UK Bank Stability

UK Banking Stability Drastically Improves...

Your Guide to Banks' Safety & Strength

Alan O'Sullivan, This is Money

The full guide to keeping your savings safe, updated (nearly) every day

Which banks are a safe haven, which are sitting on shaky foundations, and which are on the verge of collapse? As the worldwide banking industry buckles under the pressure of the credit crunch, we offer you a rolling guide to the safety of savings institutions in the UK.

You can click on each of the names below to get the latest information on each high street savings bank. But first, some explanation.

It is extremely unlikely the UK Government will allow any bank operating in the UK to fail. Moreover, your savings with each UK bank are covered up to £50,000 (up from £35,000 on 7 October).

Therefore, it is best to keep your savings with each of these institutions within that £50,000 compensation limit. Use our safe savings guide to make sure your deposits are safely spread.

Some of these banks will have smaller subsidiaries operating under the same savings compensation licence. If worried, open our table charting bank ownership, look up their banking group and cross-check the name here.

Fitch ratings: These are used as a guide to bank stability based on available funds and ability to repay debts. These ratings run from AAA (the best), down through AA+, AA, AA-, A+, A, A-, BBB+, BBB and BBB- for 'investment grade' banks. 'Investment grade' generally means 'low to moderate risk'. There are 14 levels of ratings below this for 'sub-investment grade' companies. The share prices of publicly traded companies have also been included to give a reflection of market sentiment.

CDS rates: The CDS or credit default swap measures the cost of insuring a bank's debt. So the higher the figure, the riskier the bank... in general: CDS rates can be extremely volatile and depend on how many people are investing in the CDS market that day, what they think of the banking industry generally and how they view that particular bank. They are only of use if a rate is used in conjunction with other indicators and show a consistent trend over a reasonably long period of time. Daily peaks and troughs are not that significant.

Most major banks have a rate between 100 and 300 in a normal environment. But even giant, stable banks such as HSBC have seen rates pushed higher than this usual band during the credit crunch. Again, their use as an assessment tool in isolation is controversial. To see how they reflect a bank's safety, read Fears grow over Icelandic banks (again). For an overview of banks' CDS rates, see the table at the bottom of the page.

IMPORTANT: the following is advice offered to savers on the safest banks for their savings deposits. It is NOT investment advice and should not be regarded as such.

Latest news: UK bank stability drastically improves (15 October 2008)
The market's view of UK banks has drastically improved over the past week, although questions remain over Indian bank ICICI.

Growing Anger Over Bank Bonuses

Chancellor Alistair Darling has ordered an inquiry after claims a UK bank rescued by taxpayers is planning to hand out £1bn worth of bonuses to staff.

68% of the Royal Bank of Scotland is owned by the taxpayer

The bank concerned is the Royal Bank of Scotland (RBS)which was bailed out to the tune of £20bn.

Only a few days ago Prime Minister Gordon Brown warned RBS there should be "no rewards for failure".

But according to The Sunday Telegraph, executives are contemplating a massive reward package for senior staff.

The paper says they were planning to limit cash payments to £25,000 and make up the rest in bank shares.

It was hoped this would be more acceptable to the public but the proposals have provoked fury.

Vince Cable On Bank Bonuses

Vince Cable, finance spokesman for the Liberal Democrats, said City bankers "know no shame and take no blame".

"This is unbelievably crass and irresponsible behaviour by people who have learned absolutely nothing," he added.

Shadow chancellor George Osborne said: "Cash bonuses at a time like this for people who have been involved in the higher echelons of a bank is simply unacceptable."

The Sunday Telegraph said RBS, which is now 68% owned by the taxpayer, wanted to pay its staff nearly £1bn in bonuses this year.

Alistair Darling speaks to Sky's Jeff Randall

Mr Darling on Sky News

This is despite running up the biggest losses in UK banking history and having to be rescued by the Government.

Mr Darling told the paper: "Success should be rewarded. Failure should not."

Critics say the bonus culture and excessive risk taking by banks is mainly to blame for the global recession.

In the US President Barack Obama has put a cap on executive pay, while France has told senior bankers to return previous bonuses.

Bank Boss: "Bonuses Out Of Whack"

The boss of one of the UK's biggest banks has admitted financial sector pay has been disproportionate in recent years as public anger escalates over City bonuses.

City pay has come under fire as banks' bad deals have been exposed

Barclays chief executive John Varley said there had been "examples of pay not representing risks" in the banking sector.

The news comes as Barclays registered pre-tax profits of £6bn for last year and said its bonus payouts would be down by 48%.

