FSCS reassures Santander customers
The Financial Services Compensation Scheme (FSCS) will protect depositors in Santander, the scheme’s chief executive, Mark Neale, said.
Deposits up to the value of £85,000 are protected by the scheme and savers with more than this amount should distribute the money across different banks and building societies, to ensure that the total amount is protected.
Mr Neale was speaking to reassure investors that their money is safe with Santander after the bank’s credit rating was downgraded by Moody’s, along with its parent company Banco Santander and other Spanish banks.
With Spain’s economy struggling, the country’s banks experienced an increase in bad loans in March, to their highest level in 18 years.
Moody’s cut Santander UK’s credit rating to A2, which downgrades its ability to repay short-term debt obligations from ‘superior’ to ‘strong’.
The news prompted customers with large amounts of savings in the bank to start withdrawing cash, and enquiries from worried customers to call centres and branches of the bank soared.
Kent County Council, which suffered losses of £50 million from the collapse of Icelandic banks in 2008, withdrew its funds from Santander as a result of the ratings downgrade.
The council had £3 million deposited in the bank.
Santander UK confirmed to The Guardian that its funds have been ringfenced by the FSA since December, with a voluntary agreement in place to prevent the bank from transferring funds back to its Spanish parent company.
Santander’s troubles are causing the mortgage shortage in the UK to worsen, with the bank scaling back its lending to home buyers from 25 per cent to 14 per cent.
It is believed that Santander could reduce mortgage lending even further if the eurozone crisis worsens.
Bob Pannell, the chief economist at the Council of Mortgage Lenders, said: “Both confidence and funding could be affected by the renewed eurozone uncertainties, so the underlying picture of a relatively quiet mortgage market seems likely to persist for some time.”