How safe is a sterling lump sum deposit?

HSBC is about the world's 5th largest bank. Your deposits are guaranteed up to £85000 by around 60 million uk taxpayers assuming you are invested in an ordinary UK branch.

Why would you be worried?

More importantly why at you taking the more significant currency risk of holding sterling if I assume your day to day liabilities are in euros.

Here's a possible scenario for you to consider. Greece exits the euro but the euro survives confidence returns and the euro appreciates significantly against a now more isolated pound suffering from run away inflation but unable to raise interest rates due to the significant debt burden.
You would lose big time holding sterling in this scenario so you are taking a risk you are not being rewarded to take. Currency speculation is just that.

If you are worried about uncertainty then the antidote is always a diversified portfolio of assets across the world.
 
Marc said:
HSBC is about the world's 5th largest bank. Your deposits are guaranteed up to £85000 by around 60 million uk taxpayers assuming you are invested in an ordinary UK branch.

Why would you be worried?

If you are worried about uncertainty then the antidote is always a diversified portfolio of assets across the world.
Click to expand...

"Across the world" - I trust that you don't really mean physically in accounts or institutions in different countries outside of the UK?

What about a multi-currency account in the bank that you mentioned above?

What are your thoughts on having part or all of the amount mentioned by the OP in an account in Swiss Francs?
 
I mean an investment portfolio of assets;Cash and equities bonds real estate etc.

Any "investment" in a currency or basket of currencies has an expected return of 0% with a volatility of around 10%pa. This means that you do not expect to make money but you have considerable risk (plus minus 30% would be expected).

Cash and short term fixed interest securities should be held in the currency in which you have your liabilities as the currency volatility swamps the underlying investment.

As for the argument often put forward on here and elsewhere about buying "safe haven" currencies like the Swiss franc my view would be that the market knows that the Swiss franc is seen as being less risky and therefore in 2008 the decision to buy Swiss francs was shown to be a good one with the benefit of hindsight.

But you would have had to have already bought Swiss francs. The risks we see all around us means that the Swiss franc has already been bid up in the market to such an extent that the Swiss found it necessary to intervene to push the currency back down again.

The future movements of currencies is just going to be a random walk as the news comes out. I can't predict the news so I cant expect to profit from speculating in currencies.
 
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