85k protection.

MarcoM

Hi,

Reading through one of the threads on here I came across
a post in which the author explained that they have 400k invested with HSBC.

Now I understand that only 85k are covered per institution for bank accounts and 50k only for investments in case of provider default but what do people with a lot of money do? Do they split their cash into 10+ bank accounts or does it come to a point where this 85k protection is not the end of it all?

One could assume that if a bank such as hsbc were to fail, then whatever 85k account you have elsewhere would not help much as the banking world would be in deep trouble anyway.

innovate

MarcoM wrote: »

Hi,

Reading through one of the threads on here I came across
a post in which the author explained that they have 400k invested with HSBC.

Now I understand that only 85k are covered per institution for bank accounts and 50k only for investments in case of provider default but what do people with a lot of money do? Do they split their cash into 10+ bank accounts or does it come to a point where this 85k protection is not the end of it all?

One could assume that if a bank such as hsbc were to fail, then whatever 85k account you have elsewhere would not help much as the banking world would be in deep trouble anyway.

You are right, you could imagine an armageddon scenario. In banking industry terms, there have been a few near-Armageddons, but none of the man-made disasters we have witnessed to date has yet been strong enough to bring down the entire world.

Huge banks have failed already - Lehman Brothers being one example of one that caused a financial earthquake and tsunami, and extinguished itself in the process. But we are still here, there are still many people who have more than £85K to put into many banks. Many of these have people have benefited from protection schemes before, and anyone prudent would not keep more than £85K (allowing for interest accrual) in the same financial organisation.

I wouldn't be surprised if there were still many people (incl MSEers) who distribute their cash carefully across different financial institutions in £80Kish chunks.

northerner77

innovate wrote: »

I wouldn't be surprised if there were still many people (incl MSEers) who distribute their cash carefully across different financial institutions in £80Kish chunks.

A member of my family banks with LTSB & I was surprised a while back when they started enclosing with practically every monthly statement (it seemed) a very lengthy message on its own page along the lines of 'We are covered by the FSCS to the tune of 85K - they can pay compensation to depositors if a bank is unable to meet its financial obligations' - surely Lloyds as part state owned are one of the banks least likely to go under yet they do this. My bank doesn't send me this message with statements, I wonder how many of them do. Also wonder about the reaction of customers upon receiving such prominent warnings. Good or bad measure?

opinions4u

Lloyds as part state owned are one of the banks least likely to go under yet they do this. My bank doesn't send me this message with statements, I wonder how many of them do.

They are required to enclose the message twice a year with statements.

If the account doesn't offer twice yearly statements once is allowable.

If the account doesn't offer statement at all a mailing is required.

Mr_Dudley

MarcoM wrote: »

Hi,

Now I understand that only 85k are covered per institution for bank accounts and 50k only for investments in case of provider default but what do people with a lot of money do? Do they split their cash into 10+ bank accounts or does it come to a point where this 85k protection is not the end of it all?

One could assume that if a bank such as hsbc were to fail, then whatever 85k account you have elsewhere would not help much as the banking world would be in deep trouble anyway.

Hi

I have around £900k to invest now from sale of property. Looking around, to get a decent rate on savings there are very few real providers who arent linked with each other. On that basis I am going to HAVE to put more than £85k with several institutions.

The ones I am going to save more with are generally part state owned and huge in their countries of origin - kind of too big to fail.

Anyway, until 2008 nobody ever thought a bank could go bust. The capital controls now are much more stringent so I would have thought they are safer now than they were then....

Mr D

Glen_Clark

The Government has shown that it would rather print money to bail out any UK regulated bank out than let it fail.
Personally I don't worry about having over £85k in a UK regulated bank.
I have no doubt the cash will be preserved.
Its hyperinflation I am worried about.:eek:
A few years ago the current Chancellor described money printing as the last refuge of desperate Governments. Now its a such a regular occurrence he seems hooked on it like a drug.

innovate

Mr_Dudley wrote: »

On that basis I am going to HAVE to put more than £85k with several institutions.

You could - - at the expense of getting the best interest rates - - put all of it into NS&I.

innovate

Glen_Clark wrote: »

The Government has shown that it would rather print money to bail out any UK regulated bank out than let it fail.
Personally I don't worry about having over £85k in a UK regulated bank.
I have no doubt the cash will be preserved.

I don't share your optimism. A few years ago, almost nobody was aware of any protection scheme (even though it existed). Government intervention could perhaps be justified back then on those grounds.

Nowadays, almost nobody with more than £85K is unaware of the protection limit. To rely on a further Government bailout is at best a high-risk strategy.

grey_gym_sock

there are plenty of strategies, really ... you can only go over £85K with "too big to fail" institutions ... you can put a lot (though not unlimited amounts) in NS&I ... you can buy very short-term gilts ... you can not keep all your money in cash

innovate

who defines "too big to fail"? And guarantees it?

grey_gym_sock

it means so big that the government would definitely bail them out if necessary ... this is a view about how the government will act, rather than a guarantee, but the term "TBTF" is used in governments and central banks, and i think it reflects their thinking.