How do I evaluate risk exposure to my U.K. bank in light of the possible collapse of the Euro or Eurozone economies?
You could evaluate the risk exposure of your UK bank reading this post and this other old one. They basically say that UK bank exposure to Greece is less than 6 billions pounds (BOE data), so there is no reason to be worried now. The main issue of this crisis is not the Greek exit from the Euro on its own (it seems to be considered almost a fact by CITI, and by MS at 35% probability, Profumo ex CEO of UNICREDIT, says the possibility are more than 50%) – the main issue is that other countries like Italy and Spain might follow the same fate. If they do, the exposure of many foreign banks (including the UK ones) to their debts is not negligible (191,80 billions pounds for UK banks) moreover other EU banks (even the German ones) exposed to Italy and to Spain will suffer too, and this suffering will be translated into more suffering for UK banks exposed also to Germany and to France. That's why you read Euro doom articles like this one from Paul Krugman (who won a Nobel Memorial Prize in Economics.)
"On contrary of what Mike Scott suggested, I think in case of EURO DOOM it's a lot safer if your savings were changed into another currency in advance. Beware that bringing your money into an EURO CORE country (like Finland, Austria, Germany, Nethereland) it's useful if you think those banks are safer, but totally useless to avoid the conversion of your saving from Euro into your national currency. In case of EURO CRASH, only the Central Bank will decide what happens to ALL the Euro deposited wherever, single banks, even if they are Deutsche Bank or BNP or ING, can not decide what to do on their own. ECB (European Central Bank) might decide to convert EURO into local currencies based on the account's owner nationality. Therefor if you are Greek and you moved your saving in a German bank, the ECB might decide that your Euro are converted into New Dracma even if they sit in a German bank account. The funniest thing is that if you ask to a Finland bank: ""In case of Euro crash, would you convert my Euro into New Dracma?"", they sure would answer ""No, we can't!"", which is true, they can not because it's only the ECB (Europe Central Bank) the one that decides how an ordered Euro crash has to be manged, and the ECB might decide as I explained you above. Other Central Banks (Swiss, FED, etc.) would only follow the decisions of the ECB. Moreover in case of EURO DOOM, it's highly probable that the Euro currency looses a tremendous value compared to other currencies, the loss would be huge in case the Euro Crash happens in a disordered way (i.e. a strong country like Germany and their banks decides to get out and they start printing their own money w/o listening to the ECB anymore). So even if your saving are in Euro in Germany they would loose so much value (compared to other currencies) that you will regreat forever not to have converted them into another currency when you had the time to do it. Couple of advises: 1) If you want to change you savings into another currency you don't need to bring them into another bank/country (like US), you could simply buy US Shares/Bonds at your local bank. Shares/Bonds of a US company/US gov will always be worth their value in dollars no matter in what new pathetic currency your account will be converted. 2) But is there a drawback in converting my saving into another currency (i.e. buying dollars in the form of US treasury bonds)? Unfortunately yes, the drawback is that in case this Euro drama comes finally to an happy ending and Germans decide to open their wallets for the nth time to save the currency, the Euro might suddenly increase its value compared to other currencies, therefor if you changed your saving into another currency you might loose money (i.e. US dollars looses value against the Euro)." Given that we live in a world rife with geopolitical risks such as Brexit and potential EU breakup, would you say it's advisable to keep some of cash savings in a foreign currency? Probably not.  Primarily because you don't know what will happen in the fallout of these sorts of political shifts.  You don't know what will happen to banking treaties between the various countries involved. If you can manage to place funds on deposit in a foreign bank/country in a currency other than your home currency and maintain the deposit insurance in that country and not spend too much exchanging your currency then there probably isn't a downside other than liquidity loss. If you're thinking I'll just wire some whatever currency to some bank in some foreign country in which you have no residency or citizenship consideration without considering deposit insurance just so you might protect some of your money from a possible future event I think you should stay away. How can I calculate my currency risk exposure?  You own securities that are priced in dollars, so your currency risk is the amount (all else being equal) that your portfolio drops if the dollar depreciates relative to the Euro between now and the time that you plan to cash out your investments. Not all stocks, though, have a high correlation relative to the dollar.  Many US companies (e.g. Apple) do a lot of business in foreign countries and do not necessarily move in line with the Dollar.  Calculate the correlation (using Excel or other statistical programs) between the returns of your portfolio and the change in FX rate between the Dollar and Euro to see how well your portfolio correlated with that FX rate.  