Do you have unshakable belief in the FSCS?

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Band7

I don't vote in voodoo polls.

grumbler

This  question makes no sense. Belief in what?

That your £85K will be refunded? Sure they will - the government will print whatever is needed.

Will it be the same £85K that you expect? Quite possibly, not. The purchasing power can drop unpredictably depending on what banks fail and the amount printed.

Thumbs_Up

Yes:

My fault, didn’t emphasize to well. This really was aimed at people who are putting their hard earned money in banks no one ever heard of and only recently got their banking licence, or a bank you loan your money too, said bank loans money to SME which –

“  Some 390,000 businesses failed between 2020 and 2021 (6.5% of the total population), a 23% increase in business failures from the previous year. “

“ On average, almost 20% of new businesses fail in their first year. This isn’t exclusive to new business owners, as a report from The Insolvency Service revealed that only one in three small businesses last for more than 10 years.”

https://www.money.co.uk/business/business-statistics/small-business-statistics

adindas

Well at least getting protected for your £85k is a good thing.

eskbanker

Thumbs_Up said:

My fault, didn’t emphasize to well. This really was aimed at people who are putting their hard earned money in banks no one ever heard of and only recently got their banking licence, or a bank you loan your money too, said bank loans money to SME which –

“  Some 390,000 businesses failed between 2020 and 2021 (6.5% of the total population), a 23% increase in business failures from the previous year. “

“ On average, almost 20% of new businesses fail in their first year. This isn’t exclusive to new business owners, as a report from The Insolvency Service revealed that only one in three small businesses last for more than 10 years.”

https://www.money.co.uk/business/business-statistics/small-business-statistics

Banks aren't stupid, and those choosing to support SMEs will be well aware of such statistics, and price their services to them accordingly, factoring in the risks of business failure and bad debt, etc.  There have been numerous new entrants to UK savings and banking markets over the last decade or two, but if you look at recent FSCS stats, it's only a few small credit unions that have failed and required FSCS intervention, despite pandemic turbulence, etc.

Swipe

Yes:

adindas said:

Well at least getting protected for your £85k is a good thing.

Yes, much better than it used to be.

subjecttocontract

Yes:

FSCS is not just about protecting deposits of £85000
It's also about small people like me who save £5000 or £10000 into various banks as well.
If I had no confidence in FSCS protection I would be putting my money under the mattress.

Frequentlyhere

Yes:

In answering the question, I like to think about the counterfactual. 

If the Government were willing to renege on the FSCS guarantee and did so, what would happen?

Well, in the short term, I think it would cause a total collapse of scores of banks. It wouldn't just be " Trustus bank of Nigeria UK ltd' but basically anything outside of the top 5. And then, probably, the top 5 would also collapse. After all, they practically did during the GFC, so why not now too?

In the long term, no-one would ever trust what the UK Govt promised and legislated for ever again in that space. We'd probably immediately convert any £ we earn into $ and stick them offshore or under the mattress.

Would the £ collapse? Quite possibly.

I think it would be that cataclysmic.  I mean, look back at the Truss times. It only took the suggestion of a somewhat less favourable approach for the markets to our economic policy, and the UK bond market almost collapsed.

Meanwhile, as already pointed out, the Govt owns the printing press and so there's absolutely no reason to let that happen. And if that's irrelevant because of hyperinflation, well, we have bigger problems than FSCS failing, don't we?

So - yes - I do strongly believe in the FSCS. I don't however like the word 'unshakeable'  as that implies I wouldn't change my mind if facts change, but as it stands - yes.

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Yes:

eskbanker said:

https://www.money.co.uk/business/business-statistics/small-business-statistics

Banks aren't stupid,

Clearing banks, merchant banks, retail banks, some have made serious errors of judgment.

Ps going out for a walk, I deal with the flak later.

eskbanker

Thumbs_Up said:

eskbanker said:

Banks aren't stupid,

Clearing banks, merchant banks, retail banks, some have made serious errors of judgment.

By removing the rest of the quote, you've omitted the context - I wasn't saying that various different types of banks don't make mistakes, just that those in the business of lending to small companies (or any size for that matter) will clearly have risk management procedures that recognise the potential for default or failure, so the stats that you were quoting wouldn't be news to them and would already be incorporated into their business models.