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Plan calls for FSCS deposit class

The Financial Services Compensation Scheme could introduce a new deposit class carrying a 100 per cent unlimited Government guarantee under proposals from the Which? Future of Banking Commission

The commission, which published a number of recommendations for reform of the banking industry this week, says investors in the new class should only be invested in “safe” assets such as government bonds.

The proposal, put forward to the Commission by Bank of England governor Mervyn King, would allow retail investors with a large lump sum in transition to place their deposits into safe haven accounts.

The Commission is also calling for the £50,000 upper limit for retail deposits to apply to each brand in a group rather than to each licensed institution.

Other recommendations inc-lude clear signs on all bank tills, websites and promotional material telling depositors how much of their deposit is protected by the FSCS and reformed bankruptcy procedures so that depositors are put ahead of creditors.

CBK Colchester principal Peter Chadborn says: “The new deposit class makes perfect sense but there must be clear rules about what banks can define as safe assets.

“We do need to know who will fund this new class and whether it will be completely funded by the banking sector or if other sectors like IFAs will be expec-ted to contribute.”

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