Why a bank merger may risk your cash

SAVERS must monitor takeovers and mergers to ensure their cash stays safe if their bank or building society goes bust.

Last month, Clydesdale and Yorkshire Bank Group (CYBG) bought Virgin Money, while Holmesdale BS merged with Skipton BS.

While those with Virgin Money won’t see any change in their compensation limit, savers with Holmesdale could find that some of their money is no longer covered.

Under the Financial Services Compensation Scheme (FSCS), savers are guaranteed to get the first £85,000 of their savings back (£170,000 for joint accounts), in the unlikely event that their bank or building society collapses.

The limit covers all of the money you have with that institution — easy-access accounts, fixed-rate bonds, Isas, notice accounts and even your current account.

You get extra protection after a significant event, such as selling a home or receiving a big insurance policy payout. There is a £1 million limit for savers in this position.

Most confusing for many, however, is what counts as an institution. This all comes down to its banking licence, issued by the City watchdog. Many banks share a licence with others in the same group, while others operate on their own.

The CYBG takeover of Virgin Money created the UK’s sixth-largest bank, with £84 billion in assets and around six million customers.

Over the next three years, all customers will move to the better-known Virgin Money brand. Branches will also be renamed Virgin Money. However, the message from both CYBG and Virgin Money is that savers don’t need to do anything, as their compensation cover stays the same as before the takeover.

This is because the combined group will still operate under two separate licences — one for Virgin Money, one for CYBG. Clydesdale and Yorkshire Banks already share a licence.

This could all change in the future. But a Virgin Money spokesman told Money Mail: ‘Should there be any changes, we would notify customers.’

But savers with Holmesdale BS, now part of Skipton BS, should act now if their combined savings with both the societies breaches the compensation limit following the merger.

Skipton says savers in this position can move money out of their accounts without giving the usual notice.

It will also waive any penalty charges customers would usually stump up for making early withdrawals.

However, savers must move their money before December 31. Wait any longer and you will face the usual penalties.

Any money you put into the new easyaccess account at 1 pc from Monzo Bank, out last week, comes under the same licence as Investec Bank, which is where your money ends up. But the rest of your money with Monzo — for example, in your current account — comes under its own licence, so has its own £85,000 limit.