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FSA introduces new rules on deposit compensation arrangements

The FSA has introduced new rules which will require all banks, building societies and credit unions to clearly indicate which deposit guarantee scheme will apply to their customers’ deposit.

The rules, which take effect from August 31, will force all banks to prominently display posters and stickers in their branches and on websites to indicate which scheme applies to each customer.

The new regulations will mean customers using the UK branch of a foreign bank from the European economic area will have to be made aware that they will not be covered by the Financial Services Compensation Scheme and these banks will need to specify which national scheme provides protection.

FSA director of UK banks and building societies Andrew Bailey says: “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.

“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 banks where the home country’s deposit guarantee scheme applies.

“Banks, building societies and credit unions will have to display these compensation stickers or posters in the branch window along with a sticker at the cashier’s window or desk and a further poster in a prominent position inside.” 

The FSCS is also calling for financial firms to do more to give consumers clear information about the protection it provides.

FSCS chief executive Mark Neale says: “”The banking crisis shows how important it is for consumers to have clear information about FSCS protection. We never again want to witness the run on a bank because people do not know their money is protected. Since then, the industry has improved the quality of information it gives to consumers about FSCS. However, it needs to do much more to provide clear, accurate information about the protection we provide. This is essential to building consumer confidence, and is not limited to deposits. It is something that is normal in other parts of the world.

“We have been working with major firms in a bid to get them to go the extra mile in building awareness of the Scheme. We are grateful for their support and hope they will lead the way. We encourage all banks, building societies and credit unions to have a sticker on display, posters and information in branch and on their web sites. Go the extra mile. Tell consumers about FSCS. It is good for consumer confidence. And that is good for the industry too.”

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. FSCS front line staff clueless during the 08 meltdown – repeatedly informing customers of well known UK based insurance companies that their endowment and bond policies were not covered, along with other errors. I hope they have given their own staff clear information since then.

  2. They should also have to make it clear if they are part of a group which might reduce the amount of cover available.

    i.e.. Where an institution trades under more than one name what level of compensation is available.

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