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Consumer Panel calls for 100% deposit protection

The Financial Services Consumer Panel has called for the Financial Services Compensation Scheme to offer a 100 per cent guarantee on all deposits.

In its annual report for 2008-09, published today, the FSCP says expecting consumers to understand the risks institutions are taking, when many in the financial community have not understood them, is unreasonable.

The FSCP says: “We have also pointed out that, although the new £50,000 compensation limit means that 98 per cent of depositors are protected, this still means that only around two-thirds of the total amount deposited is safeguarded. This situation could result in further runs.

“We believe it would make more sense to consumers for all to reap the benefits of a straightforward 100 per cent compensation scheme.”

The FSCP is also arguing that under the retail distribution review, advisers should have to achieve level five qualifications.

It states: “Any increase in minimum professional standards should be welcomed, but we have said there should be a clear timeframe commitment to the aspiration to raise the standards further to level five: in future, entry should be at graduate or equivalent level and the industry should accept that there is no professional group currently which requires less.”

The Consumer Panel says it remains unconvinced that money guidance will give the level of detail and insight required for retirement planning, particularly for decisions on personal accounts.

It says: “Our suggestions to the FSA have been that there should be more coordination with organisations such as PensionsForce and The Pensions Advisory Service, and that focused advice is an option within regulated advice, to cover some of the areas in which money guidance could not meet consumer needs.”

Chairman Adam Phillips says: “The financial crisis has created great challenges for the industry, the FSA and consumers. But in the end, it is consumers, both as paying customers and taxpayers, who are bearing the cost. It is essential to maintain the stability of the financial system, but the FSA also has a statutory objective of consumer protection.

“It must rise to the challenge of ensuring that the financial services industry really does treat its customers fairly.”


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  1. Is this common sense or completely senseless?
    If you have unlimited deposit protection, would that be only for private individuals or for businesses as well? I suspect as the former are voters and the later have no vote, it would be the former only. As a result, then surely NO business would hold ANY significant cash in the business name, it would pay out as much as it could in dividends to it’s directors, simply so they could hold the money on deposit with unlimited protection and then when or if the business needed a capital injection, they’d have to lend it back to the company!
    In the meantime if the business paid out more than their 40k (ish), it would have been taxed at 40% thus giving a big wadge to this government of incomptents who got us in this situation in the first place. Who do the FSCP work for the consumer or those who appoint them to the FSCS in the first place and who does I wonder?

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