My understanding is like Mark’s, that Banco Santander is one of the safest Spanish banks with considerable overseas earnings and comparatively little exposure to its domestic market. In respect of the first point it is like HSBC which although lost money on toxic investments is one of the best UK banks. However one can never say any institution is 100% safe even the UK government whose debt is AAA rated.
It seems to me the Financial Services Compensation Scheme (FSCS) that provides cover for £35,000 per depositer in the event of insolvency of a bank is largely irrelevant. It will only come into play if a retail bank is allowed to fail. The government fearing another Northern Rock with investors queuing around the block to withdraw cash is simply unwilling for this to happen, for the sake of its own reputation for prudent management of the economy as well as the potential domino effect. Logically it means all your savings are “safe” for now.