Bellmore Group Management Services, Tokyo Japan How to Secure Your Savings (Part 2) | Page 2

In the event that a bank falls into difficulties, a bailout might cover your savings, providing protection for your money
(although there is no full guarantee to that effect). This happened not only to UK-owned Northern Rock and Bradford &
Bingley, but also to Iceland-owned (but UK-regulated) Kaupthing Edge.
As much as possible, limit your savings under the £85,000 limit, since the protection is a goal but not a guaranteed
promise in case of a bank run. Nevertheless, this is specifically applicable to non-European banks, as this has not been
proven in reality so far (and we are hoping it will never happen!).
Not all European banks are UK protected
A bank could be operating in the UK with the FCA's complete approval; but the FSCS may not provide protection for the
money you put into them. Be more careful then about European-owned banks than those owned by overseas companies.
The reason behind this caveat is that banks from the European Economic Area may choose to have a protection that is
slightly variant, referred to as the 'passport' scheme, meaning you would have to claim compensation for your money from
the compensation program in the bank's originating country.
Overseas banks are not allowed to do this in Europe; hence, they have to provide complete UK compensation if they
operate in UK.
Remember, if you save with one of those banks owned by overseas companies, the safety of your savings will depend on
the foreign nation’s stability and solvency or their authorized financial regulator.
Certainly, there are some countries that have greater financially stability than the UK; however, you will then rely on a
government upon which you do not have complete trust to protect your savings.
But on the bright side, beginning in 2010, every European nation has been required to set a compensation cap of
€100,000 (which is equivalent to £85,000 in UK, which does not use the euro).
In case you have savings in a European bank that is presently protected by the FSCS at the maximum limit and it converts
to the 'passport' scheme, the bank should inform you of the change.
Finally, a European bank may also operate in the UK while applying its own home-compensation program that may be
below the UK limit, giving you protection only for that lower amount. Under this arrangement, the overseas bank will not
be FCA-regulated but remains regulated by its government's own protection program.
Nevertheless, accounts with these banks sometimes provide higher rates compared to UK-protected banks.
Remember then that dealing with non-UK regulated banks may result in difficulty of getting back your money in the event
of a bank failure.