Santander safety Q&A: your questions answered

This follows last night's news that ratings agency Moody's has downgraded Santander UK's credit rating, along with 16 Spanish banks.

Santander UK stresses:

• UK savers' cash is ring-fenced from Spain. "Our Spanish parent cannot take all the money out," a spokesman says.

• Cash raised in the UK (ie, your savings) stays in the UK.

• UK savers' cash in Santander UK is protected up to £85,000 per person by the UK Government, in the unlikely event it went bust.

Santander UK is still rated better than its parent, Banco Santander.

This article is not suggesting Santander UK is in trouble, so please don't read it that way. Instead, this is in response to questions we've had from users worried about the safety of their money.

What happens if Banco Santander goes bust?

Let's be clear, we're not saying this will happen.

But, in the unlikely event it does, Santander UK states the money it holds is ring-fenced from its Spanish parent. As the UK arm is a separate entity, it could keep going.

A spokesman says Banco Santander "cannot, at the press of a button, take all the money out of its UK operation to prop up its business there [in Spain]".

He adds: "Effectively we are a bank with one shareholder, Banco Santander.

"The only way to get their hands on the money here would be by a large dividend.

"That would only happen with the permission of the [UK's] Financial Services Authority, and it would only allow it if there was still sufficient money in the UK bank to meet its requirements."

Where are savers' deposits held?

The bank says "more than circa 90% of our total assets are held in the UK".

Won't Santander UK be hit if the eurozone goes under?

The bank says fewer than 1% of its assets are exposed to the eurozone crisis.

What happens if Santander UK goes bust?

In the unlikely event this happens, the UK Government's Financial Services Compensation Scheme (FSCS) protects the first £85,000 per person in any UK-regulated financial institution, of which Santander UK is one.

Remember you only get one lot of £85,000 per person protection for the group. Santander UK consists of the former Abbey, Alliance & Leicester (A&L) and Bradford & Bingley.

So say one person had £85,000 in Abbey and £85,000 in A&L before the mergers, and they've not touched the cash, only half is protected.

Santander will snap up the 318 Royal Bank of Scotland branches in England later this year, so those customers are unaffected for now.

Private bank Cater Allen is also part of Santander in one sense but has a separate banking licence so you'd get £85,000 protection in it and another £85,000 for the rest of the Santander group.

Martin Lewis, MoneySavingExpert.com creator, says: "Santander UK is a British bank, fully UK-regulated and thus in the unlikely event it were to get in serious trouble, the UK Government via the FSCS guarantees the first £85,000 per person in it.

"If you've more cash, it's always a good tactic to spread it in £85,000 chunks across a number of different institutions to mitigate the risk."

If you're really worried you could even spread smaller amounts so you don't keep all your eggs in the same basket.

What if I have a mortgage or loan with Santander?

If you owe a bank money, in the unlikely event it went bust, the bank would sell your debt on, so you'd owe someone else.

Martin adds: "On a fixed or discounted mortgage the rate would stay the same. The only minor issue is a new bank could change the standard variable rate but that concern is a triviality at the moment."

What does a rating actually mean?

It explains the agency's views of whether a company or country is able to pay its debts. It does not tell consumers whether or not the company or country in question is likely to go bust.

What's going on in Spain?

The Spanish economy is suffering badly and is in recession.

Nearly a quarter of the workforce is unemployed, while the Bank of Spain said last month the economy contracted by 0.4% in first three months of this year, after shrinking by 0.3% in the final quarter of last year.