Friday, 18 May 2012
Bank scare stories
One newspaper told us this morning that the Spanish banking crisis had hit the UK High Street.
They were referring to a credit rating agency, Moody's, downgrading Santander UK from A1 to A2, with a negative outlook.
To most people this means nothing, but it does make you ask: "Should I panic? Should I pull out my money?" etc etc
1. What is a credit rating agency?
It tells investors how risky it is to invest in companies, including banks. A lower rating means it's slightly riskier.
It is not telling customers whether or not their bank is about to fail.
2. What are they saying about Santander UK?
That it's slightly riskier than before, though not as risky as its big Spanish parent, Santander.
The A2 rating is still firmly "investment grade", as are all the big High Street banks in the UK.
3. How does Santander UK compare?
The highest rated UK banks are HSBC and Barclays.
But another big bank, RBS (which includes NatWest), has a lower rating than Santander UK.
So it's in the middle of the pack.
4. What does Santander UK say?
That 90% per cent of its assets are safely in the UK.
And even Moody's says that it's highly unlikely that the UK banking watchdog, the FSA, would allow this money to be used to prop up Santander in Spain.
What does all this mean? Don't panic - just calm down.
NB The FSCS protects deposits up to £85,000