A levy to be forced on savers in Cyprus, as part of the EU bailout of the country, has caused alarm amongst savers throughout Europe. However, in the UK at least, moves have been made to reassure savers that their savings accounts will not be raided in the same way.
The EU has agreed to a 10 billion Euro bailout of the Cypriot economy, but as part of the measures all bank customers, including those holding savings accounts, must pay a one off levy; people with more than 100,000 Euros in Cyprus will have to pay 9.9% of their balances, with those holding lower amounts of cash paying 6.75%.
Whilst the move still needs to be ratified by the Cypriot parliament in a vote later today and could well be changed, it sparked angry protests in Cyprus and nervousness throughout Europe that the measures could be repeated in other Eurozone countries.
UK savers who live in Cyprus and hold money on the island will be hit by the new levy, however savings accounts with the UK arms of Bank of Cyprus and Laiki Bank, which is not covered by the UK Financial Services Compensation Scheme (FSCS), will not be hit; the UK government was also quick to announce that it would compensate any UK military or government personnel on the island caught by the levy.
However, the move to raid savings accounts, which would have been fully protected under a compensation scheme similar to the FSCS if Cypriot banks had failed, has caused nervousness throughout the EU.
Here in the UK the FSCS were quick to play down fears that a similar situation could arise in the UK. Mark Neale, Chief Executive of the FSCS, said that the situation in Cyprus was “unique” and that it was “inconceivable” that the move could be repeated in the UK.
Neale went on to say: “The UK government is not in anything like the same position as Cyprus. I am emphatic that people (in the UK) will not lose a penny of their savings in this way.”
The FSCS provides compensation, up to £85,000 per person, per institution, to savers in the UK if their bank, building society or credit union goes bust.
More details about the FSCS and the protection it affords to UK savers can be found by clicking here.