Are my savings safe with Santander?Spanish bank's credit rating downgraded

18 May 2012

Gold pig

Your savings are protected up to £85,000 under the FSCS

The credit rating of Santander, along with 15 other Spanish banks, has been downgraded by a leading ratings agency, amid the growing financial crisis in Spain and across the eurozone.

The part of the bank that operates in the UK runs as an 'autonomous subsidiary of the Santander Group', meaning that its British bank should be shielded from problems coming from other parts of the company. Santander has stated that this is a 'firewall' and money borrowed and lent in the UK stays in the UK.

Head of Santander UK's retail bank Steve Pateman, said: 'Customers of Santander UK have absolutely nothing to be concerned about.  We operate entirely separately from Spain and we are, financially, one of the strongest banks in Britain. Additionally our exposure to Europe amounts to less than 1 per cent of our total assets.'

Here, Which? explains what has happened and how your savings are protected.

What is a credit rating and why has Santander been downgraded?

A credit rating is a measure of the credit worthiness of an institution or a sovereign state. It gives an indication of how well it is able to repay any money that has been lent to it and whether a firm or country may default or fail to pay back its debt.

The credit rating agency Moody's has downgraded Santander, along with 15 other Spanish banks. It cited 'adverse operating conditions, characterised by the renewed recession, the ongoing real-estate crisis and persistent high levels of unemployment.' It also believes that the debt burden on the Spanish government reduces its ability to support its banks.

Have people been taking money out of Santander because of this?

Not people as such, but this week, a few county councils have made public announcements regarding their arrangements with Santander. Councils who deposit funds usually base their decision on which institution to use on its credit rating.

Havering County Council has removed Santander from its approved list of banks and Westminster Council removed £10m from the bank 18 months ago. Unlike individuals, councils do not have any protection from the UK's Financial Services Compensation Scheme (FSCS).

Are my savings safe with Santander?

Santander UK is authorised and regulated by the Financial Services Authority (FSA) and, as such, deposits in the bank are protected by the UK Financial Services Compensation Scheme (FSCS) if the bank were to go bust. However, this is limited to £85,000 per person, across all accounts. If you have a joint account, you have £170,000 worth of cover.

If you have more than £85,000 in savings, you should spread it around several financial institutions. If you originally had savings with the Abbey, Bradford and Bingley or Alliance & Leicester, these brands merged and were renamed as Santander, so you'll only have the maximum £85,000 cover. 

This is the same if you have savings with Cahoot. Cater Allen private bank (which is also part of Santander UK) has a separate banking licence so you'll have a separate limit for any deposits with Cater Allen.

Find out more in our guide to 'Are my savings safe?'

Are there any Santander products that aren't protected?

Santander offers structured investment products, which are five or six year investments that the bank claimed will give you a payout based on the performance of the stock market over that period, or will guarantee to pay your money back. In the past, these products have been called: Guaranteed Capital Plus, Guaranteed Growth Plan, Santander Growth Plan and Santander Returns Plan.

These products are backed by Santander itself, and if the bank were to go bust, you would not receive FSCS protection. Customers should avoid Santander's range of structured investment products as they risk losing money if that bank collapses. 

If you think you have been mis-sold one of these products or Santander did not make it clear that these products are not covered by the FSCS then complain to the bank and take your complaint to the Financial Ombudsman Service if you are not satisfied with the bank's response.

The bank was fined £1.5m by the FSA in February 2012 for failing to adequately explain this risk to its customers.

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