Just looking through West Bromwich building society's terms and conditions and read this clause 4c.

"The Society reserves the right at any time to limit the amount that may be withdrawn from the account, if the Society reasonably believes it necessary in order to protect the interests of its members as a whole. This term and condition 4c) is not applicable to Stakeholder ISAs."

Does this mean that if there was a run on the building society and they considered it would jeopardise 'members as a whole' to meet withdrawal requests in full that they could refuse to pay up or just pay out a proportion?

I've seen a similar clause in another bank's T&Cs where they reserve the right not to honour a withdrawal request for up to 60 days.

Is this legal?

If it's not legal, it would take a couple of months for legal action to take its course. If someone owes you money and they don't have it, you have to wait.

As long as you stick to investing with banks and building societies who have had sensible lending policies, there's little to worry about.

How would one find out if a bank/bs has had sensible lending policies? Is there something specific to look for in their published accounts (also assuming groups publish individual companies separately)? Is it as simple as finding a savings to lending ratio?

I suppose even a responsible past lending policy might not be a cast iron guarantee in the current economic climate. If an event outside of the bank/bs in question's control forces people to withdraw funds en masse, would even a 'solid' organisation be able to cover all requests - and stay in business?

I find it interesting that not all banks/bs have such clauses in their terms & conditions and wonder why some do and some don't.

There are surely things to look for in published accounts and in credit ratings but I personally would stay away from anyone who had been lending 125% mortgages or who marketed loans at poorer people. For example, Halifax got involved with a government scheme to encourage saving for people on low incomes and then they used the addresses to send out mailings for loans - things like that put me off trusting them with my money.

The thing is, maxstream, that it can become a full time job watching out for what the banks are/have been up to - and I'm sure they all have some/lots of skeletons jangling in their Head Office cupboards. If you're purist about it, you could end up investing in the Bank of Under My Bed.

You wouldn't think that the likes of dear old Westbrom and Scarborough (which has an even more upfront clause about limiting withdrawals in the event of a run on its reserves) would have been involved in any subprime-type scandals - more likely they're just protecting themselves from broader, external economic incidents - which is one of the many sad indictments of the situation we're in. I'd like to invest with one or both of them - but I like access to all of my money whenever I want it more.

Anyway, latest news that Germany is protecting depositors 100% and the hint that the UK may follow alters the landscape again. If UK guarantees 100%, we don't (in theory) have to spread investment risk across multiple accounts and so we could pick one we like and stick with it.

The T & C may be different but I reckon all banks and building societies have procedures to stop people turning up and asking for big wads of cash. The building society that I use has a system that, if you want more than a few hundred in cash, you have to phone up the day before. Personally though, I'm not worried as they have always had good lending policies. It's the ones where they gave out 125% mortgages and where they try to lend to people with financial problems (perhaps through a subsidiary) that you should be thinking about the compensation schemes for.

Sadly, I find this thread a tad academic today. I selected Icesave on the basis of their not having one of these 'we can hold onto yer dosh if we want to' clauses - and it doesn't seem to have made much difference. It appears that when the chips are down, the only term and condition that is valid is the one that allows you to join the queue for the FCSC or equivalent in the country of origin. Hey ho. At least I don't have to ponder the Westbrom dilemma any more. And Buddha did say that the only person who is truly free is the person who has nothing.

Indeed. As mentioned above, whatever is legal or not, if someone owes you money and they don't have it, you must wait. In the case of Icesave unless someone steps in to save them, you are likely to get anything up to £50k in the next months (I reckon that they just fell into the new limit but I may be wrong). Anything over that, you are likely to get most of that back but, looking at what happened with BCCI, it will take years. I believe that BCCI investors have, to date, got around 80% of what they were owed - they went into liquidation in 1991.