Is Santander safe?

So are my savings safe?


UK consumers with money in Santander are protected by the Financial Services Compensation Scheme. This covers deposits of up to £85,000 held in the bank, or £170,000 for couples, and includes money previously held in Alliance & Leicester or Abbey accounts. If the worst did happen you would get that much money back, although it could take up to six months for your claim to be processed. The standard consumer advice is not to hold more than £85,000 in the account of any UK bank, Santander included.


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I have money in a Santander UK account, is it safe?


Yes, the UK bank is in no imminent danger of going bust.


And if the worst did happen, savers would have substantial protection for their money under the Financial Services Compensation Scheme (FSCS) which covers the first £85,000 of someone's savings in a bank.


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I'm worried that money held with Santander could be at risk. Is it safe?
A The UK business operates under a subsidiary model and is autonomous from its Spanish parent – that's the message from a spokesman.
"This structure acts as a firewall to prevent problems within one part of the group spreading to other units," she said. The bank adds that it operates a 'firewall' approach to borrowing and lending in the markets it operates in, which means money raised in the UK stays there.


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What happens if a bank were to collapse?


Now while I don’t want to scaremonger, and think this is an unlikely outcome. Let’s just explore what’d happen in that eventuality, as it may help put some minds at rest.


The only precedent we have here is what happened in 2007-8 when we saw a spate of banks in trouble. The outcome for banks in the UK depended very much on whether they were fully UK regulated (as Santander UK is), not whether they were UK owned.


The fully UK regulated banks – including Northern Rock, Bradford and Bingley, and Icelandic owned bank Kaupthing Edge. When they got into trouble, there was no need for them to be bailed out as the government simply moved them away from the troubled banks, ring-fenced the cash in them and kept them operating.
Eg, Bradford and Bingley savings became part of Santander, and Kaupthing part of ING Direct.


UK banks operating without full UK protection– The big one here was Icelandic bank Icesave, which unlike Kaupthing, was passport protected and thus reliant on the Icelandic government for some of the compensation and the UK scheme for the rest (this is because the Icelandic protection was lesser than the UK, and the passport scheme meant you should always get the higher amount).In the end, famously, Iceland didn’t pay up, so the UK’s Financial Services Compensation Scheme stepped in and paid out, and not just the protected amount, but all UK savers got all of their money back (only those who’d saved offshore, outside UK protections lost out).
Now my suspicion, or perhaps guess is a better word, is that if any fully UK protected bank went bust now the government would try and simply move its operations or sell its savings book – by far the most preferable option – rather than relying on shelling out enormous amounts of money in compensation.


I would have much greater concern if a bank that didn’t have full UK protection went bust (not that anyone is saying one will) as I doubt we’d again see the situation of the FSCS paying out beyond the compensation limit, and again there is always the worry that if a major foreign regulated bank went bust, it’s likely its government would be struggling and UK savers wouldn’t be a priority.


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