The Financial Services Authority (FSA) is making it obligatory for all banks, building societies and credit unions in the UK to prominently display, in every branch and on every website, how much compensation savers could claim in the event of an institution failing. This is part of a continuing effort by the FSA and the Financial Services Compensation Scheme (FSCS) to improve confidence around compensation by increasing awareness of deposit protection.
Proposals published in December 2011 require each FSA-authorised bank or building society based in the UK to state that: ‘Your deposits are protected up to £85,000 by the Financial Services Compensation Scheme, the UK deposit protection scheme. Any deposits you hold above this amount are not covered.’
Banks with branches in the UK, but headquartered and authorised in the European Economic Area (EEA), will have to state that deposits held with them ‘are not protected by the UK Financial Services Compensation Scheme.’ They will also have to state which other national scheme is providing the protection so that customers again know which compensation scheme they are relying on, which country it is based in and how it would work – for example how long it would take them to get their money back.
The proposed changes are designed to reinforce existing deposit protection measures and to ensure that every customer can clearly see how much of their money is protected, how much is not and whether they are covered by the UK compensation scheme. Recent research conducted by the FSCS to measure consumer awareness of the scheme, found customer knowledge continues to be extremely poor, and has in fact dipped since the crisis.
These proposals are the latest step in improving the deposit protection arrangements for consumers. A year ago all national compensation schemes across the entire European Economic Area were harmonised to offer cover at €100,000, or the local currency equivalent, and ensure eligible consumers are paid within 20 working days. At the start of 2011, the UK introduced faster payout rules, with a target of a seven day payout for the majority of claimants and the remainder within 20 working days.
If you want to find out more contact Matthew Walne who will be happy to help.