UK bank customers will now have increased protection for their money if a financial institution fails, thanks to new regulations taking effect. Starting December 1, individuals can expect up to £120,000 of their funds to be reimbursed in the event of a UK-authorised bank, building society, or credit union collapse. This new cap is a significant rise from the previous limit of £85,000, which had been in place since 2017.
The enhanced protection is under the Financial Services Compensation Scheme (FSCS), and the higher limit was officially announced by the Prudential Regulation Authority (PRA). The compensation ceiling is applicable per person, per authorised firm, and is typically automatically processed within seven days post the firm’s insolvency.
In cases where an individual holds accounts with multiple banks within the same banking group sharing a license, the compensation cap applies to the total sum across all these accounts. Additionally, the limit for temporarily high balances will be raised from £1 million to £1.4 million, addressing scenarios like property transactions and insurance payouts.
Temporary high balances are safeguarded by the FSCS for six months from the date of crediting the amount into an account. The FSCS is funded through a levy on financial firms authorized by the PRA or the Financial Conduct Authority (FCA).
Sam Woods, the Bank of England’s Deputy Governor for Prudential Regulation and PRA’s Chief Executive, emphasized that this adjustment aims to uphold public confidence in the security of their finances, ensuring depositors are protected up to £120,000 in case of insolvency.
Martyn Beauchamp, FSCS’s Chief Executive, welcomed the increase in the deposit protection limit, highlighting that consumers can now feel assured that their funds are secure up to £120,000. This move is crucial for fostering trust in financial services and supporting confidence in the UK’s financial system.
Various industry figures, including Rocio Concha from Which?, Eric Leenders from UK Finance, and others, have all lauded the decision to boost consumer confidence through the higher deposit protection limit. They emphasized the importance of strong consumer protections in maintaining stability and growth in the financial industry.
