Savers in Cyprus have rightly expressed outrage at an EU bailout which will see up to 10% of their savings taken in a special levy.
Savers with less than 100,000 euros will pay a levy of 6.75%. Those with over 100,000 saved in a Cypriot bank will lose 9.9% of their savings.
In return for this loss of savings, depositors will receive shares of equivalent value in the banks.
According to a report on the BBC News website this afternoon, one British ex-pat saver with money in Cyprus has branded the move “robbery”.
This action represents a major departure from previous EU bailout measures.
Such a precedent should scare UK savers in foreign banks. Hopefully most had previously learnt lessons from the Icelandic bank debacle at the height of the global financial crisis.
Sticking with UK authorised and regulated banks makes real sense for British savers.
This results in government protection in the form of the Financial Services Compensation Scheme (FSCS), funded by banks and other regulated firms.
It means that, should a British bank go bust, savers would be protected up to £85,000 per individual per banking licence.
Chasing slightly higher rates of interest, however tempting in the current low interest rate environment, is a risky strategy given the perilous state of banks in Europe and across the globe.
Photo credit: Flickr/Draig
