Echo: October 2008

Financial Strength
The words don’t panic should no longer be attributed to Dad’s Army but also the banking sector, the recent government move to raise the Financial Services Compensation Scheme (FSCS) to £50,000 provides additional guarantees for investors and some peace of mind.

Let us be absolutely clear on one point – not one single person holding a deposit, or savings, account with a UK bank has lost any money from the current credit crunch collapse. The only people who have lost money from, say, the Northern Rock and Bradford & Bingley collapses have been shareholders, people who have invested in the company itself.

It is incredibly difficult to judge a banks financial position and unfortunately a lot of banks have come under pressure due to speculation and rumour as opposed to financial strength issues.

Regardless of market rumours though it’s best to know your rights and ensure that you have a clear understanding of the FSCS scheme and that your money is protected.

Some points of interest are:

• Any debts you have with the institution are subtracted from the amount paid to you
• The cover level applies to £50,000 per person (so joint account holders get £100,0000 cover on a joint account)
• The protection only counts per financial institution and NOT per bank account and we have enclosed a list for you to ensure you do not have multiple accounts per institution
• Offshore Savings Accounts may not be protected
• The compensation will not be paid immediately to you, some legal wrangling will occur first so you should ensure you have alternative funds

With events moving fast in this sector and markets struggling, banks liquidity and financial strength is very much under the microscope at present. However, it is important not to panic as national governments on the whole have moved to stop the banking crisis.

Below is a list of the banks classed as one financial institution. This is not an exhaustive list - please check the Financial Services Authority website for full details.