Santander savers given assurances after Spain downgrade

The Spanish giant – which includes the former Abbey and Bradford & Bingley (B&B) brands, plus Alliance & Leicester (A&L) and Cahoot – has become a huge player on the UK high street with a string of high-paying accounts (see the Top Savings and Top Cash Isas guide).

Yet last Friday, the Spanish economy received a blow after a major credit agency lowered the rating used to assess the country's financial strength.

We've received numerous emails from worried Santander savers so we've answered some of those concerns below (see the Safe Savings guide).

To avoid panic, there is no obvious concern about the stability of the bank, according to experts.Santander stresses its UK arm is self-sufficient so is not dependent on events in Spain.

What's happened in Spain?

On Friday, credit agency Fitch downgraded its view of the Spanish economy from AAA to AA+.

In plain English, this means Fitch has lost some confidence in the Spanish economy and is a sign to the investment community that all is not well.

There are fears the country may be struggling to pay some of its debts, while figures yesterday showed close to 20% of Spaniards are unemployed, the highest rate of all the countries that use the euro, and the second highest in the EU.

This is in addition to the ongoing problems in the Eurozone caused by the crisis in Greece.

What does this mean for Santander?

Fitch stresses that while the Spanish economy is wobbling, Santander is not.

Santander's credit rating was unchanged on Friday, and remains at AA, despite the downgrading of the Spanish economy.

To put this in context, according to Fitch, only HSBC of the major UK banks and building societies can match Santander's AA status.

The other major high street names of Barclays, Lloyds Banking Group, Nationwide Building Society and Royal Bank of Scotland all have inferior ratings.

However, Santander's share price stood at 7.99 euros at 3.30pm today, down from a 52-week high of 12.14 euros. The share price is often a good indicator of market sentiment towards a firm.

Justin Urquhart Stewart, from Seven Investment Management, says: "Santander has some very serious problems in Spain but it has the plan and the method to recover.

"You can never say never but there is no reason to doubt its future now."

How is your cash protected within Santander?

The bank's UK arm is registered in the UK so any cash savers have is protected in the same way as the other major deposit takers here.

This means the first £50,000 per person is protected by the Government's Financial Services Compensation Scheme in the unlikely event Santander went bust.

What brands are included within Santander?

Santander swallowed up the now defunct Abbey and B&B brands at the start of the 2010.

While A&L and Cahoot still retain their brand names they are part of the Spanish giant, though A&L will be rebranded later this year.

Before last Friday, A&L had a separate banking licence, giving savers with both it and Santander two lots of £50,000 protection.

But now, you're down to a single £50,000 guarantee between the two.

Our view on keeping your cash safe

Martin Lewis, MoneySavingExpert.com creator, says: "The most important thing to remember is Santander is a fully regulated UK bank.

"That means in the unlikely event it were in trouble, if you've money in one of its current accounts or savings products, the Government will ensure consumers get back at least £50,000.

"Yet more so, no UK saver in an onshore account has yet lost money even with the collapse of Northern Rock, and the Icelandic banks.

"When B&B was in trouble, it was Santander the Government allowed to rescue it. One has to assume it did its due diligence at the time."

Santander's statement

A spokesman says: "Customers need not be worried as both Santander and Santander UK are strong businesses focused on retail banking with no exposure to toxic financial products.

"Santander's UK business is strong and we have just announced very strong first quarter financial results, with profit before tax up over 15% to £426m.

"Santander UK is also fully regulated by Financial Services Authority and all its deposits are covered under Financial Services Compensation Scheme.

"Furthermore, Santander operates under a subsidiary model. This means that Santander UK is completely autonomous from its Spanish parent company.

"This structure acts as a firewall to stop problems within one part of the group of spreading to other units in the event of financial difficulties. Also, money raised in the UK stays in the UK."

Further reading/Key links

Best rates: Top Savings, Top Fixed Savings, Top Cash Isas Stay safe: Safe SavingsHow the story's covered elsewhere: Telegraph.co.uk