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21 Mar 2019

Top savings provider Brexit-proofs its accounts

French bank RCI is now part of UK's compensation scheme, offering vital protection for savers

RCI Bank - the savings arm of French car manufacturer Renault - has made changes to Brexit-proof its table-topping accounts by becoming part of the UK's Financial Services Compensation Scheme (FSCS).

The French bank has been granted a UK banking licence, which means that customers' savings protected up to £85,000 if the firm were ever to go bust.

This has become a vital protection for savers following the banking crisis of 2008 - particularly for banks based in other countries. UK taxpayers were forced to pay out £4.5bn to people who had money with Icelandic bank Icesave, which was only fully recouped in 2016.

This announcement comes amid uncertainty over how European banks will operate in the United Kingdom after it leaves the European Union.

Which? explains how the RCI Bank development will impact customers and the best current deals offered by the company.

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What difference will RCI Bank's UK licence make?

Previously, the bank operated under a scheme known as 'passporting',meaning that an EU company can operate in another EU country and provide the same services without getting direct approval from all the member states.

This had meant UK RCI customers were protected by the French state compensation scheme, which covered upto u20ac100,000 per depositor, equivalent to £85,000.

However, gaining a UK licence makes it much easier for customers to claim compensation should the bank ever go bust.

What savings options does the RCI Bank offer?

RCI Bank's instant-access Freedom Savings Account has a 1.42% AER which is one of the top rates for instant-access savings accounts.

It requires an initial minimum £100 deposit, but there's no limit on how many withdrawals you can make.

The table below shows how RCI Bank's instant access account compares to the best rates currently available to savers. The links take you to Which? Money Compare, a price comparison service offered by Which? Financial Services.

Provider/accountAERMinimum initial deposit
Kent Reliance Online Only Easy Access account Issue 331.50%£1,000
Yorkshire Building Society Online Single Access Saver Issue 171.46%£100
Shawbrook Bank Easy Access - Issue 141.43%£1,000
RCI Bank Freedom Savings Account1.42%£100

RCI Bank also offers a one-year fixed-term savings account paying 1.71% AER, which requires a minimum initial deposit of £1,000. See how it compares with other table-topping accounts below.

Provider/accountAERMinimum deposit
Shawbrook Bank 1 Year Fixed Rate Bond Issue 581.97%£1,000
ICIC Bank 1 Year HiSAVE Fixed Rate Account1.92%£1,000
Aldermore 1 Year Fixed Rate Account1.85%£1,000
RCI Bank 1 Year Fixed Term1.71%£1,000

How does the FSCS protect customers?

The FSCS pays compensation of up to £85,000 per person, per financial institution if bank or savings company goes bust and is unlikely or unable to return their customers' money.

But it only applies to funds saved within each financial institution with a banking 'authorisation' - not each bank account, or even each bank.

So, if you've saved more than £85,000 with two banks that are owned by the same institution with just one authorisation, you're only covered for £85,000 in total.

In recent years Lloyds have taken over HBOS, The Co-operative Bank merged with Britannia, and Santander purchased Abbey, Bradford & Bingley and Alliance & Leicester, so you should check to see which financial institution your money is saved with.

Find out more: everything you need to know about the FSCS

How will Brexit impact European banks?

The Financial Conduct Authority (FCA) has set up a 'temporary permissions' regime scheme, which it expects to last for three years, for banks and companies from the European Economic Area in the event of a no-deal Brexit.

This would mean the companies signed up to the 'temporary permissions regime' would get equivalent cover as that of UK institutions.

Firms are then encouraged like the RCI Bank to apply for a UK licence.