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Triple alliance to raise EU up to UK compensation

The FSA, the Treasury and the Bank of England are forming an alliance to press for the European Union to raise compensation to UK standards.

In a joint submission to an EC consultation on compensation in financial services, the three bodies say inconsistencies in consumer protection across Europe, with customers getting less protection than in the UK, need to be addressed.

They want greater co-ordination across the insurance, investor and banking sch- emes to ensure consistent application of EU compensation standards.

Commentators believe that the varying degree of protection for consumers across the EU states threatens the viability of a single market and cross-border trade, creating opportun- ities for regulatory arbitrage.

It is understood that the FSA is concerned that UK clients who buy financial products from other countries will have less protect- ion than if they buy prod- ucts in the UK.

But FSA spokesman Robin Gordon-Walker says: “We are not in the business of saying there should be a single maximum limit that everybody has to meet.”

Cardif Pinnacle deputy head of risk Keith Martin says: “Price is probably going to be the main consideration for UK consumers thinking of buying a policy in another country. Perhaps if they knew that the local compensation scheme was not as good as ours, they would think again.

“UK intermediaries and insurers are at a financial disadvantage, when compared with EU states with no such protection.”

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