How safe is your money?
In the past couple of weeks there has been one shocking headline after another concerning the state of our financial markets.
We have seen Lehman Brothers file for bankruptcy; potential takeover of HBOS by Lloyds and AIG being bailed out by the government.
Who do you bank with?
Only recently Simpson Millar LLP had a client ask us who we banked with. If this question had been asked 6 months ago, it may have seemed a little strange, but in the current financial market it is a perfectly valid question.
The client wished to know this information as we held money on account for them and they wanted to make sure it was perfectly safe. We were pleased to tell our client that we bank with Yorkshire Bank who are part of the National Australia Bank Group. They combine global strength with the local service of a well established regional bank.
Yorkshire Bank (AA- rating) and National Australia Bank Group (AA rating) have been awarded an international long term rating by Standard and Poors. The ratings indicate the overall strength of the Group and show that Yorkshire Bank has a very high credit quality and therefore it denotes expectations of very low credit risk. The rating also indicates very strong capacity for payment of financial commitments. International Long-Term Credit Ratings (LTCR) are used as a benchmark measure of probability of default and are formally described as an Issuer Default Rating (IDR). A Standard & Poor's issue credit rating is a current opinion of the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs).
After talking to us regarding our banking facilities, the client felt assured that their money was safe and were happy to leave the money on account.
What happens if your bank gets taken over?
Well hopefully for the average consumer, this will mean that you will in effect just get a new lender eg if you have a Halifax mortgage then your payments and terms will remain the same.
What happens to the savings in my bank?
All UK deposits in bank or building society savings
products are covered by the Financial Services Compensation Scheme (FSCS), which is an independent fund set up by UK financial bodies and regulated by the Financial Services Authority (FSA) which promises that, in the event of a bank collapsing, you'd get some of your money back.
Each depositor is protected up to the first £50,000 of savings they have with one organisation, regardless of the number of accounts. Some banks are under the same FSA authorisation as other banks (part of the same banking group) in this case the depositor would only be entitled to £50,000 compensation.
However, you need to be aware of a small detail that the Financial Services Compensation Scheme rules declare. If you have debts, eg mortgage, loan or credit card with a bank that you also have savings with, any outstanding debts will be subtracted from the savings (ie say you had £10,000 in savings, but had a loan of £8,000 and the bank went bust you would only get £2,000 compensation.)
Further information concerning the scheme can be found here: http://www.fscs.org.uk/