FSCS --- £85k maybe

2010

With all these new savings banks (mainly mobile) springing up all the time, I only hope the FSCS have vetted and scrutinised them more thoroughly than Ofgem did with the power companies, many of which have gone bust.
(as we all know and are now paying for)

Will the £85k guaranteed by the FSCS really happen if quite a few of the minions go to the wall in their efforts to keep at the top of the saving`s table.
Will the good old BoE step in to prevent any failing.

eskbanker

It's the FCA that's responsible for authorising new institutions to conduct regulated activities, not FSCS....

dunstonh

I only hope the FSCS have vetted and scrutinised them more thoroughly than Ofgem did with the power companies, many of which have gone bust.

The FSCS do none of that.    it is not within their remit.

Will the £85k guaranteed by the FSCS really happen if quite a few of the minions go to the wall in their efforts to keep at the top of the saving`s table.

Yes as that is what it is there for and the odd small failure or a mainly deposit taker isn't going to hit the scheme hard.

Will the good old BoE step in to prevent any failing.

Yes.  That is within the compensation scheme rules.

masonic

It is the Treasury that would step in if the FSCS runs out of money, but it would only lend the money to the FSCS. The loan would be repaid through increasing the levy on surviving financial services companies, which would ultimately hit us all. So, not too dissimilar to what has happened with energy firms, except FSCS money is not spent on the costs of a wholesale transfer of customer accounts. It's worth remembering that credit unions are part of the FSCS, and there seem to be a steady stream of failures in that part of the market.

Millyonare

Let's say the UK has roughly £500 billion in total personal savings "bank accounts" in 2023... and there is a power-firm-like crisis among the fintech and highstreet banks next year... where 10-50% of them go belly-up... The FSCS or Treasury might have to find £50-250 billion in cash to bail them out... Painful, but doable.

Not a forecast. Just a pretend-scenario for forum discussion. Dyor, etc.

eskbanker

Millyonare said:

Let's say the UK has roughly £500 billion in total personal savings "bank accounts" in 2023... and there is a power-firm-like crisis among the fintech and highstreet banks next year... where 10-50% of them go belly-up... The FSCS or Treasury might have to find £50-250 billion in cash to bail them out... Painful, but doable.

Not a forecast. Just a pretend-scenario for forum discussion. Dyor, etc.

It's not a particularly credible scenario IMHO, but similar previous discussions on here have highlighted the Treasury's loan of over £20billion to FSCS in the 2008 financial crisis, so there is precedent for such support in extreme circumstances:

https://forums.moneysavingexpert.com/discussion/6289127/fscs-how-much-of-everyones-cash-can-they-insure/p1

However, the capital requirement controls introduced as a result of that crisis were aimed at prevention rather than cure, so the prospect of a widespread industry failure is less likely now than then, again IMHO....

wmb194

Millyonare said:

Let's say the UK has roughly £500 billion in total personal savings "bank accounts" in 2023... and there is a power-firm-like crisis among the fintech and highstreet banks next year... where 10-50% of them go belly-up... The FSCS or Treasury might have to find £50-250 billion in cash to bail them out... Painful, but doable.

Not a forecast. Just a pretend-scenario for forum discussion. Dyor, etc.

What we saw in the financial crisis was that the FSCS wasn't called upon in every situation because they were either fully or partly nationalised, some banks were able to raise new equity e.g., Barclays and others were rescued by stronger players e.g., all of the BSs swallowed up by Nationwide, YBS, Coventry and Skipton.

Particularly for the systemically important banks and possibly Nationwide*, no doubt the same would happen again so the worst case scenario for the FSCS is unlikely.

*Since the Co-op Bank's failure it's been working very hard to build its CET1 capital to >20% so I'd be surprised if it found itself in trouble.

Malthusian

It is perfectly normal for small banks to go under. Tin pot credit unions go under all the time - in the last five years 27 collapsed (based on a quick search for "Union" on the FSCS website, so there could be more). 
So it is not a particularly big deal if something that already happens all the time continues to happen. That is what the FSCS is there for.

DullGreyGuy

eskbanker said:

It's the FCA that's responsible for authorising new institutions to conduct regulated activities, not FSCS....

Its the FCA or PRA depending on the activities. 

Given we are talking about banking and solvency then its the PRA that is more likely to be the authoriser as they are responsible for ensuring the financial stability of the core financial services companies like banks and insurers. FCA is more focused on conduct to ensure they are fair to customers etc but do authorise intermediaries and claims companies etc where the loss to the consumer is low if the company fails (your insurance etc is still safe as its the insurer not the broker that pays the claims)