We do not expect air passengers to check the safety of the aeroplanes they use: they do not have the skills, nor would airlines grant them the access, to do so effectively. But stories in today’s newspapers question whether governments will apply that logic to bank deposits.
Greece, following Cyprus’s example, is preparing to bail in depositors, confiscating 30% of deposits above €8000 according to these reports. No one knows how exposed international banks are to a Greek default, but on the same day (and same page) The Times reports that coverage for our money under the UK Financial Services Compensation Scheme is to be reduced from £85,000 to £75,000 with effect from 1 January (but apparently without grandfathering longer term fixed deposits). And this from a chancellor who has weakened the legal protection for larger, unprotected deposits; who is vacillating about imposing effective ring-fencing on the banks; and has already boasted (in evidence to the Parliamentary Commission on Banking Standards given in November 2012) that “We have demonstrated, and we wanted to demonstrate, that we are in the business of protecting £85,000 of deposits, and not beyond that.”
It’s not only the Greeks you should fear, whatever they bear.