Regulatory Information


From 31 August 2012 banks are required to ensure that depositors / savers are made explicitly aware of the extent of application of the FSCS scheme. Research by the regulator had indicated that around half of savers did not know about the scheme, and many did not understand it.

The basic rule is that in the event of failure of a bank, such that it becomes insolvent and cannot pay its debts in part or in full, the FSCS will pay:

  • £75,000 per person
  • per registered financial institution
  •  £170,000 for a joint account

The basic sensible advice for investors is if you are holding more than £85,000 (£170,000 for a joint account) in a single bank, then this may be unwise and you should consider placing the excess funds with one or more other banks.

The really key thing is to understand which banks come under a single institutional registration, as brand names and ownership structures can confuse the picture markedly.

For example, if you bank with RBS and you have substantial deposits, you might ask them whether having an account at, say, Drummonds (which has a number of high net worth customers) affords any additional cover. This is what the RBS website says as of 20 August 2012:

"Deposits with RBS, Direct Line, Lombard, the One Account, Child & Co, Drummonds and Holt's are all covered by a single FCA authorisation. This means the total deposits with these firms will count towards the one compensation limit."

Of course, RBS, also owns NatWest, but this appears to have its own registration for FSCS purposes.

Similarly, one of the country's largest building societies is Nationwide. However, under the same registration, you will find both Derbyshire and Cheshire building societies, so if you have £85,000 in all three totaling £255,000, your FSCS cover will be limited to just £85,000.

The unwary with long-term accounts can easily be caught out here. Some big names have been absorbed by other big names. For example, the Spanish bank Santander (which has a separate UK banking license) acquired Alliance and Leicester when the latter got into difficulties. One of the biggest high street brands, Halifax, became part of Lloyds (with some assistance from public funds).

If in doubt about your deposits ask the bank which financial institutions it shares a license with. They are obliged to tell you. If necessary move some money to a different institution. Banks can and do fail and it is far easier to rearrange your financial affairs now than when a collapse appears imminent (think back to Northern Rock).

You can also find out exactly which banks come under a single regulatory license by visiting the FCA Website. It also provides you with details of the registration status, head office address, regulatory permissions and so on.

Banks are now required to put full details of their FSCS cover on their web sites, as well as putting posters and stickers in their branches.

Extra care is needed with branches of foreign banks. They may be operating under a banking license in a foreign regulatory jurisdiction rather than a UK one. Regulation of such "branch" banks still takes place, but is more limited than for UK registered institutions. These branch banks are not necessarily covered by the FSCS scheme (in fact they are probably not) but may be covered by their own arrangements guaranteed by a foreign jurisdiction.

Deposits in foreign branch banks may attract much higher interest rates than you can get on the high street, but care is needed to ensure you understand the risk and the extent of any compensation cover – which may be zero – if the bank fails.

As a Financial Institution, Reyker Securities plc also participates in the FSCS scheme. This is because we hold and control client money and client assets. We place client money with a range of UK registered banks with UK banking licenses and sensible credit ratings: we do not use foreign branch banks at all.

If you have any questions about the application of the FSCS scheme to your investments at Reyker, please visit our contact page and find the best way to contact our team. We would be happy to answer your questions.