Expats with savings and investments held in Euro accounts need to put contingency plans in place to protect their cash.
The problem with the euro is perception – if expats and investors believe their money is at risk, they will move to a safe haven.
This reaction makes the euro debt problems even harder to resolve.
Even Bank of England governor Sir Mervyn King has admitted the country has plans to handle the fall out if the euro goes bust.
The Greeks are already withdrawing their funds from the country’s troubled banks, fearing the European Central Bank will stifle funding and let them fail if the country’s debt crisis worsens.
Spain and Cyprus have the same issues.
Most European countries have a financial deposit protection scheme – but watch out for account limits. Most schemes protect up to a maximum limit held in several accounts with the same bank.
The two points to watch are –
- Financial limits – the threshold is a total held by one customer across any number of accounts, so someone with £100,000 in six accounts with in the Isle of Man is exposed, as the island’s financial protection scheme covers up to £50,000 with any one bank.
- Banking licences – In recent years, financial problems have forced banks to merge, sell or join other groups. Most financial protection schemes apply to accounts across all the brands held under one licence.
For instance, in the UK, the Lloyds Banking Group includes Lloyds TSB, The Halifax, Bank of Scotland, Cheltenham & Gloucester and BM Solutions, so anyone with more than £85,000 in accounts across these brands is not protected.
Many banking schemes offering compensation have never had to deal with a failed financial institution and work on the basis that they will raise a levy or cash from the government to repay investors and customers who have lost money.
This can take years to sort out, just ask the customers of IceBank that collapsed during the credit crunch.
