All UK-regulated* bank accounts in banks, building societies are covered by the Government-backed Financial Services Compensation Scheme (FSCS). So if the bank fails, you’d get back up to £85,000 per person, per financial institution. Joint accounts get double the coverage i.e. £170,000.
That’s good right? Who could oppose that? Well I could and do.
These guarantees appear to protect the customer, but they don’t. In fact they just give the banks a free-hand to engage in any number of absurdly risky schemes. And why should the customers care? Their money is ‘safe’ right? So there is absolutely no competitive pressure on any institution to act in a conservative or indeed a sane way. But there is an enormous pressure to drive profits and engage in some really esoteric schemes. Of course the more profitable something is, typically the more risky it is, but why would you care if you are a banker? It’s not like the customer cares and anyway, he can always be forced to bail you out anyway, right?
Similarly, let’s make it explicitly clear that there will be no bailouts for any bank or financial institution ever again. So if a large insurance company want to take on more credit default swaps than they can ever repay, let ‘em go bust and prosecute the directors for fraud. At least then the positions can be liquidated and recovery can begin.
So kitty-counters, are you prepared to join with me in the brave new world of thinking for yourself about the security of banks and not being raped for bailout cash for these vultures or are you happy to allow the clowns who have taken us to this point to do your thinking for you?
* Not every account is regulated so do the research for yourself.