Should I keep my money in Santander UK?
Is my money safe in Santander?
What will happen to Santander?
Should I move my money from Santander?
These are all ligitimate questions. Many people are asking if their money is safe in Santander UK. Of course Santander tell you all about their subsidiary account structure and lack of European exposure. The reality is slightly different.
Once a market participant loses confidence in the market place counter-parties will not deal with you.Full Stop. Think about your regular dealings. If you dealt with a tradesman who has a bad reputation in the market are you more likely to commit to a transaction? No, you'll wait until he proves himself.
If the Spanish Santander fails most banks will begin to examine their position against all Santander subsidiaries and any monies owing will be clawed back from anywhere they can get their hands on it. They will not honour any payments to/from Santander regardless of where in the world they are made. How do I know? The same thing happened with Lehman Brothers. Remember how Lehman said it wouldn't go bust even one week before it actually did? As soon as it did go bust, banks evaluated their global risk against Lehman and even liquidated client accounts they held on behalf of the failed bank to claw back anything that was owed. Why should it be any different? If you are owed money and you have the chance to take it you will - you can be asked questions later, but its in your possession. Yours to lose. In my opinion there are too many Spanish property losses and it's only a matter of time before Spanish banks are nationalised or allowed to fail.
Of course retail deposits are covered by the FSCS guarantee of £85,000 but how long will it take to get back? Have you ever known a government organisation to react quickly especially in a crisis? You could lose you're money for 6-9 months. What about the interest? Whilst a larger Eurozone crisis rages on in the background do we really trust the government to think of the Santander deposit holders when banks across the world will be struggling? And do we remember MF Global where they "discovered" that the bank had used client money as collateral for risky derivative bets? Or the recent JP Morgan "hedging" loss of $2bn where they used Chase Manhattan retail deposits to hedge the risk in the investment bank?
If it were my money I would be moving it to a bank with more of a global presence - HSBC or Standard Chartered. Or better yet a building society or credit union that does not get involved in high risk derivative bets like Nationwide or Yorkshire Building Society.
It is slowly dawning on the UK population that there are real structural problems within the Western economies. Printing money because no one wants our debt. Stock markets rising and falling 1% on a daily basis. Nothing getting better years after the supposed short lived great moderation. They are slowly beginning to realise that debt takes a long time to wipe out. This will last for a decade or longer as long as our politicians protect banks over their own populations. If we had let them fail but continue operating as deposit taking institutions we would have purged the system of crazy underwriting and terribly bad loans that should never have been extended. Instead we continue the socialist capitalism where everything banks do must be protected! But the ultimate question is what if your government goes bankrupt protecting the banks? What then?
Good luck Santander deposit holders!
