Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

UK Company Business Bank and Savings Account Guaranteed?

Companies / Credit Crisis 2008 Oct 02, 2008 - 05:22 AM GMT

By: Nadeem_Walayat

Companies Best Financial Markets Analysis ArticleWhilst individual savers continue to adjust to yesterdays announcement by the Prime Minister, Gordon Brown to extend the 100% guarantee to the first £50,000 for individual savers. However this is an apt reminder that the guarantee does NOT extend much of the business sector, the consequences of which are that corporate runs on banks occur as corporate depositors which amount to some £1.2 trillion seek to immediately withdraw funds from potentially failing banks.


At the present time only the nationalised government owned banks offer any sort of SECURITY against default to the corporate saver. Therefore medium and large business up and down the land are at a real risk should a financial institution collapse and NOT be rescued by the Bank of England i.e. along the lines of Lehman's brothers.

Small unincorporated business are covered by £50,000 for BOTH your personal and business accounts with the institution i.e. if you have deposited £50k personal and £50k business with the same bank then only £50k in total is covered. However there is some confusion as to whether small limited companies are covered or not as the FSA Handbook implies that limited companies are NOT covered, however the FSA latest developments page in reference to Bradford and Bingley bust states something different -Important announcement: Bradford & Bingley - 29th Sept 08

Who is protected?

FSCS was set up mainly to assist private individuals, although some smaller businesses are also covered. Larger businesses are generally excluded, although there are some exceptions to this (for example for claims in respect of certain compulsory insurances). Our rules tell us which claims are eligible and form part of the FSA's Handbook of rules and guidance, under Redress, Compensation.

As an indicative guide only, for the purposes of deposit and investment claims, smaller companies are protected. A smaller company must meet two of the following criteria (as set out in section 247 of the Companies Act 1985 or section 382 of the Companies Act 2006 as applicable):

  • Turnover: not more than £6.5 million
  • Balance sheet total: not more than £3.26 million
  • Total number of employees: not more than 50

The above therefore implies that small limited companies are covered.

Extending a guarantee to all savers whether in line with the £50k limit or a full 100% along the lines of Ireland presents its own problems as there would be a loss of confidence in the currency and therefore imply higher interest rates to attract international money flows at a time when the UK government looks set to bust through the 40% government debt ceiling and therefore implies a flood of bond issues as the the earlier article illustrated- Savings Guarantee Raised to £50,000 to Halt Run on UK Banks

At the present time with the banking system in near meltdown, the best option for business depositors is probably to seek to transfer funds to one of the government backed banks or an Irish bank, as there is a potential risk that should a UK bank fail to be rescued by the British government which could ignite the "The Mother of ALL Bank Runs" as corporate depositors including foreign banks withdraw on mass and trigger a collapse of the UK banking system.

By Nadeem Walayat
http://www.marketoracle.co.uk

Copyright © 2005-08 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading, analysing and forecasting the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 150 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Christine Joyce
13 Oct 08, 14:51
bank guarantee

I have a 100,000 pound generic bond with Barclays Bank

fixed 1 year. Also 2 joint accounts with small amounts in the same bank.

If the bank should go what amounts would be guaranteed.


J Blindside
02 Feb 09, 08:04
Two accounts

I have two accounts each a little over £50K with Lloyds-TSB and Halifax . As they are both the one corporate company can you say if both these amounts are covered should either company fold ?

thank you


Nadeem_Walayat
02 Feb 09, 08:38
UK retail Savers

The government has shown by its actions that it cannot risk any UK retail customers to lose money in UK banks, as this risks a collapse of the whole UK banking system, with across the board runs on banks.

However, the price paid is in terms of real terms loss of value of 30%, with another 30% to come over the next 12 months as sterling continues its bear market, which is the price of guranteeing the liability of the bankrupt banking system.

Still, in a worst case scenerio with the whole banking system in meltdown the government would be forced for the purposes of self preservation to NOT honour the 100% gurantee of all deposits, and therefore you need to ensure you stick to the 50k per institution rule.


Ian Bellhouse
23 Feb 09, 15:20
Small Ltd Company

Running a small ltd company with2 employees i have £40k in Close Brothers Bank of London will i be covered by the FSA £50,000 if the bank goes broke...


Nadeem_Walayat
23 Feb 09, 19:44
Close Brothers Bank

Their UK deposit accounts should be covered, however offshore deposits would not be covered.

Best to call them up and ask them if your specific deposit account is covered by the FSCS or not.


howard grant
17 Aug 10, 03:53
classic
-- o Every dark night is followed by a bright sunny day. So, patience and attention is required and things will be fruitful in near future. --------- o There is nothing called a free lunch is this world. If anything needed to be resolved then initiated need a support to be sorted out. ---------- o Well, it’s amazing. The miracle has been done. Well done. --------- o Hat’s off. Well done, as we know that “hard work always pays off”, after a long struggle with sincere effort it’s done. --------- Savings

Post Comment

Only logged in users are allowed to post comments. Register/ Log in