It was interesting to hear the interview this morning on BBC Radio 4 Today between the person responsible for finances at Kent County Council and the man in charge of Santander Bank in the UK.
Kent County Council has withdrawn £3m of overnight deposits from Santander UK following concerns about the financial strength of its Spanish parent.
With the eurozone sovereign debt crisis gathering momentum and some parts of the banking sector in Europe looking particularly fragile, was this a sensible move by Kent County Council?
Those with any exposure to Icelandic banks at the height of the global financial crisis will recognise these fears.
Whilst individual savers in UK authorised and regulated banks receive protection from the Financial Services Compensation Scheme (FSCS), this same protection would not apply to an entity the size of Kent County Council in the event of Santander UK going bust.
In any case, the limit of FSCS protection on a deposit account is £85,000 per institution per person. Keeping £3m on overnight deposit as an individual would be a very risky thing to do.
The Santander spokesman on the radio this morning did a good job of describing the ring-fencing of the UK bank, with its Spanish parent unable to access the mostly UK assets in the event of financial difficulties.
If the eurozone debt crisis does manage to trigger another global banking crisis, we feel that savers are better informed this time round.
Hopefully the media would also present a more balanced view of the situation, pointing out FSCS protection levels and reassuring the vast majority of savers with balances under £85,000, rather than stoking fears by televising queues outside bank branches.
Photo credit: Flickr/torrelodones
