UK bank customers will now enjoy increased protection for their funds in case of a financial institution’s collapse as new regulations take effect. Beginning December 1, individuals can expect up to £120,000 of their money to be reimbursed if a UK-approved bank, credit union, or building society faces insolvency. This new cap surpasses the previous limit of £85,000 enforced since 2017.
The augmented safeguard falls under the Financial Services Compensation Scheme (FSCS) and was officially endorsed today by the Prudential Regulation Authority (PRA). This compensation threshold applies per person per authorized entity and is typically reimbursed automatically within seven days of the company’s collapse.
In situations where an individual holds funds across various accounts within the same banking group sharing a license, the compensation limit pertains to the total balance across these accounts.
Moreover, the limit for temporarily high balances will also rise from £1 million to £1.4 million. This cap is relevant for significant transactions such as property transactions or insurance payouts.
The FSCS safeguards temporary high balances for six months from the date of deposit into an account. The FSCS is sustained by a fee imposed on financial entities sanctioned by the PRA or the Financial Conduct Authority (FCA).
Sam Woods, the Bank of England’s deputy governor for prudential regulation and the PRA’s chief executive, emphasized that the adjustment aims to bolster public trust in the security of their funds. Woods stated, “This modification ensures depositors are covered up to £120,000 in case of a bank, building society, or credit union failure, reinforcing public confidence and underpinning our financial system’s strength.”
Martyn Beauchamp, FSCS’s chief executive, welcomed the news and highlighted how the increase will instill confidence in consumers regarding the safety of their funds, from the smallest amount up to £120,000. Beauchamp stressed the crucial role of trust in financial services for stability and growth.
Rocio Concha, director of policy and advocacy at Which?, lauded the decision to raise the deposit protection limit, emphasizing its importance in fostering consumer confidence within the financial services industry.
Eric Leenders, managing director of personal finance at UK Finance, highlighted the necessity of updating the limit to align with inflation since its last adjustment in 2017. Leenders affirmed their commitment to assisting members in implementing these changes and ensuring customers are well-informed about FSCS deposit protection.