Savings protection if there’s a no-deal Brexit

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One thing that I know has concerned some of you is what happens to savings protection if there’s a no-deal Brexit. Specifically, what happens if the bank you’re saving with fails? The main message is, don’t panic!

What happens now

At the moment, banks, building societies and credit unions based in the UK sign up to the Financial Services Compensation Scheme (FSCS). This means your savings are protected up to a limit of £85,000. This applies to UK-based banks and most banks that have headquarters in the EU but that operate in the UK.

How your savings are protected after a no-deal Brexit will depend on whether your bank or building society has a banking licence or authorisation issued by the UK regulator, or whether it operates under EU authorisation and has been what’s called ‘passported’ to operate in the UK.

SAVVY TIP: Passporting means that a bank is authorised to operate in one EU country and does not have to get independent and direct authorisation  to operate in another. It can transfer or ‘passport’ its authorisation. UK firms use it to operate in the EU and EU firms use it to operate here.

If your bank is based in the UK and you live in the UK

If you have savings with a bank or building society that is based in the UK, your savings will continue to be protected up to a limit of £85,000 by the Financial Services Compensation Scheme (FSCS). This will be the case whether the UK leaves the EU with or without a deal.

SAVVY TIP: Currently your savings are protected up to £85,000, which is an amount set by the EU. All countries that are members of the EU have to offer €100,000 worth of protection to each saver, if they save with banks that are headquartered in the EU. Countries that are not part of the euro have to offer the equivalent amount of protection.

If your bank is based in the EU and you live in the UK

If your bank has its headquarters in an European Economic Area (EEA) country, but currently operates under the passporting rules I mentioned earlier, it will have to set up its own UK company if there’s a no-deal Brexit and get a UK banking licence.

A few banks that operate in the UK, (including ethical bank Triodos, which is in SavvyWoman’s Directory, Fidor Bank and RCI Bank) are currently covered by their own country’s compensation scheme. For example:

  • Triodos Bank is Dutch owned, so its UK customers are currently covered by the Dutch compensation scheme.
  • RCI Bank is covered by the French deposit protection scheme
  • Fidor Bank is covered by the German deposit protection scheme.

If you have savings with these banks, you will have received a letter or email telling you about this.

SAVVY TIP: These banks will be covered by what’s called a ‘temporary permissions regime’ if they don’t have their UK banking licence in place by the time we leave the EU. This means your deposits will be covered by the UK’s FSCS until they get their full, direct banking licence.

You can read more about Triodos Bank’s plans to set up its separate UK bank under the legal transfer section of its website.

You can read more about the RCI Bank’s plans on its website.

SAVVY TIP: It’s worth emphasising that your savings will be protected throughout. They’re currently protected by the bank’s headquartered country’s scheme (such as the German, French or Dutch one), up to a limit of €100,000. If we leave the EU without a deal, they’ll be protected by the UK’s FSCS.

If your bank is based in Gibraltar

There is one exception to what I’ve just said –and that is if your bank has its headquarters in Gibraltar. In that case, your savings would continue to be covered by the Gibraltar deposit guarantee scheme if we leave the EU with no deal.

SAVVY TIP: The Gibraltar Deposit Guarantee Scheme covers savings up to €100,000 per person. You can read more about the scheme on its website.

If you live in the European Economic Area

If you live in an EEA country and you have your savings with a bank that has its headquarters in the EEA, your money will still be protected by that country’s compensation scheme. Nothing will change.

If you live in an EEA country and you have your savings with a bank that has its headquarters in the UK, your money will not be protected by the UK’s Financial Services Compensation Scheme. Contact your bank to find out if your savings will be protected by another EU compensation scheme.

 Related articles: 

A no-deal Brexit: what it could mean for air travel, mobile phones and driving abroad

What happens to pensions, savings and investments if there’s a no-deal Brexit?

10 things you need to know about making a savings claim to the Financial Services Compensation Scheme.

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