UK bank customers will benefit from increased protection for their money in case of financial provider insolvency, as new regulations take effect. Starting December 1, individuals can expect up to £120,000 of their funds to be reimbursed if a UK-authorized bank, building society, or credit union faces collapse. This adjustment raises the previous compensation limit of £85,000 in place since 2017, as confirmed by the Prudential Regulation Authority (PRA) under the Financial Services Compensation Scheme (FSCS).
Notably, the compensation coverage is per person per authorized firm, with automatic payments typically processed within seven days of the institution going bankrupt. For individuals holding accounts across multiple banks within the same banking group sharing a license, the compensation limit applies to the combined total balance across all accounts.
Moreover, the cap on temporarily high balances will also see an increase from £1 million to £1.4 million, catering to significant financial events like property transactions and insurance payouts. The FSCS safeguards these high balances for six months from the credit date, with funding derived from levies on PRA or Financial Conduct Authority (FCA) authorized financial firms.
In response to the regulatory change, Sam Woods, the deputy governor for prudential regulation at the Bank of England and CEO of the PRA, emphasized the importance of bolstering public confidence in the safety of deposits. Martyn Beauchamp, CEO of the FSCS, echoed this sentiment, highlighting the assurance brought by the enhanced protection, solidifying trust in the financial system.
Various industry representatives, including Rocio Concha from Which?, and Eric Leenders of UK Finance, have lauded the decision to raise deposit protection limits, emphasizing the significance of consumer confidence in financial services. The move reflects a balance between economic growth initiatives and robust consumer safeguards, ensuring customers are well-informed and secure in their financial dealings.