Why the FSCS means you don’t have to panic about your finances
Don’t believe everything you read on social media, especially when it comes to your finances.
Metro Bank had to reassure panicking account holders last month after false rumours spread on social media regarding its financial health.
Twitter users posted images of queues at branches of people allegedly withdrawing funds, which was reminiscent of the collapse of Northern Rock back in 2007.
There was also a WhatsApp message circulating that warned people to withdraw their money.
The concerns came amid the disclosure of an accounting error by Metro Bank which revealed it had underestimated the risk level of some of its commercial loans by almost £1bn.
It has been hit by a profit slump and its second-largest shareholder, Fidelity, reducing its stake.
Metro Bank has reassured account holders that it is safe and successfully raised £375m from shareholders to boost its finances last month.
There is nothing to suggests Metro Bank is set to fail and it is important to not panic in these situations, especially because most money held in a standard bank account will be protected by the Financial Services Compensation Scheme (FSCS).
All deposits held in banks, building societies and credit unions (including in Northern Ireland) that are authorised by the Prudential Regulation Authority (PRA) are protected up to £85,000.
That should give you some reassurance that even if a bank fails, your money is still safe and you will get it back as long as it is below that threshold.
However, A PRA-authorised firm may own several banking and building society brands. For example, Royal Bank of Scotland owns NatWest and Halifax is part of the Lloyds Banking Group.
This means that anyone who has deposits in more than one account under a single brand, or multiple accounts under different brands owned by a single firm, is only protected up to a total of £85,000 across all these accounts.
Keeping £85,000 in a standard bank account may not always be the best use of your cash, especially if some of it could be earning interest in a savings account or by investing in the stockmarket.
This protection also applies if an investment firm collapses, meaning you would get any funds up to £85,000 back, although this does not apply to stockmarket performance, which can see your portfolio go up and down due to volatility in the markets.
Speak to your financial adviser about how your money is protected and ways to make the most of it, especially if you are over the FSCS limit.
- The value of an investment and any income from it can fall as well as rise and you may not get back the original amount invested.
- Past performance is not a reliable indicator of future performance and should not be relied upon.
