Sunday, 9 October 2011

Are UK Banks Safe?

 and Building Societies

In July 2011, the EU announced that eight banks failed the ’stress tests’ which measure how each institution could cope with a challenge to its liquidity. Of those 8 who failed none of them were British. Unfortunately, five of them were Spanish and this was my article at the time, recently updated.

On 7th October 2011, Moodys, the credit ratings agency, downgraded four UK Banks and eight building societies. This, of course, is not the same as the EU stress tests but it does shake confidence.

The downrated banks are RBS, Lloyds Banking Group, Santander (UK) and Co-op Bank. One of the downgraded building societies was the biggest, Nationwide.

Financial Pages in Spain provides financial information for British and Irish expats and property owners in Spain. Very many will have savings in UK financial institutions and this post is to help readers and to put their minds at rest and, potentially, move savings in an orderly way.

There are five important pieces of information you need to know;

  1. Every UK REGULATED account has 100% protection up to £85,000
Protection comes from the Financial Services Compensation Scheme (FSCS) which is Government backed. It covers savings in current accounts, savings accounts and cash ISA’s in banks, building societies and credit unions. The £85,000 maximum is per person per institution. Although you get your protected money back, the timescale is not pre-determined.

  1. UK savings are not necessarily UK REGULATED
Most banks, included foreign-owned ones, are regulated and covered by the FSCS scheme. So for example, Santander (UK) is Spanish owned but UK regulated. Some however are not. These include ING-direct and Anglo-Irish who are regulated in their home EU countries and ‘passported’ into the UK. I may be able to clarify an individual arrangement if you email me.

  1. If the accounts are held in joint names, the protection is DOUBLED
Cash held in joint names is deemed to be held on the basis of ‘half-each’. Therefore, a UK regulated account, with one institution but in joint names has protection of £170,000. Remember to accumulate the total if you have, in addition, a single name account with the same institution

  1. An Institution is not necessarily a single bank and is not a single account
The protection is per institution and not per bank or per account. For example, Birmingham Midshires, Bank of Scotland and Halifax are all ‘sister’ banks within one institution. You need to accumulate your cash with each to ensure that you are under the £85,000 protection maximum.

  1. Savings are more safe if they are spread
For the best protection, first, understand ‘who owns who’ so that you don’t unwittingly save too much with one institution. You can drop me an email if you want clarification.

Even if you have less than £85,000 saved, its still worth considering ‘speading’ as if one went out of business it will take time to gain accessibility.

Most important of all, to quote a well-known saying ‘Don’t panic Mr Mainwaring don’t panic’. There is no indication that these Institutions will ‘go bust’ but there is a need to protect your own savings. In fact, please tell your family and friends – send them a copy. If you have any concerns, by all means email me.

If you haven’t come across Financial Pages in Spain before you might like to make a note of these links;

La Torre Fx - Foreign Exchange

David Goodall
Financial Pages in Spain


Question: Which is the only country in the EU to offer 100% investor protection?

Answer: Luxembourg. If you want to to know more about investing in Luxembourg please email me