Cascade Commentary

March 2019

Savers remain in the dark regarding the depositor protection of their monies held with European banks in a post-Brexit environment, despite the 29th March 2019 deadline moving ever closer. As it stands, European banks are able to “passport” their permissions within the European Union (EU) across member states. Authorisation from an individual member state is tied to EU directives that permit banks and other financial services firms to distribute banking, saving or lending products and services across other member states in the EU. This allows the likes of France’s RCI Bank and Sweden’s Ikano Bank to offer savings products to UK depositors.

The savings rates on offer from European banks have typically been higher to compensate UK savers for the potential additional administration in the unlikely event that they would need to claim from the French or Swedish depositor guarantee schemes as opposed to the Financial Services Compensation Scheme (FSCS) should either bank fail. RCI Bank famously held the market leading Instant Access rate for new depositors for 48 weeks with their Freedom Savings account when they first launched in the UK market. Such rates have attracted many UK savers who are now left wondering what will happen to the protection of their monies in the event of a “no-deal” or “disorderly” Brexit.

It is understood that the government intends under the scenario of a “no deal” or “disorderly” Brexit to enact a ‘Temporary Permissions Regime’ under which firms that are already authorised to operate financial services within the UK market could continue to do so for a period of three years post-Brexit. Many European banks intending to continue operations in the UK have already begun to apply for UK banking licences such that once a direct UK authorisation was achieved, depositors would become covered under the FSCS rather than the bank’s home country depositor protection scheme thus providing the most clear-cut solution. As an example, RCI Bank have confirmed that they have now obtained a UK banking licence, approved and effective from 14th March 2019, meaning that its UK customers are now protected under the FSCS.

For those European banks that do not intend to achieve direct UK authorisation, it is understood that there will be an orderly process behind the winding up of UK operations such that no immediate withdrawal of services will occur on the 29th March 2019. In this scenario, UK consumers would be notified in due time to allow for a withdrawal of their deposits in the event that their protection would change.

Cascade has written to European banks operating in the UK market and will keep customers updated as we approach the end of March 2019. Should you have any queries in the interim period, please don’t hesitate to give us a call and we’ll be happy to assist.