With the Cyprus bailout package now sealed, Haig Bathgate discusses the questions raised by the latest bank crisis with Jeff Salway of The Scotsman.
Haig believes that fear that Cyprus has set a precedent for raiding customer deposits is premature, and asserts that in the UK it would still be highly unlikely that a retail depositor would stand to be wiped out in the event of one or more banks getting into difficulty.
"If they did this it would trigger a significant run on the banks, which would be counter-intuitive and unwind the significant efforts that have been undertaken since the credit crisis to stabilise the banks."
With regard to making safe investments, Haig warns that savers should be wary of high yielding deposits from less little-known banks.
"Those who pay the highest rate of interest by implication need the deposits most. Be realistic about the yield that can be achieved when interest rates are as low as they currently are," he said."That applies also to bonds, which we believe are in a bubble and should mostly be avoided."
Haig believes that the impact on UK investors will be minimal, pointing out that"Cyprus accounts for less that 0.2 per cent of eurozone GDP and the debt is not nearly as significant or widely held as was the case with Greece."
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