A bank strength rating will tell savers how best to allocate their savings to be secure in the current crisis. How exactly does a man in the street rate a banks safety? Let’s face it, the treasury, the Bank of England, the ratings agencies and the financial services authority can’t do it properly. How does the ordinary man in the street protect his hard earned savings?

Unless you are a financial wizard, you have to look at things a lot more simply that a ratings agency does. The factors that I look at are the geographical dispersion of the business. How much of the banks business comes from the UK and how much is abroad? How strong is the bank’s balance sheet? How high is the banks gearing ratio? This gives a good idea of how much further the deleveraging process will hurt the bank’s balance sheet. Last but not least, how exposed is the bank to the twin evils of subprime debt…which isn’t finished playing out yet, and how much exposure does the bank have to credit default swaps?

Once you get all these factors lined up, you are in a good position to make a decision about how strong the bank is.

However, this all basically mute since the government guarantees protect most savers from the banks going down, but if you have an issue that can’t be solved by spreading your money over several banks, I think HSBC is a great choice. They have  a large portion of their income from emerging markets and although their share price is getting pummelled right now by the down draft in those markets, their business is sound and their risk is a lot less than other banks. If I had to take a risk on only one UK bank….HSBC would be the one with the best bank strength rating.

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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