Bank deposit and savings compensation schemes vary widely for expats

by Ray Clancy on February 7, 2011

Expat deposit and savings compensations schemes vary

Expats need to remain on their toes over savings compensation rights, despite the higher €100,000 deposit compensation limit now in force in all European Economic Area (EEA) member states.

Research also shows that the amount of compensation paid in the event that a bank goes bust varies widely across the globe with the United States having the best deposit protection scheme while countries like Bahrain and Singapore are much lower.

Even within Europe it is not as clear-cut as it might be despite the compensation limited being equalised at the beginning of the year, the research by ExpatMoneyChannel has found.

For example, the compensation limit for British expats with an account in the UK has increased from £50,000 to £85,000, which is the sterling equivalent of the €100,000 EU limit. However, at the same time separate compensation cover for customers with deposits in two merging building societies no longer applies.

‘This new pan-European requirement replaces the existing UK arrangement which has been in place since 2009, and which allowed for separate compensation cover for customers with deposits in two merging building societies,’ confirmed the FSA.

While only ever a temporary measure, the rules were introduced following concerns that customers with savings in two merging societies could find their combined investment exceeded the £50,000 maximum deposit protection limit. The FSA added that raising the limit to £85,000 means it is less likely that depositors in two societies merging will now exceed the limit.

Popular offshore jurisdictions such as the Isle of Man, Jersey and Guernsey’s deposit protection schemes all have a £50,000 limit, despite their links with the UK as Crown Dependencies and have indicated no plans to follow the EU’s lead and increase compensation, although the Isle of Man is believed to be considering its options.

Indeed, jurisdictions that have a connection with the UK have been the cause of some confusion recently. In particular, expats reacting against the recent takeover of Bank of Scotland accounts in the Isle of Man and Jersey by Lloyds TSB Offshore were under the impression that Bank of Scotland accounts in both jurisdictions were covered by the UK’s compensation scheme, rather than the local schemes.

Gibraltar though, which is not a Crown Dependency but a UK overseas territory and so has a limited relationship with the EU via its UK overseas territory status, has decided to match EU deposit compensation limits of €100,000.

Also financial institutions that are not locally incorporated are generally covered by their home regulator that is the country or jurisdiction where they are headquartered. So, for example, as HSBC International in Dubai is only a representative office, it is regulated by the Jersey Financial Services Commission and any compensation would be via the Jersey scheme should the situation arise. Although it is possible for institutions to ‘top-up’ into the compensation scheme offered locally, if it is deemed better than the home country’s scheme.

The Hong Kong Deposit Protection Scheme can cover up to HK$500,000, which is £40,100 currency equivalent. In Jordan the deposit protection scheme covers up to 50,000 Jordanian Dinar (£44,100) and in Bahrain eligible depositors are protected up to an amount which is the smaller of either 75% of the combined total of eligible deposits held by a depositor or BD15, 000 (£25,000). In Singapore the deposit protection limit is just S$20,000 (£9,750).

The best global deposit protection scheme is in the United States where depositors in insured banks are covered up to £156,000. It is even possible to use an online tool called EDIE (Electronic Deposit Insurance Estimator) to help make sure that all of your money in US bank deposit accounts is 100% FDIC-insured.

{ 2 comments… read them below or add one }

RJ Laffins February 15, 2011 at 5:12 pm

Enjoyed your post. Thank you. Are you aware of a tool similar to the EDIE in the UK?
Thank you.


David May 5, 2011 at 3:06 am

Dear Ray Clancy,
This article is correct when talking about Savings and bank Deposits. However, it is misleading if your readers do not understand the difference between Deposits and Investments. The Saving & Bank Deposit protection scheme is £50,000.

However, under separate Isle of Man legislation, Policy Holder Protection (under Investment & Pension regulations) offers leading worldwide protection. It offers 3 levels of protection, with 90% of an investors money back, secured by the Governments of these islands. This is equal to the highest protection worldwide.

With todays opportunities who would hold more than £50,000 in a bank deposit anyway, except in exceptional circumstances. The FSA and the British Government were caught "asleep at the wheel" and hadn't increased the levels of protection for many years, when the banking crisis hit. I recently met an American who lost his daughter's university fund and his own pension (both based in the US) – and with tears in his eyes he said "and NO ONE has gone to JAIL!". So America is clearly not the safest place, but could be the land of the free, for the guilty. David – BlueStar AMG


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