Bank ratings are important to us all. I would much rather accept a lower interest rate that put my savings into a bank that I wasn’t happy was secure. Remember BCCI? They paid a market leading interest rates and we all remember what happened there.

A key corner stone of your personal finance is your personal savings so you need to make sure this is secure. The issue we have with bank ratings is that they are often completely wrong. Just look at the mess that Moody’s and Standards and Poor’s have made of the ratings of some of the leading US financial institutions. The downside is that most consumers have very little else to go on.

It’s important to remember that despite this, not a single saver in a UK bank has lost any money due to a bank failure (no…The tax payers foot the bill for that!). There are some strong protections in place including the Financial Services compensation scheme which covers up to £50,000 per person. However…. (You knew there would be a but), these schemes are totally untested and so if a bank did fail, the tax payers would be on the hook for the savers….so in a situation where you are both a tax payer and a saver, does this provide any comfort? Well, a little since the cost will be spread out over all tax payers over time.

In fact, there is an argument to go after the absolutely top rate and forget about the security of the bank now that this protection is in place, since you are covered by an explicit guarantee. For now, we can look at the top tier of the British banking system, according to Standard and Poor’s. Barclays, HSBC and Lloyds TSB all score “AA” ratings, but with both Barclays and Lloyds TSB currently under review, HSBC is the winner as at October 2008 in the race for strong bank ratings.

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For More information on specific Banks use these links

• Alliance & Leicester
• Barclays
• Capital One
• Child Trust Fund
• First Direct
• HSBC
• Post Office
• Tesco Savings