That would tell you how much risk you need to mitigate. how can I hedge against it?  There are various Currency ETFs that will track the USD/EUR exchange rate, so one option could be to buy some of those to offset your currency risk calculated above.  Note that ETFs do have fees associated with them, although they should be fairly small (one I looked at had a 0.4% fee, which isn't terrible but isn't nothing). Also note that there are ETFs that employ currency risk mitigation internally - including one on the Nasdaq 100 .   Note that this is NOT a recommendation for this ETF - just letting you know about alternative products that MIGHT meet your needs. "No, this is not solid advice. It's a prediction with very little factual basis, since US interest rates are kept just as low and debt levels are just as high as in the Eurozone. The USD may rise or fall against the EUR, stay the same or move back and forth. Nobody can say with any certainty. However, it is not nearly as risky as ""normal forex speculation"", since that is usually very short term and highly leveraged. You're unlikely to lose more than 20-30% of your capital by just buying and holding USD. Of course, the potential gains are also limited." Not anytime soon, I suspect, but not necessarily for financial reasons. I found this interesting, including the link to the five tests, but I think that this topic is only partially judged through financial eyes, there's a lot of political issues around this with national identity/immigration issues already in the spot light as well as political aspirations. If there will be a call in the near future to join the Euro, how would that reflect on the financial industry in the UK from a PR perspective? and on the political leadership and how it managed the financial crisis?  I believe that it is in the interest of all the people in the high positions to show the country getting back on track rather than making ground shaking moves. But what do I know....:-) In the US, you would probably look at a certificate of deposit (CD).   I imagine there is a similar financial product in the UK, but don't know first hand.   I think it is wise to be risk averse in this situation, but be aware that your interest rate will be dismal for guaranteed returns. I work as an investment risk manager for what would popularly be called a top tier investment manager. Most large asset managers use vendor models like RiskMetrics, Algorithmics, Barclays Point, Barra or something similar, and use those to calculate endless varieties of analytics and risk metrics.   Some of these are granular risk models (single asset based and computing covariances between them) while others are factor models (e.g. mapping bonds to a yield curve and sector and country spread and computing the risk largely based on that mapping). Things like Value at Risk in any of its many flavors (simulated vs non simulated, mainly), ex-ante risk relative to a benchmark, stress tests, duration, beta, yield, spread, expected shortfall, what have you...   Counterparty/credit risk is a whole different world I could get into. What else do you want to know in detail? "This question is different because you are asking for actual advice vs. a more academic, ""what if"" scenario. The answer that I'll give will be different, and similar to another recent question on a similar vein. Basically, if you're living in a European country that's effectively in default and in need of a bailout, the range of things that can happen is difficult to predict... the fate of countries like Ireland and Greece, whatever the scenario, will be economic and social upheaval. But, this isn't the end of the world either... it's happened before and will happen again. As an individual, you need to start investing defensively in a manner appropriate for your level of wealth. Things to think about: I'd suggest reading ""A Free Nation Deep in Debt: The Financial Roots of Democracy""" "These have the potential to become ""end-of-the-world"" scenarios, so I'll keep this very clear. If you start to feel that any particular investment may suddenly become worthless then it is wise to liquidate that asset and transfer your wealth somewhere else. If your wealth happens to be invested in cash then transferring that wealth into something else is still valid.  Digging a hole in the ground isn't useful and running for the border probably won't be necessary. Consider countries that have suffered actual currency collapse and debt default.  Take Zimbabwe, for example.  Even as inflation went into the millions of percent, the Zimbabwe stock exchange soared as investors were prepared to spend ever-more of their devaluing currency to buy stable stocks in a small number of locally listed companies. Even if the Euro were to suffer a critical fall, European companies would probably be ok. If you didn't panic and dig caches in the back garden over the fall of dotcom, there is no need to panic over the decline of certain currencies.  Just diversify your risk and buy non-cash (or euro) assets. Update: A few ideas re diversification: The problem for Greece isn't really a euro problem; it is local. Local property, local companies ... these can be affected by default because no-one believes in the entirety of the Greek economy, not just the currency it happens to be using - so diversification really means buying things that are outside Greece." ''just how much of the troubled southern EU nations' debt is due to the rescuing of private banks?  thanks''  My answer rambled onto related topics.  