MSE News: Bank of Cyprus may get UK savings protection

Former_MSE_Helen

"Bank of Cyprus's 50,000 UK savers are likely to be protected by this country's compensation scheme from mid-July..."

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Bank of Cyprus may get UK savings protection

oldvicar

Disgraceful. Profits sent to Cyprus. Compensation costs / risks a drain on UK banks.

talexuser

Exactly my first thought too. Are they doing this British subsidiary just to launder money from home losses? Is the FSA up to the job of making sure the subsidiary will be safe and pay its fair share of the compensation fund?

Glen_Clark

sounds like they are being allowed to take out medical insurance after they have fallen ill.
The banks are a law unto themselves, as usual.

Reaper

I'm speculating as I don't know the details but my guess is it will operate like Santander. In other words:
1) The UK arm will be a standalone entity with its own profits and loss on UK business.
2) Although alls its shares will be owned by the parent there will be a limitation on the withdrawal of funds preventing it being bankrupted by a desperate parent taking all the assets out.

If so then it should succeed or fail on its own, and as it will be paying in to the compensation pot then I don't have any objection.

Glen_Clark

Stopping them taking assets abroad, one way or another, would depend on the FSA being one step ahead of the bankers. That would be a novelty.

ashleypride

oldvicar wrote: »

Disgraceful. Profits sent to Cyprus. Compensation costs / risks a drain on UK banks.

I agree, but at least they will pay into the UK compensation fund, unlike the Icelandic banks when the government compensated savers anyway.

mulronie

Reaper wrote: »

I'm speculating as I don't know the details but my guess is it will operate like Santander. In other words:
1) The UK arm will be a standalone entity with its own profits and loss on UK business.
2) Although alls its shares will be owned by the parent there will be a limitation on the withdrawal of funds preventing it being bankrupted by a desperate parent taking all the assets out.

If so then it should succeed or fail on its own, and as it will be paying in to the compensation pot then I don't have any objection.

Spot on, the only way they could join FSCS is if they operated as a UK registered bank, rather than the current model where they are a UK branch of a Cypriot bank.

This is why their website now says: "we propose to transfer the banking business currently carried out by Bank of Cyprus Public Company Limited through its UK branch to Bank of Cyprus Advances Limited [....] This subsidiary will be renamed Bank of Cyprus UK Limited."

Thus the new UK bank will operate as a standalone institution, and while it can pay dividends from retained profit to the shareholder (i.e. the existing Cypriot parent), the new UK bank will have its liquidity and capital position regulated by the FSA - so as far as I can see there's absolutely no reason why it shouldn't be able to join the FSCS party.

innovate

It's exactly what the Bank of Ireland (Post Office) did.

oldvicar

innovate wrote: »

It's exactly what the Bank of Ireland (Post Office) did.

In the Bank of Ireland case that was a downgrading of depositor protection from an unlimited guarantee from the Irish (Eire) government, to the £85K limit of UK FSCS.

VT82

oldvicar wrote: »

In the Bank of Ireland case that was a downgrading of depositor protection from an unlimited guarantee from the Irish (Eire) government, to the £85K limit of UK FSCS.

If I had over £85k to save prior to when this happened, I certainly wouldn't have put it into the Post Office and hence relied on the Irish government's ability to pay an unlimited sum out. And with under £85k to save, I'd much rather it was guaranteed by the FSCS than by the Irish government.

So I think you're in the minority in thinking this was a downgrade in protection.