Banks to post notices about compensation schemes

Posted in Banking on Tuesday, May 29th, 2012 at 11:52 by Martyn Shaw.

Consumers who save money in British banks are protected against an institution’s insolvency through the FSCS or Financial Services Compensation Scheme.  In some cases, however, banking customers may not be aware of how much of their money is actually eligible for this protection.  Several different “banks” that appear to be separate to the consumer may actually be considered a single institution by the government; this can reduce the total amount that consumers receive as compensation in the event that the institution goes bankrupt.  In addition, money that is held in banks owned by foreign institutions may be eligible for different compensation schemes instead of the FSCS.

 

In order to clarify the situation for consumers, the Financial Services Authority has now instructed both banks and building societies to post notices in their branches to provide improved information about how the cash held in consumer accounts is protected.  Similar notices are to be posted on company websites, according to the City regulator.

 

The standard amount of compensation from FSCS is £85,000 per saver.  However, when money is held in a joint account, this limit is generally doubled.  These compensation limits do not affect amounts that customers are responsible to pay in the form of mortgages or a car loan in the event of a bank insolvency.

 

Money held in foreign banks is generally protected only up to €100,000, which works out to slightly less than the level of compensation for a single saver under FSCS provisions.  In addition, customers of foreign banks must claim compensation from the relevant nation rather than from the UK government.

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