How safe are smaller banks?

There are lots of hoops that banks need to jump through in order to get a banking licence and to be authorised by the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA). For starters, they’ll need to prove the safety and soundness of their company.

As long as they’re authorised, they‘ll be covered by the Financial Services Compensation Scheme (FSCS). This protects up to £85,000 of your eligible deposits. It doesn’t differ depending on the size of the bank, so smaller banks get the same protection as larger high street banks. But be aware that the £85,000 limit applies to each banking licence. If your bank shares a licence with another, you’ll only get a total of £85,000 protection across both under the FSCS.

You can check to see if your bank shares a licence with another through the Financial Conduct Authority’s Financial Services Register.

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