Bank Account Coverage - Does the UK have their version of FDIC coverage?

Hello Everyone -

I've moved from the United States to London about 10 months ago.  I've recently sold my property in the U.S. and will soon need to transfer my money to the UK.

I'm concerned about putting my money into a bank account in the UK, because I don't know if they have protection on their accounts like they do in the U.S. (like the FDIC in the U.S.)

I've asked some of the banks - and no one seems to know the answer.  Any assistance would be greatly appreciated.

Thanks!

The Financial Services Compensation Scheme (FSCS) is the UK's statutory fund of last resort. At the moment, the threshold for deposits is £35,000 ($62,580 today) but is expected to rise soon (autumn 08 or early 09) to £50,000 ($89,400). The threshold for investments is £48,000 at present.

The compensation limit of applies to each depositor for the total of their deposits with an organisation, regardless of how many accounts they hold.

If people hold multiple accounts in banks that are part of a larger group, if each of the banks is separately authorised by the Financial Services Authority, FSCS would pay compensation up to the limit, per authorised institution.

If each of the banks is not separately authorised but is covered by the parent company's authorisation, FSCS would pay compensation up to the limit once, irrespective of how many different institutions a person held accounts with.

So for 100% peace of mind, it might be worth thinking about that.

However, Great Britain is not a third world country, its GDP approached 3 trillion dollars in 2007. I would not be worrying too much.



http://www.fscs.org.uk/consumer/

For comparison, US depositors have FDIC protection of up to $100,000 in the event of a bank failure. I understand it is common practice to split larger sums across different accounts to ensure protection.

Because the pound has fallen recently against the dollar you are likely to make foreign currency gains which you will need to disclose on your UK tax returns.

Note that in the UK you only 100% of your money back up to £2,000, after that you get 90% back up to £35,000.

This may change soon too though.

Note that in the UK you only 100% of your money back up to £2,000, after that you get 90% back up to £35,000.

This may change soon too though.

It already did. Nearly a year ago. On 1st October 2007. Your source needs updating. The figures you quoted only apply to claims against deposit-taking firms declared in default before 1 October 2007. For defaults after that date the limit is 100% of the first £35,000.

It's in the FAQ at the FSCS site.

Just got back from a long holiday.  Thank you so much for the information you've supplied.  I really appreciate you help!

 

The limit goes up to £50,000 next Tuesday 7 October.

http://news.bbc.co.uk/1/hi/business/7650551.stm

keith2008, given the sort of size of money we might be talking about, probably nicely above £35000 or £50000, consider putting the money into Northern Rock, now owned by the UK Government, or into one of the 6 biggest Irish Banks. Doing either of those things will give you a 100% guarantee ... without monetary limit. 

My understanding is that the Irish banks guarantee up to £75,000, not unlimited.

Vicky

keith2008, given the sort of size of money we might be talking about, probably nicely above £35000 or £50000, consider putting the money into Northern Rock, now owned by the UK Government, or into one of the 6 biggest Irish Banks. Doing either of those things will give you a 100% guarantee ... without monetary limit. 

As Vicky pointed out I think there is a limit on the Irish deposits.  Plus there is talk of limiting foreign transactions.  The Irish government is only so big and good and I would say in these times if one of the big banks were to default, the government would have a hard time securing those monies.

Also, Northern Rock has ceased new savings customers because of the "unfair market advantage" it might have because it was getting a large influx of new savings accounts recently.

Best strategy is to not panic and don't do anything rash!

As I said .... 6 Irish Banks ... unlimited guarantee ..... click here.

And also the same now applies to Greek banks .... click here. This also confirms the action taken by the Irish authorities.

Breaking news! Now also German banks! Click here. The German government had to act, given that Hypo Real Estate, Germany's second biggest commercial property lender, was in great danger of collapsing.

IMHO just a question of time before the UK, and all other EEA governments guarantee all bank deposits.

There was an article last week in the Guardian finance section which said, in essence, that the £35,000 limit or the (from Tuesday) £50,000 limit are actually hokum because in reality the government would have to bail out everybody, regardless of any notional "limit".

Like JohnL says, it's only a matter of time.

It is only my guess but given that the Prime Minister and the Chancellor of the Exchequer are both talking in terms of "whatever it takes", I think the UK Government will guarantee all bank deposits, whatever their size, tomorrow morning ..... before the banks and the markets open.

Failing that there will be enormous runs on all UK banks as money shifts to Irish, Greek and German banks. For the same reason I expect at least the great majority of EEA governments to do the same, again before the banks and markets open tomorrow morning.

Only time will tell if I am right.

Yes, but the scary thing is that the governments might be over extending themselves!  I realise they can't not act, but this is becoming a bit of a scary house of cards...  A run on one big bank is will take before panic sets in...