MSE News: Santander safety Q&A: your questions answered

Faz1963

I have been trying to find information about how the offset mortgage and savings pot attached to it are viewed in the case of the Bank falling into trouble.
Having spoken to the local branch, they verbally tell you that savings are covered by the UK Government's Financial Services Compensation Scheme (FSCS) which protects the first £85,000 per person in any UK-regulated financial institution, of which Santander UK is one.
I have £60,000 offset against my mortgage. What happens if the bank goes bust and my debt is sold on? Does the net balance of the account get sold on, ie mortgage less £60,000 or does the whole mortgage get sold on and I have to fight to get my £60,000 back. How does this work, I do not want to get stung again like I did with Northern Rock, so would like to make preparations based on written data and not just a verbal statement. Can anyone point me in the direction of such information?

jamesd

Mr_K wrote: »

However the same messages are coming out at the moment that came before there was a run on NR. True nobody lost any money but who needs the hassle ? There will be a limit to how much the UK govt. and/or the FSCS can pay out. Particularly if this goes really horrible and one bank follows another.

An FSCS payout for a big bank is very unlikely. Much more likely is a forced takeover using the living will provisions to keep the accounts functioning normally. The living will provisions are one of the things that have been done to improve potential failure handling in the last few years. Any interruption of service is likely to be minimal because of those changes.

Even last time around the bigger banks like RBS didn't go bust and have the FSCS get involved, they were partly nationalised instead to ensure that they had the cash to keep operating. There was effectively no interruption to service.

jamesd

Faz1963 wrote: »

I have been trying to find information about how the offset mortgage and savings pot attached to it are viewed in the case of the Bank falling into trouble.

If it's one account and works like a big overdraft then the savings offset the mortgage and no compensation will be paid but your mortgage will be reduced by the offset amount. The One Account works like this.

If the mortgage and offset accounts are independent with their own different account numbers the offset money gets the FSCS protection and limits and you're left owing the full mortgage amount plus the cash the FSCS pays. First Direct with its mortgage and savings and current accounts offsetting work like this.

So for your amount you don't lose money, all that changes is whether you have higher mortgage plus cash or lower mortgage and no cash, depending on the type of mortgage. It's more of an issue for those with more than £85,000 offset.

opinions4u

Faz1963 wrote: »

I have been trying to find information about how the offset mortgage and savings pot attached to it are viewed in the case of the Bank falling into trouble.
Having spoken to the local branch, they verbally tell you that savings are covered by the UK Government's Financial Services Compensation Scheme (FSCS) which protects the first £85,000 per person in any UK-regulated financial institution, of which Santander UK is one.
I have £60,000 offset against my mortgage. What happens if the bank goes bust and my debt is sold on? Does the net balance of the account get sold on, ie mortgage less £60,000 or does the whole mortgage get sold on and I have to fight to get my £60,000 back. How does this work, I do not want to get stung again like I did with Northern Rock, so would like to make preparations based on written data and not just a verbal statement. Can anyone point me in the direction of such information?

Read the post above yours. It probably arrived while you were typing.

sabretoothtigger

compensation up to the limit and the remainder would automatically be set-off against the debt

I thought this was the case, they cant ignore savings and demand debt repayment.
Read the fscs link above not our speculative opinions

Also Im pretty sure being in debt to a bankrupt bank doesnt mean you get debt collectors set on you. Whatever contract existed previous continues to apply.
The only debatable part here is variable interest rates, I believe they would have to act reasonably and be governed by the FSA on any rise.

The other point would be overdrafts, usually the terms are it can be recalled with no notice. Thats what I would worry about most as its the most flimsy contract.
Ive said for ages, its best to secure long term interest rates via a fix if possible on mortgage or whatever, get it and set it while its cheap.

UK has some pretty favourable laws for retail debtors, if you cant pay the overdraft immediately again I dont think debt collectors can be sent in while a repayment plan is worked on. There'd be at least as much time given as the savings takes to repay
Really theres nothing to worry about in my opinion, this aint Dubai, etc

royston_vasey

This alarm over Santander would appear to be because of ignorance of the rartings for other banks etc where people place their cash wwith little concern.
Santander Uk has a Moody's long term rating os A2 and a short term rating of P1 (top rate) - same as Nationwide BS. But -
Co-operative Bank/Britannia BS - LT A3, ST P2
Yorkshire BS (& its group) - LT Baa2, ST P2

sabretoothtigger

The perception is Nationwide takes no risk and Santander is bull fighting with flaming swords in the twilight of a Spanish empire
and we all know what happened to the Armada last time right :eek:

Santander Picks UBS, Deutsche, Itself For Mexico IPO -Sources
 
   By Christopher Bjork 
   Of DOW JONES NEWSWIRES 
 
MADRID (Dow Jones)--Banco Santander SA (STD, SAN.MC) has picked Swiss bank UBS AG (UBS) and Germany's Deutsche Bank AG (DB.XE) as advisers to coordinate a stock market listing of its fast-growing Mexican unit later this year, people familiar with the matter said Wednesday.

