Brexit -  How could it affect your savings?

20th May 2016

Brexit – it is the word that is on everyone’s lips, will we, won’t we? Of course until the referendum results from June 23 are known, no-one will know the answer for sure, but that does not stop us worrying in the meantime about what might happen to the status quo if we do vote to leave the EU.
 
Savers with money sitting in accounts with  EU-based banks have been asking us what might happen to their money in the event of a Brexit, so we have compiled this short, handy Q&A guide to help answer the questions you might have, but please feel free to come back to us with anything else you would like answered by the experts at Savings Champion.
 
Do other countries have the same safety nets for savers as the UK?
 
Yes, in many cases they have similar schemes to the UK, but it is important to understand the nuances of each if you are putting deposits into a foreign bank, even one that has branches in the UK.
 
If their branch is in the UK, does it automatically mean it falls under the Financial Services Compensation Scheme (FSCS)?
 
No. For this to be the case the bank would have to have a UK banking licence and not all accounts open to UK residents have this. For example, RCI Bank is owned and operated by Renault from France and does not have a UK banking license, so its deposits are covered under the French FSCS equivalent - the Fonds de Garantie des Dépôts et de Résolution  (FGDR).
 
How much is protected under this scheme?
 
The FGDR protects deposits up to €100,000 with an institution – so that would be across all accounts, if you have more than one with the same banking group - providing the deposit is held in a European Economic Area (EEA) currency (which includes sterling). Other schemes across the world will differ, so it is important to understand the levels of protection you have, if you have money held elsewhere.
 
How long would it take to get compensation?
 
Again, the different schemes will have different timeframes, but for the FGDR scheme you can expect a compensation cheque within 20 days of confirmation that the bank cannot return its customers’ deposits, falling to seven working days from June this year.
 
If I am saving in the UK or with a European savings bank, such as RCI Bank, would my level of protection remain the same in the event of a ‘Brexit’ win in June?
 
The answer is that  nobody yet knows. Any changes resulting from a vote to leave the EU would take some time to take effect, so there would be no immediate need for concern.
 
If you hold your money with a European savings bank, outside of the UK FSCS, then you can assume that this level of protection would remain the same for some time .
 
Article 50 of the Treaty on the European Union sets out that a withdrawal agreement would need to be negotiated between the UK and the rest of the EU and if that was not applied sooner, the UK would cease to be a member of the EU two years after it notified the EU that it intended to withdraw. The only other change to this timeframe would be if the UK and European Council unanimously agreed to extend the time allowed to exit. So nothing is likely to change in the short term.
 
If the UK left the EU, there is little doubt that the UK and other EU countries would most likely want to continue with ‘business as usual’, as there is unlikely to be a desire to lose customers simply because of where they live. But only time will tell what protections would be available to savers.
 
Bear in mind that if the vote on June 23 is to stay in the EU, then nothing will change. So our advice for now would be to sit tight and see which way the vote goes on June 23 and we will update you as soon as we have more information.

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