UK bank customers will benefit from increased protection for their money in the event of a financial provider’s collapse due to new regulations taking effect. Starting December 1, individuals will have up to £120,000 of their funds reimbursed if a UK-authorised bank, building society, or credit union faces insolvency, a significant raise from the previous £85,000 limit enforced since 2017.
The enhanced safeguard falls within the Financial Services Compensation Scheme (FSCS) and was officially ratified by the Prudential Regulation Authority (PRA). This compensation threshold is applicable per person, per authorised institution, and is typically disbursed automatically within seven days of the institution’s cessation.
For individuals holding funds across various accounts under the same banking group with a shared banking license, the compensation cap encompasses the total balance across these accounts. Furthermore, the limit for temporarily high balances will ascend from £1 million to £1.4 million, catering to substantial transactions like property transactions and insurance payouts.
The FSCS safeguards temporary high balances for six months from the credit date into an account, with funding derived from a levy on financial firms authorized by the PRA or the Financial Conduct Authority (FCA).
Sam Woods, the Bank of England’s Deputy Governor for Prudential Regulation and PRA’s Chief Executive, emphasized that this adjustment is pivotal in upholding public trust in the security of their finances, ensuring protection of up to £120,000 should a financial entity fail. Martyn Beauchamp, FSCS’s Chief Executive, echoed this sentiment, highlighting the rise in deposit protection as a means to instill confidence in consumers regarding the safety of their funds.
This move was lauded by Rocio Concha, Which? Director of Policy and Advocacy, Eric Leenders, UK Finance’s Managing Director of Personal Finance, and various industry stakeholders, who underscored the importance of consumer protection in fostering trust and stability in the financial sector. The industry is gearing up to implement these changes and provide comprehensive information to customers on FSCS deposit protection.