Banking Crisis: Which are the Safest UK Banks?

We’ve seen Northern Rock and Bradford & Bingley collapse, the Cheshire and Derbyshire Building Societies rescued, and even Halifax Bank of Scotland required a bail-out from Lloyds TSB.

Turmoil in the world’s markets mean that credit around the globe has literally frozen up, and banks face the very real possibility of a systemic meltdown of the financial system.

Consumers are naturally concerned as to where to place their money for safety.

The good news is that for UK banks, savings are now protected up to £50,000 per bank - which means that if you were to have £150,000 in savings, split equally between three UK banks, the government would guarantee all of that sum.

However, even with protections in place, nervous savers want to ensure their savings are as trouble-free as possible.

While the current turmoil is obviously unnerving, all major UK banks are believed to be strong enough to weather the current crisis.

However, some banks suggest themselves as stronger than others, and we’re going to list these here:

1. Nationwide

The Nationwide Building Society refused to become a bank while others rushed in, and remained a very conservative lender, even through the property boom.

Nationwide retains strong credit ratings from ratings agencies, and because shareholders are customers, does not face the same short-term pressures of public traded banks.

The Nationwide Building Society remains the world’s largest building society, and when it rescued the Derbyshire and Cheshire building societies provided full information on its balance which demonstrated that it is clearly strongly capitalised.

With only a limited exposure to the now crippled commercial markets, the Nationwide is about as far away as you can get to the worst troubles in the financial system.

Website: Nationwide savings accounts can be found here.

2. HSBC

Of all the UK banks to be hit by the credit crisis, HSBC has easily weathered the storm better than the rest - probably because while registered as a UK bank, it’s much more dependent on Asian markets, which have been far less exposed to US toxic debt.

While HSBC did have a US mortgage subsidiary, it has mammoth investing operations across Asia that have ensure it holds an enviably strong position among public-traded banks.

For an idea of how confident investors are in HSBC, here’s the change in share price for the big 5 UK banks since July 6th last year to this morning:

HSBC: -3%
Barclays: -58%
Lloyds TSB: -60%
RBS: -83%
HBOS: -86%

That’s right - despite the financial crisis and stock market crashes, investor confidence in HSBC remains strong - HSBC has only lost 3% of its share value, compared to a minimum of 58% loss for Barclays, which is distant second place in terms of investor confidence.

Website: HSBC savings accounts can be found here.

3. Co-operative Bank

Like Nationwide, the Co-operative bank is mutually owned by customers and has not sought out aggressive profits via risky investments.

Additionally, it is relatively less dependent on commercial markets for funding compared to public-traded banks.

In addition to this, the company’s maverick insistence on ethical investment means that it has had an even more cautious investment strategy than many other financial services companies.

The Co-Operative bank only lend from their deposits without leverage, have only a relatively small presence in commercial lending markets, and at present claim to maintain a 100% self-funded position.

Website: Co-Op bank savings accounts can be found here.