Santander-Am I a fool busting the FSCS limit with this bank?

ratechaser

This is a question I've been asking myself for a while now as I've got a very significant exposure to Santander (which is of course the pessimistic way of saying that I've got a bunch of reasonably paying accounts with them). Problem is that as long as they continue to pay 3% on their 123 accounts, and turn out 'relatively' good ISAs each year, I'll probably keep investing.

Put it this way, it's not something that keeps me awake at night!

apt

I will probably go a bit over the lowered £75,000 limit with the Coventry BS because I have confidence the society is solid and am maxed out on the accounts where I could make the same or more interest elsewhere. I think the risk of Santander crashing is also low, but if I could keep to the limit by moving money to the 4/5% current accounts and high paying regular savers I would.

ChiefGrasscutter

Malthusian wrote: »

There are some who believe that in the event of another bank catastrophe, the government would guarantee all UK deposits, including those above £75,000. Exactly as they did with Northern Rock. Otherwise every single depositor would withdraw his savings from every bank and the UK economy would collapse.

It all depends on size and extent of possible contagion to the rest of the banking sector.
Yes, I tend to agree any large household name type bank is "probably" safe but any smaller institution rather less so.
Indeed this has already happened
The much unreported case of the Southsea Mortgage and Savings Company which went bust in 2011. Those who had more than then limit of 85K invested only got their 85K back and the rest was lost.
Here is one link to the case
http://www.saveoursavers.co.uk/author/jason-riddle/savers-will-not-be-fully-protected-as-southsea-mortgage-investment-company-is-wound-up/

It also probably also depends on the amount of unprotected business accounts the institution might have. If HMG allowed the entity to go bust and paid out according to the rules rather than say nationalising it as per Northern Rock then many of the businesses would loose out totally. As business deposits are many time the extent of personal deposits the affect of a full institution liquidation would much more severe for businesses than for the limited number of depositors with >£75K.
If say xx plc had £500m on deposit then loosing this might push the company into liquidation instantaneously as they may now be trading while insolvent should a bank failure event be allowed to occur. One more reason why HMG might go for a takeover of such a failing banking group rather than the liquidation/payout route.

tara747

smjxm09 wrote: »

I have bank accounts and ISA's with Santander that already take me past the £85000 limit by a couple of thousand pounds but with the new limit cut to £75,000 my exposure will be increasing if I do nothing. The problem is if I move any money I will take an interest rate hit.

I have taken the view that if the bank was starting to get into any difficulties I would read about it first and could instantly move money out of one of my Santander bank accounts to drop the total sum below £75000 via a bank transfer.

So the question is am I foolish taking this approach or wise hanging on to the extra interest?

Just like everyone was forewarned about Northern Rock?

I have just over £75,000 in Santander, and I will be moving the excess elsewhere before 1 January.

It's up to you, though.

JimmyTheWig

It depends on how losing the money would affect you.
If it would just be a case of losing money then you may be happy leaving it there on the basis that you'd rather have the guaranteed interest than guard against such a giant of a bank failing.

But if this money is needed for something specific (e.g. you are between house moves and you need it to buy the house you want) then the risk of losing it probably outweighs the interest gained by leaving it where it is.

eskbanker

ratechaser wrote: »

as long as they continue to pay 3% on their 123 accounts, and turn out 'relatively' good ISAs each year, I'll probably keep investing

Are you using 'investing' as if it was synonymous with 'saving' there or do you really mean that you'd be shifting money away from Santander?!

Pincher

smjxm09 wrote: »

I have already maxed out accounts that don't require standing orders like the TSB and Tesco Bank so this takes me back to my opening question.

http://www.tsb.co.uk/plusness/?WT.ac=A00097

Classic Plus account
5% AER/4.89% gross variable interest on balances up to £2,000. Pay in a minimum of £500 a month, register for Internet Banking, paperless statements and paperless correspondence.

macman

I too cannot conceive of a situation in which the UK govt would allow a bank as large as Santander to fail. The worst case is probably that any amount above £75K might not be recoverable for several months.
However, if you cannot afford under any cirumstances to lose £12K, then move the cash somewhere else.

Sam_J12

There is no problem at all with being a few thousand above the guaranteed limit. The chances of people losing deposits because of the bank going bust are tiny, and the chances it will happen without some information beforehand that the bank or banking system is in trouble is even smaller.

ratechaser

eskbanker wrote: »

Are you using 'investing' as if it was synonymous with 'saving' there or do you really mean that you'd be shifting money away from Santander?!

The former. April will be the next decision point as I've got about 50k in an ISA with them that is maturing, if there is better to be had elsewhere, I may move it...