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JEFF PRESTRIDGE: Foreign banks must obey our rules for savers

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Enough is enough. It is time the financial regulator stopped foreign banks operating here without signing up to our savings protection scheme and being subject to the full rigours of UK regulation.

It’s a demand we have made before and will continue to make until action is taken.

Last week, the new financial regulator, the Prudential Regulation Authority, was forced to step in to safeguard the  £270 million of deposits held by UK savers in failed Cyprus bank Laiki. Without the regulator’s intervention, they could have lost up to 60 per cent of their cash over 100,000 euros as part of the larger Cypriot bailout.

Demand: The Prudential Regulation Authority was forced to step in to safeguard the £270 million of deposits held by UK savers in failed Cyprus bank Laiki

Laiki operated in the UK without subscribing to the Financial Services Compensation Scheme which guarantees protection up to £85,000 per depositor if a bank fails. Nor did Laiki have to submit itself to the full might of UK regulation, instead choosing to be regulated by its home country.

It was able to do this because of ill-conceived EU single-market rules that allow banks to take deposits anywhere in the  27-nation bloc without having to adhere to local regulation.

The regulator’s intervention means UK depositors with Laiki will now have their money transferred to Bank of Cyprus UK, which subscribes to our compensation scheme and is subject to our regulation (a move it made last year after pressure from Financial Mail).  All fine and dandy – but all unsatisfactory.

The lessons of Cyprus – and Iceland before – teach us that no bank taking deposits here should be allowed to do business without being UK-regulated and  without providing savers with  the guarantees underpinning the FSCS.

Dutch-owned Triodos Bank is now the only large institution taking deposits in the UK without offering its savers the protection of the FSCS. It argues that its ‘robustness as a bank  and ultimately the strength of  the Dutch economy’ are good reasons why it shouldn’t conform. It is wrong.

Last week, Andrew Bailey, chief executive of the Prudential Regulation Authority, said the current system that allows the likes of Triodos to do business in the UK in this way was ‘not sustainable’. Three cheers to  Mr Bailey. It’s something we have been saying since the Icelandic banking crisis of 2008. No British saver should be expected to trust a foreign regulator – irrespective of the strength of that nation’s economy – to come to the rescue if a bank goes bust.

Triodos should now do the decent thing and ensure its UK savers are covered by the FSCS.

Financial Mail led  the campaign to safeguard the interests of Standard Life’s 2.4 million policyholders when, in 2006, the company demutualised and gave them free shares in lieu of their rights as members of a customer-owned firm.

The shares – at 218.5p – have risen to nearly 340p in the intervening years, a strong return given the FTSE 100 index has risen 11 per cent over the  same period.

But has Standard merely gone from being a customer-focused mutual to a typical financial giant of a plc where the boardroom seems to get all the bonuses?

On one level, the answer is yes. Last year, chief executive David Nish’s total pay rose by almost 100 per cent to £5 million. That astonishing leap has attracted much criticism in the past week – some of it justified.

Certainly, Financial Mail is no fan of monster bonuses for executives. And among Standard’s remaining 1.5  million private shareholders, we know we count many faithful readers. But what we will gladly concede is that at least today the interests of Standard’s boardroom members are more aligned with its customers, whether they are shareholders or not.

In 2006 we protested that Standard’s then chairman,  Brian Stewart, had pension entitlements worth £8 million, entirely apart from and almost certainly dwarfing any savings  he had with Standard Life.

Most of Standard’s own  pension customers, by comparison, had a far greater stake as their life savings were entrusted with the firm.

Today, notwithstanding doubts about Nish’s pay, the situation is better. We know he owns at least one million shares in Standard. And that better matches his own financial interests to those of his customers and private shareholders than was the case under the previous regime.

Life under Standard Life plc is better for all stakeholders (customers, shareholders and board members) than it ever was when a mutual run by a board accountable to no one but itself.

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