Mr Varley was backed by the Prime Minister who reiterated his promise that there would be no "reward for failure".

Gordon Brown said: "We are leading the way, with America, France and other countries, in sweeping aside the short-term bonus culture of the past and replacing it with a determination that there are no rewards for failure and that there are rewards only for long term, not short-term success."

But the Treasury faces accusations of a cover-up over the issue, with critics saying the Government has failed to crack down on rewards for staff at institutions bailed out by the taxpayer.

Yvette Cooper: No Bonuses For Failure

Conservative Party leader David Cameron accused the Government of "being feeble" on bonuses and said they "were asleep on the job".

"We raised the problems of excessive bonuses in the banks which the taxpayer had put a lot of money into,"he said.

"The Government has done nothing about it.

"It is not so much that they shut the door after the horse had bolted, they shut the door after the horse ran the race."

Chancellor Alistair Darling has asked leading City figure Sir David Walker to investigate what went wrong in the management of banks to spark the credit boom-fuelled recession.

Although officials say Sir David's findings will "inform" this year's Budget, his final recommendations will not be made until the end of the year.

Shadow chancellor George Osborne says this is a "totally inadequate" response.

The Conservative said: "The problem of bonuses in the Government-owned banks has been looming for months, but now they have set up another review that will be far too late to do anything about this year's bonuses.

"They should stop dithering and act."

Liberal Democrat Treasury spokesman Vince Cable called the situation "a classic British establishment cover-up".

The head of the British bank Barclays, John Varley

Barclays boss John Varley

He said: "Instead of dealing decisively with the problem, as President Obama, the Swiss and others have done, the Government is clearly playing for time in order to avoid anything to upset the bankers.

"The public will be even more infuriated than before."

Mr Darling announced the review as he indicated some staff at a bank bailed out by the taxpayer are likely to receive some bonuses, amid mounting pressure for all payments to be halted.

He insisted "absolutely no figure" had been agreed with Royal Bank of Scotland after it was reported to be proposing a package totalling £1bn, despite being propped up with a £20bn state cash injection.

But he accepted that "contractual problems" and the right of staff other than those involved in "excessive risk taking" to be rewarded would rule out a total ban.

Bradford & Bingley To Pay £1.7m In Bonuses

Nationalised lender Bradford & Bingley has announced it will pay bonuses totalling £1.7m to its junior staff.

Nationalised lender has ditched bonuses at middle and senior level

The bank said it would pay rewards of just under 8% of salary to 800 staff.

But middle and senior management will not receive any bonus, it said.

The development follows a move from Northern Rock to block bonuses for senior staff while junior management will receive a deferred bonus for 2008.

Last week Royal Bank of Scotland, which is about 70% owned by the Government, announced it was shrinking its bonus pool by 90%.

That move prompted the Prime Minister to demand the crackdown on rewards to be replicated across the sector.

Lloyds Banking Group, which is 43% owned by the Government and set to announce losses of about £10bn this Friday, is expected to pay out about £120m in bonuses.

Lloyds said in most cases the payouts would amount to £1,000 or less for employees earning about £17,000 per year.

But two banks that have fared better throughout the current financial crisis, Barclays and HSBC, are expected to defy Government guidelines by handing out much larger bonuses.

Northern Rock To Block Bonuses For Bosses

Northern Rock says it will not give bonuses to senior and executive staff for 2008 and 2009.

Anger has surrounded the decison to award bonuses to bank workers

Unveiling a £14bn mortgage package aimed at kickstarting the mortgage market, the nationalised bank said junior management would receive a deferred bonus for 2008 - payable in 2010, unless they leave the company in the meantime.

Northern Rock added that it expected to make a full-year pre-tax loss of £1.4bn for 2008. It now owes £8.9bn after repaying £18bn last year.

Gordon Brown: People Need The Chance To Borrow

The Government is making the cash available to the Rock over the next two years so the bank can offer "responsible" loans for first-time buyers and customers who are remortgaging.

Northern Rock was infamous for its Together mortgage products which would lend customers up to 125% of the value of their homes before the credit crunch struck.

However, the Rock's new mortgage package is relatively small.

In 2007, banks lent house hunters £363bn. Last year, the mortgage lending figure was £257.7bn and, in 2009, the Council of Mortgage lenders predict it will be £145bn.

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The company's expected losses of £1.4bn are almost 10 times bigger than the £167.6m loss posted during 2007 - when the firm was crippled by the freeze in credit markets and the UK's first bank run for 140 years.

This year's losses are driven by a £900n bad debt charge on its loans as the UK's recession deepens.

Northern Rock largely withdrew from the mortgage market before being nationalised in February last year.