What is the probability of Bank of Scotland going bust?

move it

So do we.

No - that has not happened yet, and some newspapers are suggesting that the present share price discrepancies indicate that the market thinks it may not happen.

At the moment, the 'safety' is purely down to HBOS and whatever the deposit guarantees (including verbal ones from poloiticians) might actually do.

Ignoring the politicians' suggestions (because whatever they might say does not give any grounds for enforcing rights at law), it is not clear to me that the FSCS covers commercial deposits. (It may do, and if someone else knows, hopefully they'll chip in here.)

In the event that the FSCS scheme did not cover company deposits, Britain is nevertheless legally obliged to run a deposit scheme conforming to the European Deposit Guarantee Scheme Directive,

1. Deposit-guarantee schemes shall be in a position to pay duly verified claims by depositors in respect of unavailable deposits within three months of the date on which the competent authorities make the determination described in Article 1 (3) (i) or the judicial authority makes the ruling described in Article 1 (3) (ii)."

So, a payout within 3 months. Only a few types of deposit are excluded (eg money market loans, pension scheme deposits, etc). Among its exclusions of certain deposits:

"14. Deposits by companies which are of such a size that they are not permitted to draw up abridged balance sheets pursuant to Article 11 of the Fourth Council Directive (78/660/EEC) of 25 July 1978 based on Article 54 (3) (g) of the Treaty on the annual accounts of certain types of companies (1)."

So deposits by large companies are not covered. We are a small company (we are legally permitted to draw upabridged balance sheets), so our deposits are covered up to E 20k under the Directive.

What I do not know is whether the FSCS scheme is the British scheme under the Directive (the Directive allows member states to cover more than E 20k), or whether the FSCS scheme provides only additional protection for, for example, consumers only, say. The text of the regulations giving effect to the Directive, and/or setting up the FSCS will make it clear whether or not the FSCS is the UK scheme complying with the Directive in all its provisions, and therefore includes small companies is the scheme. Again, I would think someone here knows.

As posted in another thread, maybe, if the 3 months lock-up would be problematic (presumably so, for a business)

I'd certainly like to hear answers to that question! Is anywhere any safer if confidence goes?

Allied Irish perhaps? Unfortunately everybody is playing this game and they are not answering their phones!

Also it takes 1-2 weeks to open up a corporate deposit account. By that time this will be over - one way or another.

IMHO there is no way that companies can lose their deposits. Most would be unable to pay wages, etc. If this happened, all banks would have to be nationalised.

Well, I was in the process of switching my business account to BOS. I'm seriously reconsidering now. There is risk that the deal with Lloyds won't go through, in which case I may end up banking with a non-existent bank if HBOS goes under, which wouldn't be good.

And even if the deal does go through, part of the motivation for switching to BOS was the generous interest rate they pay on credit balances. What are the chances that that will still be as generous this time next year if the merger goes ahead?

Am I missing anything?

Adam

Probability of of Bank of Scotland going bust? It has already happened, and it looks like Royal Bank of Scotland, Barclays and Lloyds may well follow tonight.

My view is, if you have your money in a large British bank with lots of branches, you should be fine, as the government will make sure all depositors keep their money.

If however, you have your money in a foreign owned internet bank such as Icesave, Kaupthing, ING, Egg or FirstSave, then you will get what you are entitled to under the terms of the relevent compensation scheme, and no more. If the relevent compensation scheme is in Iceland (eg Icesave, but not Kaupthing), then you might not get anything.