PROTECT YOUR CASH
The unfolding events in Cyprus are a valuable lesson in keeping your money safe if you have more than £85,000 in cash savings.
Every EU country has to have in place a deposit guarantee scheme which promises that the first €100,000 is 100% safe if the savings institution where it is deposited goes bust. Countries outside the Eurozone are allowed to set the limit in their own currency and in the UK it is fixed at £85,000. The limits are per person so a joint account, for example with a spouse, is protected up to double the normal limit.
Every bank that trades in the UK is covered by this scheme in one of two ways. If the bank is from outside the EU it must trade as a UK subsidiary and all of them as well as any UK based bank is covered by the £85,000 guarantee. If one of these banks goes bust then the Financial Services Compensation Scheme (FSCS) promises to refund the first £85,000 to each account holder within seven days.
Some banks with head offices in another EU country operate in a different way. They are a branch of the EU bank not a UK subsidiary. They are covered by the EU rules. So the first €100,000 is protected and if one of these banks went bust depositors would have to go to the scheme in the country where the bank is based. That could take longer than the FSCS – up to 20 days – and the money would be paid in euros.
If you have more than the limit in any one bank then any surplus could be lost. The deal in Cyprus, which is still not completely clear, could mean that people with money in Laiki Bank in Cyprus will lose everything above €100,000. So an individual with millions in the bank may find all but €100,000 is gone. People with money in Bank of Cyprus on the island may lose some of their money above €100,000. Details are awaited
The limits apply to each separately licensed financial institution. Nowadays, many banks and building societies are owned by other, bigger firms. So if you have more than £85,000 and want to split it between separate businesses it is important to check that the ones you choose are truly separate.
In the UK Cyprus Bank trades as a UK subsidiary and the first £85,000 is safe. However, Laiki Bank which has branches in Birmingham and London trades as a branch of the Cyprus based bank. So people with savings in the UK branch would have to rely on the Cyprus compensation scheme which will protect up to the first €100,000 (£85,400).
It is not clear yet what protection amounts above these limits in UK branches will get, though
Last week savers in UK branches of these banks were assured the crisis in Cyprus did not affect them and that money in overseas branches would not be subject to any special levy.
All banks trading in the UK must tell customers the compensation details that apply. You can find out which banks share licences and which are separate here www.savingschampion.co.uk/advice-guides/fscs-licence-information
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