Are your savings safe? article discussion

Malthusian

Up until the 2007 collapse of Northern Rock, when panicking customers queued outside branches in a desperate attempt to take out their savings, the FSCS only promised to repay 80% of the first £35,000 held in a failed bank or building society.

Never change, Grauniad. (It was 100% of the first two grand and 90% of funds between £2,000 and £35,000.)

In regard to the "superior" protection of the USA's FDIC, it's worth noting that this doesn't appear to have "temporary high balance" protection as the FSCS does (although this only came in here in 2015).

The £85k limit only really needs to be increased when we reach the point that people are ignoring it in large numbers because £85k is worth so little that people can't be bothered to split up funds into £85k chunks, and instead start keeping all their money in one place and assuming the Government will step in if needed. (In much the same way as few people bothered to split up cash into £35k chunks in 2007, and nobody split up cash into £2k tidbits to secure 100% FSCS coverage.) Which is still a few decades of inflation away. (Maybe.)

As long as the vast majority are staying under the FSCS limit (and the few who don't bother don't have enough numbers to cause a bank run) there is little impetus to increase them.

I can still see the Government increasing the limit to buy some easy headlines to calm the horses if a big bank (bigger than Silicon Valley Bank, at least) goes under. 

RG2015 said:

I wasn't aware of this and am surprised that the US would guarantee more than Europe and the UK. 

They are almost twice as rich as we are, remember. $250,000 is twice and a third times the FSCS compensation limit at current exchange rates. Other things being equal, you'd expect a country which is twice as rich as another to have double the savings and need double the deposit protection. (The alternative is that their citizens would have to expend twice as much effort in spreading their money around, which is not how being rich works.)

baby_boomer

Yea. Why shouldn't the UK government waste taxpayers' money and throw it at banks that take unacceptable risks? 

eskbanker

baby_boomer said:

Yea. Why shouldn't the UK government waste taxpayers' money and throw it at banks that take unacceptable risks? 

FSCS is funded by the industry, not the government.

It's true that there is an arrangement via which the Treasury can loan money temporarily to FSCS in the event of a shortfall, but the funds all eventually come from the institutions rather than the taxpayer as such, although of course those funds will ultimately be borne by customers....

GeoffTF

eskbanker said:

baby_boomer said:

Yea. Why shouldn't the UK government waste taxpayers' money and throw it at banks that take unacceptable risks? 

FSCS is funded by the industry, not the government.

It's true that there is an arrangement via which the Treasury can loan money temporarily to FSCS in the event of a shortfall, but the funds all eventually come from the institutions rather than the taxpayer as such, although of course those funds will ultimately be borne by customers....

The FSCS protects the bank's depositors, not the bank's shareholders. They lose their money if the bank goes down.

eskbanker

GeoffTF said:

eskbanker said:

baby_boomer said:

Yea. Why shouldn't the UK government waste taxpayers' money and throw it at banks that take unacceptable risks? 

FSCS is funded by the industry, not the government.

It's true that there is an arrangement via which the Treasury can loan money temporarily to FSCS in the event of a shortfall, but the funds all eventually come from the institutions rather than the taxpayer as such, although of course those funds will ultimately be borne by customers....

The FSCS protects the bank's depositors, not the bank's shareholders. They lose their money if the bank goes down.

Yes, this thread is all about deposit protection - perhaps the poster I replied to was looking to derail it in a different direction, but that wasn't clear....