Should you get out of Bank of Cyprus UK?

By Staff Writer Ruth Jackson Aug 15, 2011

Ruth Jackson

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As the debt crisis in the eurozone mounts thousands of British savers with money in the Bank of Cyprus UK are growing increasingly concerned about the safety of their savings. The Mediterranean islands’ exposure to Greek banks, coupled with local crises, including a huge munitions explosion that wrecked vital infrastructure, has led to all three of the big credit rating agencies downgrading Cyprus in recent months. The Bank of Cyprus UK has operated in Britain for 55 years and 50,000 people have savings accounts with it. If you are one of them, what should you do?

Most accounts are fixed-term and savers will face penalties if they decide to withdraw their cash. That’s one reason not simply to demand your money back. The bank’s marketing manager, Richard Simon, has also pointed out that the bank has a healthy deposit-to-loan ratio, is well funded, and doesn’t rely on the money markets for funding. “I would not be unduly worried if I had money in a fixed-rate account with the Bank of Cyprus,” says Kevin Mountford of MoneySupermarket in The Sunday Times.

One feature of the Bank of Cyprus UK will nonetheless worry some savers – it isn’t a member of Britain’s Financial Services Compensation Scheme. This protects deposits of up to €100,000 (£85,000) per person and double that for joint accounts, in the event of a bank collapsing.

Instead, Bank of Cyprus UK customers are covered by the Cypriot deposit protection scheme, which protects up to €100,000 per depositor with compensation paid out in euros. Fine, but the concern is that “any compensation scheme is only as safe as the government backing it”, says Justin Modray of Candid Money, also in The Sunday Times. And right now the Cypriot government isn’t looking very safe.

Indeed, comparisons are being drawn to the Icelandic banking collapse in 2008. Then the British government had to step in to compensate savers when the Icelandic government couldn’t afford to. The difference with Cyprus is that it is a member of the European Union (EU). So if the Cypriot government can’t afford to compensate savers then the European Central Bank would have to step in.

So an awful lot would have to go wrong for existing British savers to lose their money at the Bank of Cyprus UK. Those with €100,000 or less already deposited should think hard before facing the penalties for withdrawing it all. Meanwhile, anyone looking for a new home for their money should look elsewhere as the bank isn’t offering top table interest rates anymore.

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Published in Savings | More articles by Ruth Jackson

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  • 1. Richard Simon

    (18 August 2011, 01:25PM)  Complain about this comment

    Thank you for highlighting the valuable deposit protection our customers receive (up to €100,000 of eligible deposits) which is now standard across the EU. We are self funded bank and comfortably passed the recent EU stress tests and therefore believe that we are in a strong position to withstand these adverse economic conditions. In addition, as you point out Cyprus is a member of the EU and Eurozone and as such would have the backing of other Eurozone members and the European Central Bank should it be needed.

  • 2. Norbut

    (21 August 2011, 11:24AM)  Complain about this comment

    If...nay....when the eurozone goes over the edge and its banks start falling like ninepins, and the Euro becomes a lavitorial accessory, any default and protection system will be a long drawn out affair.
    You can bet the British will be at the back of ze que.

  • 3. costas

    (21 January 2012, 07:21PM)  Complain about this comment

    I have loans with this Bank and there Behaviour is no diffrent to a loan shark threatning to call loans in if new higher interest agreements where not signed somebody help me i can not meet the new payments

  • 4. costas

    (21 January 2012, 08:33PM)  Complain about this comment

    This bank increased its interest rate to lenders by force we are waiting for the chance to leave.We are a small group we owe 20m between us it will be the beginig of a tsunami when we leave we are nearly there. They lost millions in Russia and even more in Greece, they do not have enough cash to pay the savings back, customers have tried only to be told they missed the deadline or pay a large penalty
    Your money is not safe in this bank

  • 5. Simon Wright

    (17 March 2013, 11:11PM)  Complain about this comment

    Costas, I hope people listened as you were 100% right

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