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How Safe Is Tesco Bank?

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Totally laughable if you knew me, but someone's asked me for advice on a safe bank to put a £50K inheritance. He doesn't want to put any more in HSBC.

I was thinking of Tesco Bank as an option. I read that they are fully owned by the main Tesco company. Does this mean Tesco are fully liable to repay any deposits? If so, I was thinking that because they only have £5bn in deposits, then even if the bank has a major problem they could easily repay that amount. Even a 100% loss only amounts to a couple of years profits so it's hardly going to trouble them. Is there anything wrong with my basic reasoning here?

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TPF used to be RBS but I believe a few years ago split to become directly under Tesco.

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Totally laughable if you knew me, but someone's asked me for advice on a safe bank to put a £50K inheritance. He doesn't want to put any more in HSBC.

I was thinking of Tesco Bank as an option. I read that they are fully owned by the main Tesco company. Does this mean Tesco are fully liable to repay any deposits? If so, I was thinking that because they only have £5bn in deposits, then even if the bank has a major problem they could easily repay that amount. Even a 100% loss only amounts to a couple of years profits so it's hardly going to trouble them. Is there anything wrong with my basic reasoning here?

Tesco Bank is a subsidiary of Tesco plc. Unless there is a guarantee from the parent company, then the main Tesco company is no more liable for the debts of Tesco Bank than any other bank shareholder. However, they might pay off the debts to avoid a mass boycott of their stores.

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Guest unfunded_liability

Nadeem Walayat of The Market Oracle reckons Tesco is one of the safer banks to deposit your money:

The Market Oracle - Savers Protect Your Deposits From Bankrupting Banks and Quantitative Inflation

The Euro-zone continues to teeter over the edge of the financial abyss as bankrupting countries that cannot print Euro's threaten the collapse of its banking system that would would soon collapse the whole global banking system in a matter of hours as electronic bank runs sweep across the worlds financial system resulting in trillions of dollars worth of deposits being withdrawn in a matter of hours and thereby collapsing first the Euro-zone and then within 24 hours the UK, USA and Asia along with it...

...The focus of this article will be on concrete steps that depositors need to take now to reduce the real risk of the actual loss of their funds on deposits at bankrupting banks before they should go on to protect against the ongoing real terms loss of value in the face of the perpetual money printing Quantitative Inflation Mega-trend.

Steps You Need to Take Now !

The following are my updated lists of tasks you need to do to protect your deposits because you are NOT being paid to carry the REAL RISK OF LOSS OF FUNDS ON DEPOSIT!

1. Ensure that you have at least 2 current accounts across banking groups and at least one with a safer bank such as HSBC.

2. Next make a list of all of your deposit / bank accounts, with the amounts on deposit.

3. Now group your accounts by banking sector group (see list here as a guide).

4. If you are anywhere near the £85k limit with any banking group then move those excess funds immediately! ...

Instant Access Savings Accounts with Lower Risk banks

* NS&I - 1.75%

* Tesco - 2.90% (includes 1.65% bonus for 12 months)

* HSBC - 0.75% (includes 0.5% bonus if you do not withdraw in a calendar month)

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I work within the Tesco group PLC (not bank or retail) the below is all in my humble uneducated opinion.

I have all my savings with Tesco (I know all eggs in one basket etc) however this article tipped it for me

http://www.marketoracle.co.uk/Article28905.html

Banking Groups (separate Licences) Probability Deposits over £85k are Safe

National Savings & Investments 99%

Tesco Bank 80%

HSBC 75%

Co-op 75%

Standard Chartered 65%

Santander Group 50%

With recent events imagine the percentages for most have dropped ..as far as I know Tesco Bank as no response to Greek Bonds

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Tesco Bank is a subsidiary of Tesco plc. Unless there is a guarantee from the parent company, then the main Tesco company is no more liable for the debts of Tesco Bank than any other bank shareholder.

Thanks, jonb, for pointing out the major flaw in my reasoning.

Whilst I'm still thinking about supermarket banks, what about Sainburys Bank? That's a JV between Sainsburys and HBOS. I know HBOS itself is very weak, but does that have any impact on Siansburys Bank, or is it ringfenced?

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Guest unfunded_liability

Thanks, jonb, for pointing out the major flaw in my reasoning.

Whilst I'm still thinking about supermarket banks, what about Sainburys Bank? That's a JV between Sainsburys and HBOS. I know HBOS itself is very weak, but does that have any impact on Siansburys Bank, or is it ringfenced?

You should reassure your friend that their money is safe in any UK based financial institution regulated by the FSA. The government will undoubtedly print as much currency as is required to cover any losses. Fear not.

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I'm a little skeptical of any article that lists Standard Chartered as a UK retail bank. They have a private bank for sure, but it's not somewhere 99% of the population could put their money.

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You should reassure your friend that their money is safe in any UK based financial institution regulated by the FSA. The government will undoubtedly print as much currency as is required to cover any losses. Fear not.

Yes the magic printing press guarantees no nominal loss of cash, purchasing power that's a whole different ball game.

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Say there are 20 banks and one fails, the other 19 pay the bill for compensating savers up to £85k.

If another fails then 18 pay the bill for that failure.

Tesco could be the safest bank but they are at the top of a pyramid. The 80% doesn't apply if there is contagion.

The FSCS rewards places that have less retail deposits by making them contribute less to failures, which are more likely at places with less retail deposits!

All building societies and banks are required to pay a levy to the Financial Services Compensation Scheme (FSCS) as part of the government’s bailout of the failed financial institutions such as Bradford & Bingley, and the Icelandic banks.

The allocation of payment to the FSCS relates to the size of each contributor’s retail deposit balances. Building societies, which have the majority of their funding from traditional retail savers, will pay (relative to their total balance sheet) much more than banks who have relied excessively on wholesale funds - which experience has shown to be a much more volatile form of funding

http://www.ybs.co.uk/your_society/fscs-levy-unfair.html

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Totally laughable if you knew me, but someone's asked me for advice on a safe bank to put a £50K inheritance. He doesn't want to put any more in HSBC.

I was thinking of Tesco Bank as an option. I read that they are fully owned by the main Tesco company. Does this mean Tesco are fully liable to repay any deposits? If so, I was thinking that because they only have £5bn in deposits, then even if the bank has a major problem they could easily repay that amount. Even a 100% loss only amounts to a couple of years profits so it's hardly going to trouble them. Is there anything wrong with my basic reasoning here?

Why does he need to bother when the govt. guarantees the first 85,000 Euros - or its equivalent?

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Thanks, jonb, for pointing out the major flaw in my reasoning.

Whilst I'm still thinking about supermarket banks, what about Sainburys Bank? That's a JV between Sainsburys and HBOS. I know HBOS itself is very weak, but does that have any impact on Siansburys Bank, or is it ringfenced?

Sainsbury's Bank have their own independent banking license, so in FSCS terms is independent of HBOS, even though Sainsbury's Bank is a 50/50 JV between Sainsbury's and HBOS.

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Why does he need to bother when the govt. guarantees the first 85,000 Euros - or its equivalent?

Because you lose access to your 'money' until such time as the FSCS pay you. IF they can pay you.

If you feel that you can do without access to your funds for an unspecified period of time, probably months, at a time of financial crisis and you are willing to risk that the FSCS actually has the wherewithall to compensate, then good luck to you.

Plus, in the event of a major banking crash then by the time you get your currency back it's likely to have a LOT less purchasing power than it did when the bank originally went bust.

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • up 5%



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