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Savers – make sure you know where you’re protected

Savers – make sure you know where you’re protected

Category: Savings

Updated: 13/01/2016
First Published: 22/12/2015

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Many savers will have noticed the rise in the number of challenger banks on the market in recent months, and while some are based in the UK, others are overseas. Although they'll have a similar level of financial protection to their UK-based counterparts, it's still worth making sure you understand where, and how, you're protected, and we're here to help!

The issue explained

Most banks seeking savings deposits from UK consumers have a UK banking licence, and deposits with them are covered by the UK Financial Services Compensation Scheme (FSCS) for up to £85,000 per person (although this will reduce to £75,000 per person from 1 January 2016).

However, European banks are also allowed to operate in the UK under their home country's regulations. This is what's known as "passporting".

The main differences affecting consumers is that these passporting banks are covered by their home country's compensation scheme (up to €100,000 per person), and not the UK's. As this limit is fixed in euros, fluctuating exchange rates mean that their cover in the UK could be less (or more) than that offered by the FSCS.

Also, should a European bank fail, compensation claims by UK customers will have to be made against the compensation scheme in that bank's country of origin, possibly in the language of that country, which may make it more difficult to resolve the issue.

Currently, the European registered banks operating in the UK under the passporting scheme are:

Provider Country Regulated in Compensation Cover Notes
AgriBank Malta €100,000 A European credit institution licensed in Malta providing asset finance and co-investment products to UK farmers. Value of assets not available.
Fidor Bank Germany €100,000 Part of German internet bank Fidor Bank AG, which has assets of €304m. Will be offering personal loans in the UK in the near-future.
Handelsbanken Sweden €100,000 Part of Swedish bank Svenska Handelsbanken AB, one of the largest banks in Sweden, with assets of €305bn. Lends to personal and business customers in the UK.
Ikano Bank Sweden €100,000 Part of Swedish bank Ikano Bank AB (publ), which is owned by the Kampard family (founders of Ikea) and has assets of €2.8bn. Provides store cards for UK retailers.
RCI Bank UK France €100,000 Part of French bank RCI Banque Group, which is privately owned by Renault and has assets of €32bn. Lends to personal and business customers in the UK through RCI Financial Services.
Triodos Bank Netherlands €100,000 Part of Dutch bank Triodos Bank NV, which has assets of €7bn. Lends to organic food & farming, renewable energy, recycling and nature conservation projects in the UK.

"With an increasing number of European banks now offering competitive rates, customers need to be aware that not all savings accounts offered in the UK are covered by the UK compensation scheme," said Rachel Thrussell, Savings Insight manager at Moneyfacts.

"However, savers can be reassured that, under European Law, savings with European banks are covered by the compensation scheme of the banks' home country, although they should bear in mind that in the event of a crisis, they could be faced with language and exchange rate issues."

What does it mean for my savings?

Hopefully, it shouldn't pose too much cause for concern. Your money will still be protected under a regulated depositor scheme, albeit under a different scheme to the UK, with the main issues being the language and exchange rate differences. Nonetheless, given the rates on offer from these providers, they could still be worthy of consideration – check out our savings best buys for more details on the accounts available.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.