Bank of England to hike FSCS protection from £85,000 to £110,000
UK depositors will receive greater protection from the Bank of England as the amount of money covered by a nationwide deposit guarantee scheme is set to rise to £110,000.
The scheme provides financial protection to depositors in case banks, building societies, and credit unions become insolvent.
It is funded by a levy paid by regulated companies to the Financial Services Compensation Scheme (FSCS).
The proposal increases the cap from £85,000, which has been in place since 2017.
The increase to the limit suggests lenders will increase their contribution to the UK deposit guarantee scheme offered by the Prudential Regulation Authority (PRA), the financial services regulator, which sits under the Bank.
Sam Woods, the PRA’s chief executive, said the changes would boost confidence in financial systems.
“We want to support confidence in our banks, building societies and credit unions by raising the amount that people can keep in their account which is covered by the deposit guarantee scheme to £110,000 per person, so all that money is safe even if the firm fails,” he said.
FSCS boss Martyn Beauchamp said protection offered by the scheme increases was a “critical component of stability and growth”.
“It’s important that FSCS’s limit is reviewed to ensure it stays appropriate and relevant.”
The FSCS has paid depositors compensation worth £10.1m in the past three financial years.
The 2008 financial crash largely accounted for its total of £20bn in payouts since 2001.
The revisions to deposit protection policies follow the collapse of Silicon Valley Bank in the US two years ago, which left depositors worrying about their financial security.
The Bank also confirmed it would introduce rules that allow the FSCS to intervene when smaller lenders fail.