A user has asked: If I want to hold a large Euro sum before transferring to GBP what is the best way to manage this? A Euro bank account in an established bank? If so any thoughts on best bank?
Answer: The main thing to consider here is what’s “called counter-party risk”. That being is the bank or broker where you hold your money going to go bust whilst it’s there?
It’s important to note that funds held with currency brokers for large transactions are not protected under the FSCS which currently protects funds up to £85,000 if an authorised funds fail. Currency brokers should hold client funds in ringfenced accounts separate from their own working capital at established banks. However, it is still something you should be aware of and you should make sure your funds are in and out as quickly as possible.
The FSCS also says that FSCS covers deposits made in different currencies; however, all claims will be paid out in UK Pounds. So if your bank does fail you will get GBP not Euros.
The FSCS does however provide cover for Temport high balances up to £1m for up to 12 months from the deposit. You can read more about this on the FSCS website here.
When is the best time to convert a large amount of Euros to Pounds?
It is also worth noting that currency exchange rates move, so getting the best rate is not the only concern. You should also look at Pound to Euro forecasts.
Holding a large amount of Euros in a challenger bank versus an established High Street Bank
There are pros and cons of using an established bank versus a challenger bank for holding Euros.
Established banks like Barclays are easy to keep an eye on their financial well being by their share price information and as public companies have to report their results more often. Their current market cap is nearly £19billion. However, whilst they may appear safer, there can always be unforeseen issues that can cause instability. Plus, you may have difficulty opening a Euro account, as the high street banks don’t offer these as much as they used.
The advantage of a challenger bank like Starling Bank is that they offer GBP and Euro accounts as well as very competitive exchange rates for converting currency. Starling is authorised and regulated by the FCS and funds are covered under the FSCS. However, as a new bank, they can be perceived as more of a risk to hold a large amount of money with.
How long does it take to convert a large amount of Euros
One final note is that if you are moving a large number of Euros into a new bank account (or even your existing one) it may take some time. There are very strict rules that banks have to ahead to detect money laundering so you may have to prove the source of funds. In order to avoid delays with any incoming or outgoing transfer make sure you contact whatever bank you decide beforehand and explain the situation. And make sure you have supporting documentation to satisfy their compliance departments.
Richard is the founder of the Good Money Guide (formerly Good Broker Guide), one of the original investment comparison sites established in 2015. With a career spanning two decades as a broker, he brings extensive expertise and knowledge to the financial landscape.
Having worked as a broker at Investors Intelligence and a multi-asset derivatives broker at MF Global (Man Financial), Richard has acquired substantial experience in the industry. His career began as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson), following internships on the NYMEX oil trading floor in New York and London IPE in 2001 and 2000.
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