New Ts &Cs bank notifications

Packingpaul

Hi all,

This is more of a question of clarification.

I have received a number of emails about the above title and having read most of the changes it seems to be a constant. I am clear that the new FCS limits have been raised to £120k per account/bank but I also see a notification that my acceptance of the banks new Ts & Cs signs me up to stakeholder status that means should the bank fail my savings could/will be used to pay creditors. Now I understand that the government is supposed to underwrite our savings to the max limit but I also read that when the max limit was £85k the government account to reimburse us was woefully under funded (75% underfunded in fact) and now that the limit has been raised to £120k it is percentage wise even more underfunded.

Can anyone confirm or explain to me how my savings would be safe if the above is true.

Many thanks,

Paul

pochisoldi

Which bank/financial institution are we talking about here?

Do you have a link to the webpage/document in question?

Without either of the above, the answer to "Can anyone confirm or explain to me how my savings would be safe if the above is true." would be "No".

flaneurs_lobster

Don't know where you are reading your information but the FSCS has never been underwritten by Government, the clue's in the name, so there is/was no Government account to be funded, woefully or otherwise.

I have received one of those changes to terms emails today (from Cahoot). There's no mention of a "stakeholder status" or indeed any change at all other than the amount covered.

Care to share your sources? My money's on the Mail/Express.

eskbanker

FSCS has never been underwritten by Government, the clue's in the name, so there is/was no Government account to be funded, woefully or otherwise

FSCS is indeed industry funded, but the government does effectively underwrite it, in terms of the Treasury backstop, used in exceptional circumstances such as in 2008:

During the crisis, we had to borrow a large amount of money from HM Treasury so we could pay compensation quickly and not leave customers out of pocket.

https://www.fscs.org.uk/news/archive/book-closed-on-2008-banking-crisis/

gpman

https://forums.moneysavingexpert.com/discussion/6653959/new-ts-cs-bank-notifications

Without knowing what financial institution you are referring to, nor the verifying the detail you have posted, the explanation I would offer is as follows:

You are a creditor of the financial institution.

In the unlikely event it goes bust, you are still treated as a creditor and will be treated as such.

The FSCS is a statutory scheme that protects you from any loss (subject to their own t&cs, limits, etc)

In the even more unlikely event the FSCS cannot meet it's liabilities, I'm sure the government will step in (but that is not guaranteed)

The FSCS is not underfunded in the sense of being unable to pay claims. The scheme operates where it raises funds to cover possible failures it reasonably expects, rather than holding a massive reserve to cover total sudden failure of all the UK banking institutions.(or at least a major part of them)

TheTelltaleChart

my acceptance of the banks new Ts & Cs signs me up to stakeholder status that means should the bank fail my savings could/will be used to pay creditors

To clarify: when you have £100 in an account with Bank A, there is no "your money". A bank account is not like a safety deposit box.

Having £100 in an account with Bank A just means that the bank owes you £100. It's like a scribbled note that your mate Davina might make after a night out saying "I owe Paul £100".

The main differences between that scribbled note and a bank account are:

a) more reliable record keeping. Banks don't just lose transactions (despite what the bitcoin bros might say!).

b) multiple convenient payment systems. I.e. if you want to pay £10 to Toni (or to We Sell Things Online plc), who has an account with Bank B, there are various ways to get £10 added to their account balance with Bank B, and correspondingly £10 deducted from your balance with Bank A (which will always involve Bank A paying Bank B £10 in some form acceptable to both banks).

c) if Bank A goes bust, the FSCS stands behind them, and the UK Treasury behind the FSCS. As already mentioned, usually the UK lends the FSCS any short-term cash it needs, and the FSCS later recovers that from the industry. The UK itself cannot run out of cash, because it is the source of all £s: money (in sterling) is simply IOUs written by the UK.

masonic

https://forums.moneysavingexpert.com/discussion/comment/81874996#Comment_81874996

Effectively every deposit account operates like this. That is why we have the FSCS.

LHW99

And if every bank in the UK failed at once and needed bailing out - make sure you're well stocked with beans.