Deposit claims FAQs
1. I have my money in a joint account in a High Street bank. How would FSCS pay compensation if the bank failed?
The compensation limit of £50,000* applies to each depositor for the total of their deposits with an organisation, regardless of how many accounts they hold or whether they are a single or joint account holder. In the case of a joint account, FSCS will assume that the money in that account is split equally between account holders, unless evidence shows otherwise.
This means that each account holder in a joint account would be eligible for compensation up to the maximum limit.
*The FSA amended our rules to increase the limit to 100% of the first £50,000 with effect from 7 October 2008. For claims against credit unions declared in default between 1 October 2007 and 6 October 2008, the maximum level of compensation is £35,000 (100% of the first £35,000). For claims against credit unions declared in default before 1 October 2007, the maximum level of compensation is £31,700 (100% of the first £2,000 and 90% of the next £33,000).
2. What is the position for people who have multiple accounts with banks that are subsidiaries of another bank?
For people who hold multiple accounts in banks that are part of a larger group, if each of the banks is separately authorised by the Financial Services Authority:
- FSCS would pay compensation up to the limit of £50,000 per person, per authorised institution.
If each of the banks is not separately authorised but is covered by the parent company's authorisation:
- FSCS would pay compensation up to the limit of £50,000 once, irrespective of how many different institutions a person held accounts with.
If you have a question about how a bank or building society is authorised, please contact the Financial Services Authority Consumer Contact Centre on 0845 606 1234.
3. If I have more than £50,000 in an account, does that mean I will lose money?
A depositor whose total deposits with a failed bank exceed the compensation limit will receive compensation for the amount of their deposit up to the limit (£50,000 from 7 October 2008), in the same way as depositors with funds below the limit.
However, depositors with deposits above the limit may also receive additional funds above and beyond what comes from the FSCS. Depositors may receive a share of their savings back following any distribution of assets as part of the insolvency process for a failed bank. How much they receive depends on the rate of recoveries (also known as the dividend rate) in the liquidation of the failed bank.
The liquidation process can take a long time to complete. Depositors will have to wait until the liquidator has completed the liquidation to find out how much more they might receive in total, and there is no certainty that they will receive any further payments.
4. What is the position of people who have an account with a UK branch of European bank?
If you have an account with a UK branch of a bank incorporated in the European Economic Area (EEA) that becomes insolvent, we may also be able to help. Under the EU Deposit Guarantee Schemes Directive, all member states of the EEA are required to establish a deposit guarantee scheme which gives a minimum level of protection for depositors of 20,000 Euros per eligible depositor in the event of a bank failure.
A bank established in another EEA state should be a member of that state's compensation scheme, which is designed to protect depositors in that EEA country, and those with accounts at branches in other EEA countries. Where the bank's home state scheme provides a lower limit of compensation than FSCS (i.e. less than 100% of £50,000), or the scope of protection is less than FSCS's, the bank may choose to join FSCS to 'top up' the level of protection offered by the home state scheme. The link below leads to a list of banks that have topped up into the UK Scheme with their FSA reference numbers and the month and year FSCS or the predecessor scheme accepted their application to top up.
In the event of a failure of one of these banks, there would be a two step process as the home state scheme would have lead responsibility for claims, and would be responsible for paying the first part of any compensation. FSCS is only responsible for paying compensation for the topped up element to £50,000 on deposits with the UK branch. FSCS would, wherever possible, try to assist claimants in their dealings with the home state scheme (for example, by putting them in contact with the home state scheme, or helping them understand the process that the home state scheme will follow). FSCS would then deal with any 'top up' claims.
5. What happens if I owe money to a bank, building society or credit union that fails?
Amounts owed to the failed firm (for example, loans, mortgage or credit card debts) are taken into account before any compensation is paid.
If you are a borrower with the same firm this may affect the amount you can claim, as the amount of your deposits may be 'set-off' against any amounts you owe.
If a firm were to fail, FSCS would consider a depositor's overall net claim, which would include taking into account any amount owed which the firm may set off.
In the event that set off is applied, and if the borrowings exceeded the depositor's savings, there would be no overall claim against the failed firm, and the depositor would not be entitled to any compensation.
For example, if a depositor had a mortgage of £200,000 and savings of £150,000 with the same bank, set off may be applied by the Insolvency Practitioner dealing with the bank failure. As a result, the depositor may end up owing the bank £50,000, so there would be no positive balance and no claim for compensation.
6. How long will it take to process my claim?
After a declaration of default, FSCS aims to process all claims within six months. However, the time this takes depends very much on the type of claim. For example, most credit union claims can be completed within four weeks. For other types of claim it may take longer, depending on how complex it is and on some factors that may be outside of our control, such as waiting for information from third parties.
7. What happens if I am a member of a credit union that fails?
To claim compensation from us you will need to complete an application form, which will be sent to you. You must provide proof of your deposit with the failed credit union, which we will then verify against its books and records. If you have kept clear, accurate, records of your deposits and transactions it will help to speed up payment of compensation.
If possible we will issue a cheque for compensation, but we will consider other alternatives for claimants who do not have a bank or building society account.
If you have any questions, or want an update on compensation payments, you can contact us.
8. Will you compensate me for any interest I have earned on my account?
Interest owed to the depositor as at the date the bank is declared "in default" by FSCS will be paid as part of the compensation amount. Notice accounts will be paid as if notice had been served on the day the account was frozen and payment will be made, including interest, at the end of the notice period. Fixed term accounts will be paid at the maturity date with the interest that would have been paid by the bank at maturity date.
9. Are offshore deposits covered?
We do not cover deposits outside the European Economic Area (EEA), or in the Channel Islands or Isle of Man.
10. Does the Scheme cover deposits made in different currencies?
Yes. Compensation payments will be made in the relevant currency.
11. Are deposits held by nominee companies covered?
We cover deposits held in client accounts, for example by solicitors, and may cover deposits held by nominee companies. FSCS does not protect non-nominative deposits.
12. Do you cover deposits made through solicitors and other professionals?
We will cover client account arrangements, which are usually set up by solicitors and list individual depositors, provided the deposit-taker (e.g. bank or building society) is authorised to accept deposits, which would normally be the case.
The Law Society has its own compensation scheme for its members' investment business, that only applies in the case of dishonesty of a solicitor. In those circumstances claims against solicitors in England and Wales should be referred to it. Claims against solicitors in Scotland should be referred to The Law Society of Scotland.
However, if the solicitor is holding your money in a client account with an authorised deposit-taker that fails, then your claim is against the deposit-taker and you should ask us to deal with it.
Claims against some other professionals can be made to us, but only if the claim arises on or after 1 December 2001. If your claim is for activities before this date, look at our Claiming compensation booklet for details of the organisations to contact.
