In terms of deposits, no bank is 100% safe.
The Financial Services Compensation Scheme however guarantees 100% of deposits in a bank up to £35,000 provided that the deposit is lodged with an institution authorised by the FSA. You can see a list of authorised institutions on the FSA website
http://www.fsa.gov.uk/pubs/list_banks/2008/aug08.pdf Northern Rock is probably
99.99% safe as they have been nationalised and arrangements have been made by HM Treasury and The Bank of England to guarantee all deposits. I say 99.99% because, it is of course possible (but highly unlikely) that HM Treasury and The Bank of England would default on their guarantee.
That said, all of the other UK Banks registered by the FSA are effectively
"only" 99.98% safe! If an authorised UK bank went into liquidation and depositors lost any money, the confidence in the UK as a global financial centre would be lost overnight and upwards of a million people would lose their jobs. Financial Services is such a crucial part of the UK's economy and is the single largest contributor to the UK balance of payments, that a failed authorised UK bank would be bailed out at all costs.
Secondly, there seems to be some confusion on the thread - are you referring to Yorkshire Building Society or Yorkshire Bank? They are two separate institutions:-
- "Yorkshire Bank" is a trading name of Clydesdale Bank. Clydesdale Bank is classed as an "authorised institution" by the FSA. Clydesdale Bank plc is in turn owned by National Australia Bank. The second largest bank in Australia. In terms of its size and as a comparison it is about the same as Lloyds TSB.
- Yorkshire Building Society is the third biggest building society and is owned by its members (depositors). It is half the size of Clydesdale Bank and less than a tenth of the size of National Australia Bank.
If you are referring to Yorkshire Bank, your passbook / statement will say Yorkshire Bank and carry their logo, but you are in fact banking with Clydesdale Bank and it will also say this in their passbooks, on their statements, on their leaflets / website / legal notices inside branches etc. This is in the same manner as:-
- "Smile" which is a trading name of The Co-operative Bank plc
- "NatWest" = National Westminster Bank plc, in turn owned by RBS Group
- "First Direct" = HSBC Bank plc
- "C&G" = Lloyds TSB
- "Woolwich" = Barclays Bank plc etc etc etc .....
Nonetheless, both Yorkshire Bank/Clydesdale Bank and Yorkshire Building Society are sound, well-run institutions which is evident from their external credit rating (Moodys, Fitch S&P etc). Neither institution has any significant issues as a result of the "credit crunch" as they fund the the majority of the loans they provide from their own depositors funds (
unlike Northern Rock who used less than 30% of their own depositors funds and 70% of other banks depositors funds which suddenly were not available when the inter-bank market effectively closed last year - imagine being able to rely on a £20 billion overdraft for years and then having withdrawn overnight).
That is not to say the two Yorkshire's will not be affected by the "credit crunch" as they will have to pay a higher rate to borrow on the money market and they will inevitably incur more bad debts as their borrowers feel the pinch and go into arrears - these will of course be over publicised because its grabs headlines, but these are issues for the shareholders to worry about, not depositors. Bad debts are part of banking, they are expected by banks and they make a provision for them each year.
In terms of investing - you have no need to worry about depositing funds in an account with authorised UK bank. However, investing in the shares of a bank is a totally different matter as you could lose the everything as did the shareholders of Northern Rock (and probably Bradford & Bingley tomorrow).
Hope this reassures you and puts into perspective the alarm that the media thrive on. If not you could of course stuff your money under the mattress. There are a number points to consider:-
- it also has a fixed rate of return ( 0%)
- you don't have to queue up to withdraw it
- there is no deposit protection scheme. Should your house get broken into, you would lose the lot (actually - your house insurance may cover the first £100) !
Best wishes
PM