Lots of Americans have deposits at British banks. In fact, I recently cited Barclays as a bank that consistently offers above-average rates on its savings and CDs.
But a decision to entrust your savings with a British bank may seem a little less sound as the fallout from the U.K.'s Brexit vote to leave the European Union continues to hammer British banks. While most stocks are looking pretty ugly lately, British banks have been hit astoundingly hard, with trading in shares of both Barclays and The Royal Bank of Scotland being temporarily halted on Monday because their prices fell too far, too fast.
Why that's happening mostly comes down to what we don't know, says George Kaufman, the John Smith professor of banking and finance at Loyola University in Chicago.
"There's a great deal of uncertainty, and uncertainty is never viewed as something good in banking," says Kaufman.
Ross Levine, Willis H. Booth chair in banking and finance at the University of California Berkeley's Haas School of Business, agrees.
"We just don't know what is going to happen," Levine says. "This is going to all be sorted out by negotiations and all of the minute details of what the economic arrangements will be between Europe and Britain. It's potentially huge, and it's potentially nothing, and there's a lot of distance in between, and hence that volatility means that prices fall in order to compensate people for the risk of what's going to occur."
Don't worry -- yet
So should American account holders be worried about having their money in a U.K.-owned bank? Probably not.
"I don't think there's anything for Americans with deposits in subsidiaries of British banks in the U.S." to worry about, Levine says. "Those are all regulated and separately capitalized by the U.S."
Then there's FDIC insurance. As long as the deposits you have are held at a U.S.-based branch that's FDIC-insured, your deposits would be covered up to $250,000 for individual accounts or $500,000 for joint accounts.
But FDIC insurance is highly unlikely to come into play at this point, Levine says. He expects British banks to recover as the details of Europe and the U.K.'s new economic relationship are ironed out.
Still, if Brexit is a forerunner of economic protectionism to come, especially in the U.S., there could be bigger trouble down the road for everyone, banks included, Levine says.
"Is this a reflection of the U.S. as well, in terms of how the presidential elections are going to go in the U.S., closing off to international trade?" Levine asks. "If that happened, and then there's a response by China, then you're talking about gigantic effects."