UK bank customers will benefit from increased protection for their money in case a financial institution collapses, thanks to new regulations taking effect. Starting December 1, individuals can expect up to £120,000 of their funds to be reimbursed if a UK-authorized bank, building society, or credit union faces insolvency, a significant increase from the previous £85,000 limit set in 2017.
This higher compensation cap falls under the Financial Services Compensation Scheme (FSCS) and has been officially raised by the Prudential Regulation Authority (PRA). The reimbursement limit applies per person per authorized firm and is typically processed automatically within seven days following the firm’s collapse.
In instances where an individual holds money across multiple accounts within the same banking group that share a banking license, the compensation limit applies to the total sum held across all accounts.
Furthermore, the limit for temporarily high balances will also see an increase from £1 million to £1.4 million. This particular limit pertains to significant events such as property transactions or insurance payouts and is safeguarded by the FSCS for a period of six months from the credit date into an account. The FSCS is sustained by a levy on financial firms sanctioned by the PRA or the Financial Conduct Authority (FCA).
Commenting on the regulatory change, Sam Woods, the deputy governor for prudential regulation at the Bank of England and the PRA’s chief executive, expressed the importance of maintaining public trust in the security of their funds. This adjustment ensures depositors are protected up to £120,000 in the event of a financial collapse, thus bolstering confidence in the financial system.
Martyn Beauchamp, the CEO of the FSCS, welcomed the decision to increase deposit protection limits, emphasizing that consumers can now feel assured that their funds are secure up to £120,000. This enhancement in protection aims to instill trust and confidence in the UK’s financial sector.
Rocio Concha, the director of policy and advocacy at Which?, described the hike in deposit protection as a prudent move to reinforce consumer faith in the financial services industry while not obstructing efforts to stimulate economic growth.
Eric Leenders, the managing director of personal finance at UK Finance, noted the importance of the FSCS in providing depositors with essential protection and highlighted the necessity of updating the limit to reflect inflation. He committed to supporting members in implementing these changes and ensuring customers are well-informed about FSCS deposit protection.