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Extension of deposit rules proposed

Extension of deposit rules proposed

Category: Savings

Updated: 04/06/2009
First Published: 04/06/2009

MONEYFACTS ARCHIVE
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The Financial Services Authority (FSA) has proposed that interim rules which allow separate compensation cover for customers with deposits in two merging building societies be extended until December 2010.

An extension for consumers of a society which merges with a subsidiary of another mutual society has also been proposed, as have rules for customers whose deposits are transferred from a failed firm to another deposit taker where they already have an account.

The current rules are set to expire at the end of September. These were bought in to address concerns that customers with savings in two merging societies, or those where deposits were transferred, could potentially have a combined investment that breached the £50,000 maximum deposit limit of the Financial Services Compensation Scheme.

Jon Pain, the FSA's retail markets managing director, said: "We now propose to extend the operation of these rules until December 2010, by which time it should be clear what changes will be made to the EU Deposit Guarantee Schemes Directive.

"We will then be able to put in place permanent arrangements which will take into account any new EU requirements."

The Building Societies Association's head of savings policy, Brian Morris, was quick to praise the move.

"Today's announcement is a welcome, sensible move and means members of societies that have merged, or whose deposits have been transferred to another society, will continue to enjoy the same levels of protection as if the merger or transfer had not occurred," he said.

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