service-wise. Also that there were problems with the capitalisation and leverage of Icelandic banks - though I didn't pay much attention to the details there. So I went with ASN instead. Slightly less interest, but still more than competitive and safer - and also a bank that focuses on sustainable investments.

Readers in the Netherlands will already know that I really dodged a bullet there. This week, Iceland nationalised all its banks, IceSave suffered a bank run, shut its website down, and now there's even doubt whether the Icelandic central bank is even able to meet its obligation to guarantee the account holders' savings. Iceland, a tiny country with fewer inhabitants than the US state of Wyoming, is in a deep financial crisis and its government is now borrowing from Russia - which many speculate will want favours in return. Savers have organized to seize IceSave's assets but whether they'll be succesful is anyone's guess. The UK central bank has decided to step in and guarantee British account holders' funds for them. The Dutch government has decided to pass on that one, for now; it's already bought out a large bank and doesn't particularly want to hold the bag for another.

I'm sure that IceSave savers will get their money back... eventually. But it just goes to show that a little homework can save you a lot of trouble. And it doesn't have to be a lot - the above is pretty much all I know about the IceSave situation, and some of it may be misremembered from the many blogs I read. Just spending an hour or two asking around will be enough.

And listen to people who know these things already. My friend Kim, who knows a lot about Icelandic society, has been warning her friends off IceSave, and she reports that among the people now scrambling for their savings are some friends of hers who didn't listen.

Banking for grown-ups, revisited

October 1st, 2008 by Reinder

It's actually been 2 and a half years since I wrote this post in which I griped about my bank, the Postbank, offering a silly rewards program to get deals on consumer goods with its basic savings account instead of an interest rate above inflation. 2 and a half years, and I've only now gotten off my ass and opened a savings account at ASN Bank (the product I use is ASN Ideaalsparen, which at the time of writing offers 4.75% interest and requires automatic saving so I'll be following the Pay Yourself First principle of personal finance). I'm still finalizing the paperwork and will be using their one-time offer to move my savings over before Jan. 2009.

I don't think there's any excuse for anyone even using a savings product that doesn't offer a rate above inflation (outside of situations where hyperinflation takes place, but in a financial collapse at that level, you're probably better off spending your money on canned food and firearms), but if I were to try, I'd argue that back in 2006, I really wasn't able to save much money anyway. I am now, though, and I'll be using that opportunity for as long as I manage to remain employed. Even in a recession (and even in one where trust in the banking system is suffering), I'm still better off earning real interest on my money than in letting it rot away slowly.