The instability brought on by recent financial crises has cast a shadow over the banking world, and now many fear that banks can collapse at any time. As such, if you have savings, it is important to know that they are safe.
Firstly, make sure your bank is on the Financial Services Register, and is therefore regulated by the Prudential Regulation Authority (PRA) and/or the Financial Conduct Authority (FCA). All reputable UK banks and building societies, and certain foreign banks that operate in the UK, should be on this register.
Should a regulated bank collapse
In the unlikelihood that a regulated bank collapses, customers should have recourse to the Financial Services Compensation Scheme (FSCS). This means that if the bank collapses they pay compensation to those who lose money. They compensate up to £50,000 per person, per institution. UK registered banks are fully covered by this scheme.
Some foreign banks that operate in the UK do so through UK subsidiaries, meaning that they operate in exactly the same way as UK banks and their customers receive the same compensation.
However, some foreign banks operating in the UK are registered differently and do not have UK subsidiaries. This means:
- They may be partly covered by the FSCS scheme and partly covered by their home compensation scheme.
- If you had to claim compensation you would have to apply to an overseas scheme and would be reliant on a foreign government.
- If things were to go wrong, the UK government may not be in a position to step in and help.
- When you sign up to a new bank you can check their website to see if they are on the Financial Services Register and if they are 100% covered by the UK FSCS, or if not, from which country you would have to claim compensation.
The FSCS predict about 3 months for compensation. If you need to be able to access money in an emergency, one option would be to split savings between banks so that if you cannot access one deposit you can use the other.
Other emergency financial help
- Home students can apply to their university hardship fund. Most universities offer short-term loans to those who get their loans late. If you have dependents they may offer further emergency help that you will not have to pay back.
- Some Universities have international hardship funds that help international students who are struggling due to unforeseen events out of their control.
- Independent charitable trusts often fund students who are short of money due to events that are out of their control.