Limit Risk Against Bank Collapse
Discussion
Hopefully a good question for all the multi-millionaires on here!
Our Ltd company has built up higher amounts of cash over the years and I worry slightly about mitigating against a bank collapse.
i.e. I think our account is protected to £85k if bank went under (Financial Services Compensation Scheme) -
what if we ended up with £300k in cash though or £1m?
Bank goes down and chance you might only get back £85k?
Is there anything more certain that can be done apart from splitting funds over multiple banks. For me it's money we do want to keep liquid and available.
I realise the risk now should be lower in reality etc. - in part a theoretical question.
Our Ltd company has built up higher amounts of cash over the years and I worry slightly about mitigating against a bank collapse.
i.e. I think our account is protected to £85k if bank went under (Financial Services Compensation Scheme) -
what if we ended up with £300k in cash though or £1m?
Bank goes down and chance you might only get back £85k?
Is there anything more certain that can be done apart from splitting funds over multiple banks. For me it's money we do want to keep liquid and available.
I realise the risk now should be lower in reality etc. - in part a theoretical question.
You’ve got the easy answer already. Some of the ‘challenger’ banks are quite easy to set up these days too. (Unfortunately) I don’t have the same issue as you in terms of ceiling, but in addition to an HSBC business account have one with Starling and Tide and they were both easy to set up (far easier than HSBC and then the Safeguard checks etc).
orbit123 said:
Is there anything more certain that can be done apart from splitting funds over multiple banks. For me it's money we do want to keep liquid and available.
Our Ltd is currently getting an interest rate of just 0.15% and, ever mindful of the FSCS limit, I'm giving some serious thought to spreading some cash with Flagstone or a similar platform.You can choose a package to keep cash readily available, albeit it will probably attract a lower rate of interest than anything you choose to deposit on a fixed term.
FSCS said:
Who can claim compensation?
In general, individuals and small companies can claim compensation from us. In the case of deposits, large companies are also able to claim compensation, although some exclusions may apply.
For general insurance all policyholders are eligible to claim on the compulsory element of the protected insurance. Otherwise small companies must have an annual turnover of less than £1m to be eligible to claim compensation.
In general, individuals and small companies can claim compensation from us. In the case of deposits, large companies are also able to claim compensation, although some exclusions may apply.
For general insurance all policyholders are eligible to claim on the compulsory element of the protected insurance. Otherwise small companies must have an annual turnover of less than £1m to be eligible to claim compensation.
Does sound like a spread over a few accounts is maybe only real way - just doesn't feel very scalable way to properly lower risk and a pain to manage.
I do agree that all bets off if major bank collapses but would seem like time I'd want to have proper cash!
I'll away and watch It's a Wonderful Life....
I do agree that all bets off if major bank collapses but would seem like time I'd want to have proper cash!
I'll away and watch It's a Wonderful Life....
orbit123 said:
Does sound like a spread over a few accounts is maybe only real way - just doesn't feel very scalable way to properly lower risk and a pain to manage.
One of the things that appealed about Flagstone (or similar) was the ability to monitor and control multiple accounts from one place.We've accounts with two High St banksplus deposit a/cs with Aldermore and Cambridge & Counties.
Trying to open commercial accounts with some of the new challenger banks is quite close to impossible.
Nationwide are pushing their commercial arm at present so might put some money there too.
Trying to open commercial accounts with some of the new challenger banks is quite close to impossible.
Nationwide are pushing their commercial arm at present so might put some money there too.
FSCS compensation is available to some companies (mainly SME & non financial) so you can spread up to 85k across several accounts.
You could currently use Aldermore, Virgin, Redwood, TSB, Nationwide, Kent Reliance for the 'best' (subjective and very much only in comparison with others) rates at relatively short notice (there will be others no doubt) - I just build it up in a Lloyds account (main transactional bank with a side savings notice account) until ready to transfer. I guess it depends on your business type - the above is for a one man band consultancy so have full control and low volume of transactions - in the companies I run we couldn't shift funds around like this as it be all we're doing during the morning!
At the end of the day though, I think your risk with any of the main clearing banks is low (but so is their interest) - it's just the challengers i'd be worried about. I know of 1 organisation who reviews bank ratings and has to restrict the total cash held in each bank - they view HSBC as the safest bet and limit cash there to £200m.
You could currently use Aldermore, Virgin, Redwood, TSB, Nationwide, Kent Reliance for the 'best' (subjective and very much only in comparison with others) rates at relatively short notice (there will be others no doubt) - I just build it up in a Lloyds account (main transactional bank with a side savings notice account) until ready to transfer. I guess it depends on your business type - the above is for a one man band consultancy so have full control and low volume of transactions - in the companies I run we couldn't shift funds around like this as it be all we're doing during the morning!
At the end of the day though, I think your risk with any of the main clearing banks is low (but so is their interest) - it's just the challengers i'd be worried about. I know of 1 organisation who reviews bank ratings and has to restrict the total cash held in each bank - they view HSBC as the safest bet and limit cash there to £200m.
I wonder if we will see optional insurance policies to cover 'payout in case of bank collapse'?
That said my understanding is that banks are a bit more robust than they were in 2008.
Personally I wouldn't want so much surplus cash just sitting there gradually losing value from inflation, and would want to do something more constructive with it. One for the Finance forum really.
That said my understanding is that banks are a bit more robust than they were in 2008.
Personally I wouldn't want so much surplus cash just sitting there gradually losing value from inflation, and would want to do something more constructive with it. One for the Finance forum really.
Terminator X said:
High risk activities were separated from low risk because of the 2008 shenanigans. Current accounts must be very low risk of collapse in 2019?
TX.
Hmmm, the Vickers report and retail IB separation, has led to some unintended consequencess. Basically the retail and challenger banks are struggling to make money (due to a sustained low interest rate - the lower rates go, it erodes net interest margin and the spread they can make), so they have been loading increasingly risky debt to compensate. Tesco has recently just exited its mortgage business, and there are some concerns over Metro bank.TX.
By and large, the UK banking system is safe. It's better capitalised and de-risked from investment (casino banking to some). The chasing higher yield / higher risk mortgages is pretty low risk in the scheme of things.
I'd avoid EU banks if you can. They have a very high contagion risk (again this is more theoretical than reliable risk).
Tbh, other spreading ut around - if it's a lot if cash gilts and other government securities are near cash in liquidity terms. Otherwise look for an agency cash manager and give them your risk profile.
As an aside, a guy I used to work with (in trading) bought a PMC (Private Military Contractor), given the amount if cash it generated and what he could do with it. One morning your having steal and eggs at Hawlsmoor, the next auditing 5.6mm and M4s in a floating armoury in the Med.
If you are cash rich there are plenty of options (but yield is in the toilet).
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