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Is It Safe To Use Overseas Banks?

As investors and savers look to squeeze the last penny of profit out of their assets it seems as though many in the UK are looking towards the Iceland banking community with 300,000 British residents holding accounts with banks based in the country. While there have been no problems yet there are fears that the smaller banking community of country might not be able to cope with a run similar to that seen with Northern Rock.

Despite repeated denials of problems there is still a lingering doubt over the protection afforded to savers in the country. Many people in the UK will not be aware that if an Icelandic bank was to go under (however likely or unlikely that may be) the issue of compensation would be administered by the country's own regulators - with no recourse to the UK compensation system. This begs the question as to whether any savers actually know what the compensation system is in places such as Iceland.

Iceland is only one example of a growing trend in the UK to look towards foreign based banks - with Middle East banks a favourite amongst some areas of the population - for potentially more income. However, with an added return comes an added risk as these two elements of investment, and savings are an investment in the bank you use, are closely entwined.

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