Banks, building societies and credit unions in the UK could soon have to display signs telling savers how much compensation they could claim in the event of an institution failing and where from.
Under new proposals put forward by the Financial Services Authority (FSA), every branch and website of FSA-authorised banks and building societies based in the UK will have to carry a sign stating: "Your deposits are protected up to £85,000 by the Financial Services Compensation Scheme, the UK deposit protection scheme. Any deposits you hold above this amount are not covered."
European banks with branches in the UK will have to state that deposits held with them 'are not protected by the UK Financial Services Compensation Scheme', and will have to confirm which other national scheme is providing the protection.
The proposed changes are designed significantly to reinforce existing deposit protection measures and will ensure that every customer can clearly see how much of their money is protected, how much is not and whether they are covered by the UK compensation scheme.
Recent research conducted by the FSCS to measure consumer awareness of the scheme, found customer knowledge continues to be extremely poor, and has actually dipped since the financial crisis.
"It is vitally important that customers have confidence in the banking system and that is why we are taking this step of making it obligatory for firms to prominently display compensation information," said Hector Sants, CEO of the FSA.
"Consumers must understand how their money is protected and be clear about the limits – any money over £85,000 in a deposit account is not protected by the scheme and is at risk.
"Customers should also know which compensation scheme they are relying on, which country it is based in and understand how it would work – for example how long it would take to get your money back.
"The posters and website notices we are going to be mandating will help to prompt consumers to get more information and to make informed decisions about how much money to deposit with one bank."
The proposals are the latest attempt to improve deposit protection arrangements for consumers.
A year ago, the amount of money protected by the scheme was raised from £50,000 per person per institution to £85,000, bringing it in line with the rules in force across the European Economic Area.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
Moneyfacts.co.uk will, like most other websites, place cookies onto your computer’s
hard drive. This includes tracking cookies.