Santander's own investment banking unit will also be among the three global coordinators in the initial public offering of 25% of Banco Santander (Mexico) SA, which if successful would become the largest on record in Mexico.

Santander is hoping to value the unit at $15 billion to $20 billion in the share sale, people familiar with the plans have said. A pricing at the low end of that preliminary range would allow Santander to raise $3.75 billion.

Chief Executive Alfredo Saenz said late April that the bank had taken the decision to sell a quarter of the unit in a listing.

Santander's profit from Mexico rose 46% last year to $1.3 billion. Credit is growing at an annual rate of about 30% and loan-loss provisions are falling. The strong trend continued in the first quarter this year, when Mexico represented 13% of Santander's overall profit, up from 10% in 2011.

"Mexico is having good growth, good results and a good outlook for the coming quarters," Saenz said in April. "We'll do it [the IPO] in 2012 if market conditions don't change and the preparations for the IPO have begun," he said at the time.

In June 2010, Santander purchased the 24.9% it didn't already own in the Mexican subsidiary from Bank of America (BAC) for $2.5 billion, a deal that valued the unit at $10 billion.

The listing in Mexico adds to a long-running strategy of having units trade on local stock exchanges. In 2007, the euro-zone's largest bank by market value raised roughly $8 billion by selling 15% of its Brazilian unit, Banco Santander Brasil SA. It had planned to list its U.K. unit last year but that has been put on ice at least until next year because of difficult market conditions. It also recently shelved a plan to sell a stake in its Argentine unit.

In addition to Brazil, Santander units in Chile and Poland also trade locally, as does the Banesto-branded Spanish unit Banco Espanol de Credito SA (BTO.MC).

The tactic allows the bank to take advantage of peaks in valuations in certain markets. It sold shares in the Brazilian unit when the economy was booming but has pulled other deals when it couldn't get the valuations it wanted.

Listings also proved useful when Santander needed cash in recent months. It sold small chunks of listed subsidiaries in Chile and Brazil without losing control of them. While some European rivals had to issue new shares at deep discounts to meet higher capital requirements, Santander met its needs by selling emerging-market assets that still commanded high valuations.

Santander is using the proceeds from its stake sales to strengthen its capital at a time when loan losses are close to all-time highs at its businesses in southern Europe.

Worries about the health of the Spanish economy and its banks has pushed Santander's stock to three-year lows and the broader Spanish market to lows not seen since 2003. In afternoon trade Wednesday, Santander shares were trading at EUR4.48, down 3%.

-By Christopher Bjork, Dow Jones Newswires; +34913958123; christopher.bjork@dowjones.com

(END) Dow Jones Newswires

May 23, 2012 11:21 ET (15:21 GMT)

bigcheese

But what happens to a flexible mortgage where I have more than 85k in the savings pot , and something goes wrong ?

If mortgage book bought over, does the savings pot go with it ?

Is it in a ring fenced account. not available to either purchasers or creditors ?

would it be be offset against my mortgage, reducing it, but eliminating my savings pot ?

would i be given my savings back , but only to a max of 85 k?

is the savings pot covered by the Banking scheme at all ?


I have asked them to respond in writing

jamesd

A flexible mortgage is a mortgage where you make overpayments and are allowed to take out a further mortgage advance to withdraw some of that when you want to. With a flexible mortgage, as distinct from an offset mortgage, the money you've paid off the mortgage would stay paid off, reducing your debt but not leaving you with any savings. The money is safe but you've lost the liquidity.

An offset mortgage with mortgage and offset accounts separate is a better product if you want to keep the liquidity. Then you get up to £85,000 of guaranteed liquidity and any more isn't lost but used to reduce the mortgage balance.

bigcheese

JAMESD

Snatanders product is now called Flexible Offset Mortgage- where the "savings Pot" as they term it, is a particular category of overpayment where you can withdraw the whole amount at anytime - in fact within 2 hours. A striaght overpayment into this mortgage type cannoy later be accessed separately.

You are right about the liquidyty issue though, but at least anythinmg over 85k is covered due to its treatment as an overpayment