The near collapse of US bank Bear Sterns has caused new concerns in the UK. Moneysupermarket.com editor Clare Francis chats with Ashley Whittaker, head of savings at Kaupthing Edge after recent speculation about the stability of Icelandic Banks...
Video Transcript
Further financial turmoil has rocked the stock market again. The near collapse of US investment bank Bear Sterns caused a new wave of panic to spread among investors across the world.
With the credit crunch far from over, many here in the UK are worried about which bank will be next. There's been a lot of press speculation recently about the stability of the Icelandic banks, and judging by the threads on our forums here at moneysupermarket.com, many consumers are worried about whether or not their savings will be safe with KE and Icesave, both of which are offering highly competitive deals at the moment.
Ashley Whittaker, head of savings at Kaupthing Edge, is here with us today to tell us what's going on.
Q1: Ashley, given the problems at Northern Rock and Bear Sterns, it's understandable why people are nervous at the moment. Can you explain why there is concern about the stability of the Icelandic Banks at the moment?
Ashley Whittaker: Well I think the media's focusing on a lot of different issues, and Iceland is but one of many, many issues that people are delving more and more into. I think Iceland is interesting because it is a country which has developed fantastically quickly over the last 10 years or so. Some of the institutions have been very, very successful in expanding out of Iceland into a number of different countries, and because of that people are quite intrigued by what's going on with Iceland.
I think the key point is that there's a whole wealth of issues which have been around for some, time and people haven't gone into them in as much depth as they are now, because of what's happening in the sub-prime market for example.
If you look at what we have done recently in the wholesale bond market we have issued about $1.8 billion worth of long term funding, which means that our existing investors, who understand the detail of the way that the bank operates, are comfortable with our risk.
Q2: And for a lot of people / UK savers, they've never heard of Kaupthing Edge before. What can you give to reassure them? Why should they not be worried about putting their money with you?
Ashley Whittaker: Well I would say the first thing is that actually Kaupthing Singer & Friedlander, which is the UK bank, which is a wholly owned subsidiary of Kaupthing, has been around in the UK for many, many years - indeed just over a hundred years - and we have been active in the savings market for decades, and indeed have won several awards with our savings products. The things that's new is that Kaupthing Edge is our online bank, and yes we are new entrants into the retail market, which I think is fantastic for the consumers.
If you look at the facts of the performance of Kaupthing bank in terms of the way that we are funded and the way that we are performing, and have been performing for many, many years now, we are in extremely good shape. And we have a good credit rating, and we are performing extremely well, and we have a track record of doing that in the UK and overseas.
In addition of course, we do have the full UK compensation scheme applying to the accounts, so consumers have that as additional reassurance for them if they are investing in our product.
Q3: And why did you decide to launch now, you've sort of launched two products at the beginning of February, why come into the market at this time?
Ashley Whittaker: Well we've actually been planning this for some time, I mean well before the middle of last summer when the sub-prime issue came to light. The movement into the retail market for Kaupthing edge is a natural progression for us in terms of our expansion into new markets, in terms of accessing new customers, and it's a fantastic way for us to access these consumers and give them a fantastic rate and a fantastic product and the way we can pay that rate is because we have a low cost infrastructure.
Q4: I was going to say that obviously the instant access savings account you're offering has got a rate of 6.5%, which is 1.25% higher than the Bank of England bank rate. How are you able to offer such good rate?
Ashley Whittaker: I think if you compare our infrastructure, compare it with the infrastructure of lots of other people in this market in terms of their high street presence etc, our cost base is a different league, and because of that we are able to pass on the benefit s of that to our clients, to our customers, and if you look at the way that we have behaved in the UK market and also in other European markets for a number of years, you will see that one of the things that Kaupthing is that we stand for excellent products at excellent prices. We are very consistent in the way that we behave and you will see in the UK and our other products that we have been very , very competitive for a number of years, and that's how we intend be with Kaupthing Edge also.
Q5: Obviously [that's] one of the things that people are worried about, because we see a number of institutions launch really good, headline grabbing rates, pull in loads of money and then the rate gets less and less competitive. In recent years we've seen a number of overseas institutions come into the market, ING Direct probably one of the most well-known. Obviously that launched with a mega-competitive rate that pulled in billions and billions of savers money, and over the last four/five years it's eroded, its competitiveness has eroded, and we've seen billions pour out in the last 12/18 months. What promise can you offer savers that you're not going to do the same thing?
Ashley Whittaker: Well what I can say is that first of all we have the best guarantee in the market in terms of we have guaranteed to pay at least 30 basis points over base rate until the fourth anniversary of the account, at least 30 basis points over, to February 2012. So that's the formal guarantee, the formal promise that we are giving all our customers.
I guess in addition, I think they can take a lot of comfort from the fact that if you look at our performance over the past five years or so, for example in the UK - and you could go back longer and it would show the same thing - we are committed to giving good value products to our customers at an excellent price, and I see no reason why we would change that behaviour. Kaupthing is all about long term relationships with our customers. We are simply not in the game of one day coming out with a good rate, the next day not having a good rate. I'm extremely confident that we will be paying an excellent rate to our customer for many, many years to come.
Q6: And at the moment you've got 2 products, you've got the instant access savings account and you've got a fixed rate bond. Are you planning to launch anything else - can we expect any more news from you further down the line?
Ashley Whittaker: We do have plans to have more than 2 products, and I would say for the foreseeable future they will be savings-based products. We don't have any plans to have for example a high street network in the UK or anything like that, but yes we do have very ambitious plans for Kaupthing Edge. We're very excited about it, we've currently launched so far in 5 countries and we have plans to launch in other countries as well.
Q7: And you'll come back and tell us will you when there [are] new things to be coming?
Ashley Whittaker: I'd be delighted to come back, that would be fantastic.
Clare Francis: Great, thank you Ashley, thanks very much.
Ashley Whittaker: Thanks very much.
