Government acts to support depositors during change to a new Financial Services Compensation Scheme coverage level
3 Jul 2015 11:52 AM
Legislation introduced to ensure retail customers and small businesses continue to receive current level of deposit protection.
The government has introduced legislation today which will ensure that retail customers and small businesses will continue to receive deposit protection of up to £85,000 until 31 December 2015, after which a new deposit protection limit of £75,000 will come into effect.
The Prudential Regulation Authority (PRA) today announced changes to its rules to implement the new level of deposit protection, which is provided by the Financial Services Compensation Scheme (FSCS).
The change is being made in line with the Deposit Guarantee Schemes Directive, which sets the FSCS coverage level at the sterling equivalent of €100,000.
The FSCS deposit protection limit was set at £85,000 in 2010, which at the time was equivalent to €100,000. Due to the increased strength of the UK economy, the value of the pound sterling has increased, and it is necessary to reduce the limit.
Before the change comes into effect, firms will write to their customers to inform them about the changes to the deposit protection limit. Over 95% of retail depositors will continue to be fully protected by the FSCS’s new deposit protection limit of £75,000 following 31 December 2015.
The PRA is required to review the deposit protection limit every 5 years, and will manage any future changes in a way that seeks to minimise disruption for depositors.
The FSCS deposit protection limit currently covers any losses retail customers and small businesses suffer as a result of their bank, building society, or credit union failing, up to a maximum of £85,000, per depositor, per authorised firm.