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Coronavirus Q&A: What does the Covid-19 pandemic mean for your money? Ask our investing expert your questions

Coronavirus Q&A: What does the Covid-19 pandemic mean for your money? Ask our investing expert your questions

1:57PM Is my cash in the bank safe? Susan Elliott has got in touch with a very important question about cash and the safety of banks. She says: I have cash savings in the bank and want to take it out as I’m worried about a possible run on the banks. What would you suggest I…

Is my cash in the bank safe?

Susan Elliott has got in touch with a very important question about cash and the safety of banks.

She says: I have cash savings in the bank and want to take it out as I’m worried about a possible run on the banks. What would you suggest I do with it? Investment funds, gold, or what shares would be a good thing to buy?

There’s a lot to unwrap here, but let me start with how a run on the banks might start. Your concern about a run is an extreme one, as there’s nothing to suggest that that could happen now. The Bank of England has offered funding help to all banks and the level of risky debt lent out by banks is lower. It doesn’t make it impossible, but the banking industry is in a different place to what it was in 2007 and 2008.

It’s also worth remembering that £85,000 of your savings in a bank or building society is protected by the Financial Services Compensation Scheme (FSCS) if a bank ever did go under.

The quickest way for a run on the banks to happen is people thinking a run on the banks will happen, and there’s nothing to suggest that now. If you have more than £85,000 saved in one account with one bank, then I recommend splitting this across multiple banks and that will ensure your money is protected by the FSCS.

The second part of your question is interesting, as arguably there’s no safer store for your cash than either government bonds or a bank account. A run on the banks would likely immediately lead to a stock market collapse so there is no way shares would be a safer store than banks. You could put money into bonds or gold, but again, a run on the banks is a huge financial event and there’s no guarantee it wouldn’t affect bond and gold markets as well.

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