UK bank customers are set to benefit from increased protection of their money in case of a financial institution failure as new regulations take effect. Starting December 1, individuals will be eligible for reimbursement of up to £120,000 if a UK-authorized bank, building society, or credit union collapses, up from the previous limit of £85,000 established in 2017.
This enhanced protection falls under the Financial Services Compensation Scheme (FSCS) and was officially raised by the Prudential Regulation Authority (PRA). The compensation cap applies per person, per authorized firm, and is typically automatically processed within seven days of the firm’s insolvency.
In cases where an individual holds funds in multiple accounts within the same banking group sharing a license, the compensation limit extends to the total sum across all accounts. Additionally, the limit for temporarily high balances will also see an increase from £1 million to £1.4 million, catering to significant transactions like property transactions and insurance payouts.
Temporary high balances placed in accounts are safeguarded by the FSCS for six months from the date of deposit. The funding for the FSCS is derived from a levy imposed on financial firms authorized by the PRA or the Financial Conduct Authority (FCA).
Sam Woods, the deputy governor for prudential regulation at the Bank of England and chief executive of the PRA, emphasized that this adjustment aims to bolster public trust in the security of their funds. Martyn Beauchamp, CEO of the FSCS, echoed this sentiment, assuring consumers that their money, from the first penny up to £120,000, is secure with the increased protection.
Various industry figures, including Rocio Concha from Which?, Eric Leenders from UK Finance, and others, have lauded the decision to raise the deposit protection limit, highlighting its significance in boosting consumer confidence and ensuring financial stability. Plans are underway to support members in implementing these changes effectively and providing customers with essential information regarding FSCS deposit protection.
