It seems that people with savings accounts are still unaware of the compensation they are entitled to if their bank or building society fails.
The FSA (Financial Services Authority) want to address the problem and under new regulations due to be introduced on 31st August are requiring all banks and building societies to put up notices in their branches and also on their websites explaining to savers how their money is protected.
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Financial Services Compensation Scheme limits
The Financial Services Compensation Scheme (FSCS) provides cover of up to £85,000 per individual per institutional banking licence; for joint savings accounts the figure is doubled.
However, some savers are still confused because of the complex system of shared banking licences. For example Halifax, Bank of Scotland and BM Savings are all part of the same group and trade under one banking licence, meaning that savings of up to £85,000 across all three brands are covered, not individually.
In contrast Natwest and Royal Bank of Scotland, for example, operate under separate banking licences despite being part of the same group; Santander and Cater Allen are another example.
Further confusion is caused by a number of banks who are regulated by the FSA but are not part of the UK’s compensation scheme.
Anglo Irish Bank, Tridos, ING Direct, and Bank of Cyprus are all examples of banks who are regulated in the UK but who are members of compensation schemes in their own country. This would mean that in the event of failure savers would have to apply to overseas compensation schemes, which may be inferior, due to the exchange rate, than the UK based FSCS.
New notices
The new notices will have to tell savers whether the brand operates under a shared banking licence and additional details about how their savings are protected.
Andrew Bailey, the FSA’s Director of UK Banks & Building Societies, said: “Customers need to feel confident about their money and to do this they need to know what the compensation limits are and which scheme would provide cover in the event of a bank, building society or credit union failure.”
Bailey continued: “Too many people assume that because their branch is located on a local high street in the UK, they are covered by the FSCS. This is not true for
UK branches of EEA [European Economic Area ] banks where the home country’s deposit guarantee scheme applies.”
