James Moore: A crop of problems if AgriBank were to go pop

Outlook On to high-yield savings and AgriBank, which has generated a flurry of excitement by offering a bond that might allow your money at least to keep pace with inflation.

A notable feature of it is that there's no depositor protection if the business goes pop. The founder has made much of the low-risk nature of AgriBank's lending (it specialises in loans to help farmers buy equipment) and the low default rates this type of business generates. But we've all seen how apparently low-risk business models can go bad very quickly in the wrong environment. Remember Northern Rock?

We've also seen how quickly overseas entrants can bring banking products into Britain with flashy interest rates that attract all comers, only for the roof to fall in. Remember IceSave?

AgriBank gets around the need to pay into Britain's depositor protection scheme through being based in Malta. As such, there is very little the Financial Services Authority can do about it. It is "passported" into this country under the EU's single market rules – you know, the part of the European project that the Conservatives say they quite like.

You can see the problem here. When IceSave went belly-up, the Government ended up bailing out depositors because the Icelandic depositor protection scheme didn't come up to scratch. That is probably what would happen if AgriBank fell into difficulties. There would be an avalanche of horror stories featuring vulnerable and innocent people who had lost savings, pressure would mount, and eventually, however reluctantly, the Government would act.

It's commonplace to decry EU regulations. But when it comes to bank deposits, we could clearly do with a few more.

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