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SURVIVING THE EUROSHOCK: From Spain to Holland, which country is guarding your cash?

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Foreign legion: Holland's ING is one of several overseas banks that together have more than 1.5 million customers in Britain

The turmoil in European markets this month has rocked other banking names. As Financial Mail reported last week, Kent County Council stopped using Santander UK to deposit its funds over concerns of a banking crisis in Spain.

The council has since had talks with Santander and says it has been reassured that the bank is ‘rock solid’.

  More... SAVINGS COMPENSATION & PROTECTION: A comprehensive list of bank ownership and licences

Santander, which took over Abbey National, says its UK businesses are ring-fenced from the parent company in Spain. It dismisses any concerns that a crisis in Madrid could trigger problems for its British customers.

A spokesman says: ‘Santander UK is completely autonomous from its Spanish parent company, raising its own funding to lend to consumers and companies in the UK.

‘This structure acts as a firewall to prevent problems within one part of the group spreading to other units in the event of financial difficulties.’

But past problems, such as the collapse of Iceland’s Landsbanki in 2008, are still fresh in many savers’ minds. More than 200,000 customers with Landsbanki’s UK subsidiary Icesave had funds frozen for weeks, though their deposits were eventually repaid in full after the Treasury stepped in.

With more banking brands entering the UK market, consumers are keen to know what sits behind the promises of attractive interest rates and who they are dealing with. 

The key issue for savers is whether they are dealing with a UK bank or building society, regulated by the Financial Services Authority, or whether their deposit is with a UK branch of an overseas bank.

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If the latter, regulation – and compensation after any collapse – will be handled by the home nation regulator. United National Bank and Punjab National Bank, for example, have been among the less  well-known names in Financial Mail’s best-buy tables.

Punjab is India’s third-biggest bank, while United is jointly owned by two of Pakistan’s biggest banks. Both are directly regulated by the FSA and part of the Financial Services Compensation Scheme.

Another new name, GE Capital Direct, launched last week. It offers easy-access online-only savings accounts, with initial rates of up to  2.65 per cent. Although a subsidiary of US giant General Electric, GE Capital Direct is incorporated in the UK and covered by the FSCS.

Managing director Sheragh Beirne, says: ‘We want to offer something that is safe, simple and secure. Our research shows that 82 per cent of savers are very aware of the compensation scheme and what it means.’

The FSA publishes monthly lists of banks authorised to accept deposits in the UK. This highlights those directly regulated and those that are overseas branches. See the list under ‘other publications’ in the library section of the FSA website, or call the regulator’s helpline on 0845 606 1234.


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