Britons fear saving with foreign banks
British banking brands are expected to attract tens of millions in savers’ cash as a result not least because they now dominate the popular easy access savings tables.
The irony however is that the top ‘British’ brand on interest rates, Bradford & Bingley, is not technically British following the recent spate of acquisitions within the banking industry.
A poll carried out for This is Money by YouGov and Birmingham Midshires which has benefitted from an influx of cash found that 11% of savers are now not comfortable depositing their cash with a foreign bank operating in the UK.
A further 2% said they have removed their savings from a foreign bank after the fall of Kaupthing and Landsbanki, which translates to a potential 900,000 savers if based on an adult UK population of 45.2m. This is triple the amount of people with money currently frozen in Landsbanki’s UK savings arm, Icesave.
Meanwhile, 14%, or potentially just over 6m savers, said they are more confident their money will be better protected within a British bank than a foreign bank operating in the UK.
Tim Hague, director of savings for Birmingham Midshires, said: ‘Recent events have shaken the confidence of British savers. Savers now, more than ever, need to keep an eye on where they are putting their savings to make sure they're getting a good rate.’
The news comes as once mighty foreign banks begin to drop off our best-buy tables. With previous table-toppers Icesave and Kaupthing Edge out of business, British savings brands have shot to the top of the best-buy tables.
This is Money has removed Indian bank ICICI and Nigerian bank FirstSave from our tables due to concerns over their stability (use our bank strength guide to check the stability of all UK banks).
ICICI’s instant access HiSave account pays 6.16%, while FirstSave pays just 4.75% following a 1.25% interest rate cut. The latter had one of the industry’s best rates at 6.5% at the beginning of the year. The bank has also withdrawn its range of fixed-rate bonds.
It must be said however that ICICI and FBN are fully covered up to £50,000 by the Financial Services Compensation Scheme and do not operate under a foreign passport compensation system like Dutch bank ING Direct or the Turkish Akbank.
Foreign banks dominance in savings has been usurped by Bradford & Bingley the savings brand of which is now owned by Spanish bank Santander, after the British bank fell into financial difficulty recently. Its Instant Saver 3 account offers 6.51% on deposits of £1 or more. Intelligent Finance, which falls under the HBOS savings brand, comes next at 6.4% on balances of £1 or more, while Coventry Building Society offers 6.5% on its 50+ Saver account on balances over £1.