Investors shift millions to protect savings

SPECULATION about the financial health of British banks has led to hundreds of millions of pounds being shifted between accounts as customers seek a safe haven for their savings.

Funds are being sunk into banks seen as strong performers or which are blessed with a government guarantee. And banks perceived as at risk are seeing the situation compounded by a drain on their assets.

Internet and telephone banking advances allow cash to be switched easily without panicked queues forming at branches.

The Post Office has been a major beneficiary, as its savings products are backed by the Bank of Ireland, to which the Irish government has given a limitless guarantee. British customers are also going straight to the Irish bank to take advantage of the security.

But last night, the British Bankers' Association said the Irish decision was anti-competitive. It said the move had put British banks – particularly those in Northern Ireland – at a disadvantage. It added it supported proposals aimed at ensuring financial stability, but said financial institutions across Europe had to play fair.

The European Commission has said it is "in close contact" with the Irish government over its pledge on Tuesday to guarantee all money saved with an Irish institution for two years.

Alex Salmond, the First Minister, has called on Alistair Darling, the Chancellor, to introduce the same measures in the UK.

A Bank of Ireland spokeswoman said the bank was seeing a "very steady" increase in people contacting its call centres from Northern Ireland, and it is thought the pattern is the same across Britain.

Savers are also flocking to banks such as Lloyds TSB – which has seen its share price soar in the wake of its proposed HBOS takeover – and Abbey, owned by Spanish giant Santander. Its strength was flagged up this week after it acquired Bradford & Bingley's savings assets.

The Treasury-backed National Savings & Investments scheme is seen as a safe bet and has seen an increase in interest.

A spokeswoman said: "We have seen a higher volume of calls than usual to the call centre. But it is too early for us to say if this will have affected sales."

Lloyds TSB said in a statement: "Recently, we have seen a significant increase in deposits and in the last week alone, double the average numbers of term deposit accounts have been opened."

Even Northern Rock, which suffered a run on deposits leading to its collapse a year ago, was understood to be taking in large sums thanks to its nationalisation.

The final impetus for the HBOS takeover deal is believed to have been numerous customers withdrawing cash. At the time, RBS is understood to have benefited, sucking in "several billions" from nervous investors, Yesterday, however, shares in the Edinburgh institution were struggling.

Last night, consumer groups said customers of any UK banking group had protection for the first £35,000 of savings, under the Financial Services Compensation Scheme, reducing the need to switch institutions.