Do you have unshakable belief in the FSCS?

ForumUser7

Yes:

🟦 Yes: Nothing in life is certain, all systems can fail. To say I have unshakable belief in the FSCS would be a bold statement as my opinion could change if the facts change, but at this time I trust that in the event that an authorised financial provider collapsed, they would reimburse my deposit up to £85,000. I would certainly never store more than this in 1 institution (or between linked institutions). I read on here yesterday they have an agreement to access the National Loan Fund in the event they couldn’t get enough from industry. This document https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1112371/E02795570_HC_668_National_Loans_Fund_Annual_Report_21-22_Accessible.pdf suggests they would be able to cover it:

Total Assets: £297,392,000,000 (297 billion 392 million pounds Sterling)
Total Liabilities: £2,557,909,000,000 (2 trillion 557 billion 909 million pounds Sterling)

TheBanker

Yes:

The thing is, these new banks are small, in the grand scheme of things. The FSCS would not struggle to cover their liabilities through levies on the banking sector. Banks make enough profit, and have enough reserves to cover this. The National Loan Fund is just for the short term while the money's collected up.

And big banks won't fail. They'll get nationalised, or taken over, like RBS, and HBOS, and Northern Rock, and Alliance and Leicester. 

The banking sector themselves would not let a big bank fail - because the impact would be catastrophic. 

The more interesting question is, would the government do anything for people who held more than £85k, and other depositors who aren't covered by the FSCS? I suspect they would, by nationalising the bank or arranging a takeover (as per Silicon Valley Bank UK). The impact of not doing so would be too big. 

RG2015

I find the whole premise of this poll to be flawed. The FSCS is a UK Government body. You might as well ask if people have an unshakable belief in the UK Government and all of its enacted statutes and rules.

I would emphasise that I am referring to the UK Government as an institution, irrespective of its varying political hues over time.

This is verging on the territory on conspiracy theories. For example, the Government lies to the people all of the time so you cannot believe anything they say. Therefore, if a bank goes bust they will find a way to avoid paying out the FSCS guaranteed £85,000 protected deposit amount.

As long as you obey the rules such as £85k per person per institution then all would be fine.

eskbanker

RG2015 said:

I find the whole premise of this poll to be flawed. The FSCS is a UK Government body. [...]

Not really:

• We are independent of the government and financial services industry.

https://www.fscs.org.uk/about-us/

However, they are effectively underwritten by the Treasury, so the distinction is nuanced....

masonic

Yes:

TheBanker said:

The more interesting question is, would the government do anything for people who held more than £85k, and other depositors who aren't covered by the FSCS? I suspect they would, by nationalising the bank or arranging a takeover (as per Silicon Valley Bank UK). The impact of not doing so would be too big. 

I'm less confident that they would, especially in the most likely failure case: a small savings provider failing due to its own internal problems. Such a case is not likely to attract significant publicity, and there would be very little risk of contagion. If it drove a few more people to divide up their savings or move them to NS&I, that might be considered a good thing.

RG2015

eskbanker said:

RG2015 said:

I find the whole premise of this poll to be flawed. The FSCS is a UK Government body. [...]

Not really:

• We are independent of the government and financial services industry.

https://www.fscs.org.uk/about-us/

However, they are effectively underwritten by the Treasury, so the distinction is nuanced....

That was careless, although characteristic of me.

TheBanker

Yes:

masonic said:

TheBanker said:

The more interesting question is, would the government do anything for people who held more than £85k, and other depositors who aren't covered by the FSCS? I suspect they would, by nationalising the bank or arranging a takeover (as per Silicon Valley Bank UK). The impact of not doing so would be too big. 

I'm less confident that they would, especially in the most likely failure case: a small savings provider failing due to its own internal problems. Such a case is not likely to attract significant publicity, and there would be very little risk of contagion. If it drove a few more people to divide up their savings or move them to NS&I, that might be considered a good thing.

I agree, I was thinking more of another RBS or similar, rather than one of the small banks. 

Thumbs_Up

Yes:

TheBanker said:

The more interesting question is, would the government do anything for people who held more than £85k, and other depositors who aren't covered by the FSCS? I suspect they would, by nationalising the bank or arranging a takeover (as per Silicon Valley Bank UK). The impact of not doing so would be too big. 

Like a fool I put in 100k in one of these apt base banks fixed for six months, 3 months later reading news about the small American banks in trouble, I didn’t feel great let me tell you. So now I have to stew it out for the next 2 months. I won’t make that mistake again.

I should have made the poll anonymous, maybe some well known  establish members might have selected no. Glad I asked the question, some good comments to digest.

Maybe my next poll I do will have the option “I don't vote in voodoo polls"  +

TheBanker

Yes:

Thumbs_Up said:

TheBanker said:

The more interesting question is, would the government do anything for people who held more than £85k, and other depositors who aren't covered by the FSCS? I suspect they would, by nationalising the bank or arranging a takeover (as per Silicon Valley Bank UK). The impact of not doing so would be too big. 

Like a fool I put in 100k in one of these apt base banks fixed for six months, 3 months later reading news about the small American banks in trouble, I didn’t feel great let me tell you. So now I have to stew it out for the next 2 months. I won’t make that mistake again.

I should have made the poll anonymous, maybe some well known  establish members might have selected no. Glad I asked the question, some good comments to digest.

Maybe my next poll I do will have the option “I don't vote in voodoo polls"  +

Well I wouldn't worry. These banks are subject to the same capital and liquidity regulations as the big banks.

If one got into trouble I think a big bank would acquire them. Look at SVB UK - HSBC acquired it for £1 and added £1.5bn to their profits. 

bryanb

Worked for me when Iceland bank went under. In fact they paid out more than the guaranteed sum at the time.