In short, not much. While the actual sums involved in bank bailouts are considerable, relative to sovereign debts run up by having structural/trade deficits for ~10 years, they aren't the problem in Europe at the moment...but they ARE the tip of an Iceberg that could sink parts of the EU and leave the rest struggling to stay above water.   An interesting question to ponder, with deceptively simple answers, is:  If the % of sovereign debt resulting from bank bailouts is so small, why does the media and general public throw a fit every time a major EU bank gets into trouble?  People are worried about losing their savings that they have with that bank. Its a visceral fear that is easy to personally relate to.  But scratch below the surface and there is a whole buffet of terror for you to feast on.  Assuming leverage of ~26* on assets held by banks and that true liabilities aren't completely opaque to average Joe retail investor, the collapse of the right bank could fire the starting gun on a vicious recession, trigger bailouts of other institutions exposed to the original and all sorts of nasty events.  These bank assets include the mess created by rehypothecation, securitization of shitty credit/assets and CDS, commercial paper that relies on never having to be realized as a loss and interference in the money markets and currencys by states.  Its damn hard to work out what assets and liabilities a bank has these days, let alone what any debt they have taken on is worth.   Euro Crisis Best Crisis.   *Pulled from memory, I'm not sure if this is accurate for Europe. "The UK has Islamic banks. I don't know whether Germany has the same or not (with a quick search I can find articles stating intentions to establish one, but not the results). Even if there's none in Germany, I assume that with some difficulty you could use banks elsewhere in the EU and even non-Euro-denominated. I can't recommend a specific provider or product (never used them and probably wouldn't offer recommendations on this site anyway), but they advertise savings accounts. I've found one using a web search that offers an ""expected profit rate"" of 1.9% for a 12 month fix, which is roughly comparable with ""typical"" cash savings products in pounds sterling. Typical to me I mean, not to you ;-) Naturally you'd want to look into the risk as well. Their definition of Halal might not precisely match yours, but I'm sure you can satisfy yourself by looking into the details. I've noticed for example a statement that the bank doesn't invest your money in tobacco or alcohol, which you don't give as a requirement but I'm going to guess wouldn't object to!" I don't think that it's a good idea to have cash savings in different currencies, unless you know which will be the direction of the wind for that currency. You can suffer a lot of volatility and losses if you just convert your savings to another currency without knowing anything about which direction that pair will take. Today we can see Brexit, but this is a fact that has been discounted by the market, so the currencies are already adjusted to that fact, but we don't know what will happen in the future, maybe Trump will collapse the US economy, or some other economies in Asia will raise to gain more leadership. If you want to invest in an economy, I think that it's a best idea to invest on companies that are working in that country. This is a way of moving your money to other currencies, and at least you can see how is the company performing. Oh, you mean converting your money to that of a country whose public debt is [103% of GDP, instead of the 108% of your own?](http://en.wikipedia.org/wiki/List_of_countries_by_public_debt)  That seems hardly an advancement, even more so considering that the public debt of the Eurozone as a whole is 82.5% of GDP.  Greece is just 2% of the European economy, its default would not mean the collapse of the Euro. This would effectively be currency speculation, betting that the Pound will be stronger vs. the Euro in November (or whenever) than it is today.  This would be a profitable transaction if the exchange fees are less than the swing between the two. In my (very limited) experience, exchange fees are going to be at least a few percent, and she's going to have to do the exchange twice if she wants to turn current Euros into Pounds and back into Euros later; that's at least a 6% hit.   I'd recommend against this.  While it's quite plausible for the two currencies to move more than 6% against each other in that time, it's also quite possible for them to move the other way, causing her a large loss.   The unfortunate thing about large, heavily traded things like GBP/EUR is that you're very unlikely to have some information that the big traders don't.  While lots of people think that the pound is going to become stronger, just as many people think that the Euro is going to be stronger.  These two camps are constantly bidding against each other, resulting in the 1.15 Pounds/Euro exchange rate as of this writing.  The current price and current direction that the line is moving in no way tells you what it's going to do next. Not better companies, they pick the largest market cap companies which isn't guaranteed to be the best. If they were so much better than there would be a much bigger difference between the S&amp;P 500 and the vanguard total stock market fund:   http://quotes.morningstar.com/chart/fund/chart?t=VTSMX&amp;region=usa&amp;culture=en-US  But as you can see above there is barely any difference in the gains between S&amp;P and the total stock market fund