Money in the bank - how safe?

[Mogga]

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If you're a consumer you're protected by the scheme if your bank disappears with your money - but only up to £35k.
Is there similar protection for business accounts? Or could it really all just disappear if you're with the wrong bank?

[tbp]

Im not sure of the procedures for businesses, as I only know about the consumer side.

If you are a sole trader however, and not a limited company, then you should be covered.

It is very unlikely that you would ever just lose all your money though, there should be procedures in place to stop that before it gets to that stage.

[ian]

Lloyds business account has this in the T&C's but I;m not sure how much would be covered as the compensation list only refers to 'per person'

"We are a member of the Financial Services Compensation Scheme established under the Financial Services and Markets Act 2000. Most deposits, including those made by individuals and small firms, are protected by the scheme. Further details of the scheme are available on request or by visiting www.fscs.org.uk."

[angelabx]

It's all very scary at the moment both for savings accounts and business accounts.

The £35k protection scheme is useless for larger savers or businesses with large sums passing through their accounts.

If a 'big business bank' like Barclays, Lloyds, RBS or BoS were to fail it would knock-on to loads of businesses failing too if they lost their money. I'm not sure the Government could allow it to happen. However if all the banks started getting into trouble does the government have that much money?

I guess this is why so many 'in-the'know' are buying gold

[Mogga]

I guess this is why so many 'in-the'know' are buying gold

Ethiopia bank 'bought fake gold' - ABC News (Australian Broadcasting Corporation)
Ethiopia bank 'bought fake gold'

As long as you're buying the real thing.

It is worrying - there are so many bad rumours flying at the moment.

[drivetowin]

Just had a quick read of the FSA handbook and as far as I can see you are covered by the compensation scheme if you are a 'small business' (whether sole trader or limited company) Small business in FSA terms means your turnover is less than £1 million per year - which I guess would cover 99% of affiliates.

It definitely makes sense to spread your risk though - personally I would avoid having more than £35,000 with any one financial institution. Watch out for groups though (like HSBC) - if the whole group went down you could well find yourself covered for only £35,000 even though you had accounts in separate parts of the group.

[angelabx]

It definitely makes sense to spread your risk though - personally I would avoid having more than £35,000 with any one financial institution.

We need more banks then!

Anyone with sizeable savings would need to use 15 different banks to protect just half-a-million quid. It turns into an administrative nightmare and also means you are forced to use some of the really dodgy smaller banks.

Is it best to just use the big 4 I wonder? Who knows?

It's not as if buying property sounds a sensible move at the moment either.

Interesting problem.....

[tbp]

As long as you're buying the real thing.

The prices of gold have rocketed lately, and its the highest level it's been at for many years. It's seen as a safe haven in times of economic trouble, and is a good indicator of how bad things are.

I`ve started learning about and following the stock market lately, as I`ve taken up spread betting. It's amazed me what a huge mess the economy is in, not just here but worldwide. Its certain that we are in for a major crash in the next couple of years, its extremely unlikely that it can be recovered before that happens.

Going to really hard for the next couple of years, taxes will increase year on year, prices of everything will go up and many job cuts will be made. Huge numbers of people will have their homes reposessed as they can't keep up with mortgage payments.

I just wish I had the money to leave the country now, but unfortunately I don't, and it's going to be incredibly hard to be able to save any in the next couple of years.

In a way, I wished I hadn't found out about how bad things are, as its incredibly worrying and depressing!

[ian-d]

So on a personal level, does the £35k only cover you as a person for a bank, not per account within a bank? I've used HSBC only most of my life, am i going to need to set up more banks?

Scary stuff though, i guess £30k should go in premium bonds, as i presume they are covered, what else????

[drivetowin]

Yes, it's £35K per bank, not per account (at least as far as I understand it) - but if HSBC Business and HSBC Personal for example have separate FSA registrations then you would be covered for £35K in each.

Personally if you're with one of the big four then I wouldn't worry too much - if the financial situation gets so bad that one of those gets in trouble then frankly losing your money in the bank will be the least of your worries as by then the whole economy will be in meltdown and even if you could get your money, inflation of over 100% would soon make it valueless.

That's not to say there is no risk, risk free investment simply doesn't exist, but impo you probably stand more chance of being struck by a falling meteorite than you do of losing your money in one of the big four high street banks - the Government (of whatever party) simply would not allow that sort of collapse to happen.

[tbp]

Personally if you're with one of the big four then I wouldn't worry too much - if

Very true, there are warnings about the banks at the moment saying things are going badly, and this is leading to their share prices dropping.

However, they are doing badly for banks, which means they that are still producing massive profits of millions, or even billions of pounds. What is bad for a bank would be a record profit for a lot of other businesses. So there is no way they are going to go down in near future.

[ian-d]

but buying gold/platinum and storing it under your mattress is definatly the best way to go

[angelabx]

Very true, there are warnings about the banks at the moment saying things are going badly, and this is leading to their share prices dropping.

However, they are doing badly for banks, which means they that are still producing massive profits of millions, or even billions of pounds. What is bad for a bank would be a record profit for a lot of other businesses. So there is no way they are going to go down in near future.

Profits and Liquidity are entirely different things. If a bank of any size or standing has a need to borrow and nobody will lend then they're in trouble. All the banks rely on short term borrowings and in a credit 'crunch' there are no lenders.

Northern Rock was making huge profits but hit a liquidity crisis. We all know what happened next! (Although they were an extreme case).

The big problem is nobody really knows what the banks have all been up to. They do loads of stuff off-balance sheet and using very complex instruments. That's why the share prices haven't recovered. Fund managers don't really trust what they're saying to reassure the markets.

I tend to agree with 'tbp'. Much of the world economy is in a right old mess. Especially America and UK. Darlings budget speech was in fantasy land. Where to invest right now is a tough one.

For the record, Britains big five (not four) are:
HSBC
RBS (includes Natwest)
Barclays
Lloyds
HBOS

Ironically the safest place to put your money at the moment is probably Northern Rock! I see they're offering 6.25% which is pretty good and intheory they're backed by the Government so as safe as National Savings. Am I right?

[Pete Taylor]

they're backed by the Government so as safe as National Savings. Am I right?

You are right. Northern Rock are as good as NS&I for investor protection at the moment.

[Mogga]

You are right. Northern Rock are as good as NS&I for investor protection at the moment.

But are these business accounts or personal?

Can you NS&I your business money?