UK Banks No Longer “Too Big To Fail” - Act Now To Protect Your Clients
Britain’s largest financial institutions are no longer ‘too big to fail’. That’s according to a report published by the Bank of England.
It found that the UK’s biggest banks would be able to continue providing vital banking services in the event of another 2008-style financial crisis and that shareholders and investors would be first in line to bear the costs, not taxpayers.
Put simply, if there was another financial crash, the government wouldn’t need to bail the banks out like they did 14 years ago. However, the Bank of England found shortcomings at three large banks around contingency plans were they to be wound down.
So, what does this mean for your clients?
In short, it means although big banks are no longer too big to fail, there are still questions around their ability to handle future crises.
Bank failures may not be something you routinely think about. But they do happen.
Remember panicked customers queuing outside branches of Northern Rock in 2007? Rumours the bank had applied for emergency government funding led to a public lack of confidence and customers rushing to withdraw their savings.
While the government ended up nationalising Northern Rock, it also spent £45bn and £20.3bn of taxpayer cash bailing out Royal Bank of Scotland and Lloyds respectively.
Today, that wouldn’t happen.
In its recent report, the Bank of England said it was satisfied that Britain's top banks had taken sufficient steps to ensure they could shut down without putting at risk the stability of the financial system or disrupting customers, saving the Treasury billions of pounds.
But what if your client had a concentration of funds with a failing bank? With no government bailout, could their money be at risk? The answer is: potentially.
For that reason, it’s more essential than ever to make sure your clients’ cash is protected under the Financial Services Compensation Scheme (FSCS). That means ensuring their money is spread out and that they don’t have more than £85,000 (or £170,000 for joint accounts) with one UK-regulated institution.
Under the FSCS, your clients’ money would be fully protected up to that amount if their bank, building society or credit union failed.
The simple way to safeguard cash
As their financial advisor or wealth manager, your clients will be relying on you to make sure their money is in the best - and safest - place possible.
But finding the right home for their cash can be a time-consuming task. Especially when you also want the most competitive rates.
That’s where a cash management platform like Akoni comes in.
The Akoni platform uses Open Banking technology to enable you to view and manage clients’ cash savings in one place and seamlessly open and switch accounts.
With Akoni, you can onboard with no fuss and deposit funds into a range of savings products.
Akoni has 22 bank and building society partners each providing protection of up to £85,000 per bank, or up to £1 million for Temporary High balances.
You can use the platform in whatever way best suits your business, whether your clients want to be able to review, edit and approve your suggestions, or you need complete control over all deposit decisions
Alternatively, for a completely hands-off approach, you can offer a cash dashboard on a self service basis to your clients.
To find out more about how the award-winning Akoni platform could benefit your business, get in touch today.