UK bank customers will benefit from increased protection for their money in case a financial institution collapses, thanks to new regulations taking effect. Beginning December 1, individuals can receive up to £120,000 of their funds if a UK-authorised bank, building society, or credit union fails, a significant increase from the previous limit of £85,000 that has been in place since 2017.
This higher compensation cap falls under the Financial Services Compensation Scheme (FSCS) and was officially raised by the Prudential Regulation Authority (PRA). The limit is applicable per person, per authorised firm, and is typically reimbursed automatically within seven days of the institution’s insolvency.
For those who hold accounts with multiple banks within the same banking group sharing a license, the compensation cap pertains to the total amount across all accounts.
Moreover, the limit for temporarily high balances will also be raised from £1 million to £1.4 million, protecting significant sums involved in events like property transactions or insurance payouts for a period of six months.
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, ensuring protection up to £120,000 in case of a financial institution’s failure, thus reinforcing confidence in the financial system.
Martyn Beauchamp, the chief executive of FSCS, welcomed the increase in deposit protection, assuring consumers that their money is secure under the revised limit.
The move was also praised by Rocio Concha, director of policy and advocacy at Which?, who viewed it as a strategic step to enhance consumer confidence in the financial sector without hindering economic growth efforts.
Eric Leenders, managing director of personal finance at UK Finance, highlighted the importance of the FSCS in safeguarding depositors’ funds and noted the necessity of adjusting the protection limit to account for inflation since its last revision in 2017. Industry efforts will be directed towards supporting members in implementing these changes and ensuring customers are well-informed about FSCS deposit protection.