The Brexit campaign is into the final straight and with many still undecided on which way to vote, one UK firm has been looking at the potential impact on savings protection.
Peter Griffin, investment director at Dynamic Cash Management, said: “Currently we have a fairly comprehensive protection scheme in place in the UK for savings – with the FSCS protecting up to £75k, and European schemes covering €100k for UK clients in some European institutions. We just don’t know how the protection afforded to clients with savings in overseas institutions will be affected if we leave the EU.”
Most banks that operate in the UK are currently UK-regulated, including foreign-owned institutions such as Santander. However, some EU-owned banks use a ‘passport scheme’ where protection comes from the government of their home country. Customers may be unaware whether their provider uses such a scheme and how their funds are protected.
Peter said: “We’d strongly recommend that savers take the time to check how your funds are protected. It’s not clear how the passport scheme will cover UK deposits if the voters decide to leave the EU. We think the scheme is likely to continue, but realistically, this will depend on what happens in the negotiations that would inevitably need to take place between the government and the other member states following the referendum.”
Peter also points to events in the banking crisis and the Eurozone – including the recent ‘major breakthrough’ on Greece, with the country set to receive more than €10bn in bailout funds, easing concerns that it could face financial peril this summer.
He said: “Depending on the UK’s eventual relationship with the EU, a Brexit vote may impact our view on UK subsidiaries of European banks – would they be as likely to step in and save them if they were struggling? Perhaps not. However, just because these institutions aren’t based here, doesn’t mean their failure won’t potentially impact millions of their UK customers.
“People may be assuming financial protection strategies will remain the same when it comes to financial security for savings. There will be thousands of clients in the UK who have money saved in Institutions which currently use the passport protection scheme who may be unaware how their cash will be protected if the UK leave the EU. Ultimately, whether we vote in or out, it may simply be a case of reviewing your savings protection.”
For more information about Dynamic Cash Management and to see the free-to-use cash management illustration tool and online portal for private clients or professional introducers, visit www.dcmcash.com or email DCM@DCMCash.com