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This is the latest information from FSCS

Latest deposit news - Updated 3 October 2008

New compensation limit for deposits

The Financial Services Authority announced today (3 October 2008) that the FSCS compensation limit for deposits is increasing to £50,000 with effect from 7 October 2008.

The new limit will apply to each depositor for the total of deposits they hold 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 the account is split equally between account holders, unless evidence shows otherwise.

Deposit protection frequently asked questions.
More information regarding this change is available on the FSA website.

Recent Important Announcements

Previous Important Announcements

FSCS has received a number of enquiries about how it can help consumers if a bank, building society or insurance company becomes insolvent. The most frequently asked questions are answered here:

Deposit compensation

What is your compensation limit if I have a claim against my bank or building society because it has stopped trading and is insolvent? - Answer
What are your compensation arrangements if I hold accounts with more than one bank, and if I am a joint account holder? - Answer: see our answers to questions 1 and 2 in our section on frequently asked questions about deposit claims.
What happens if I owe money to a bank, building society or credit union that fails, that I also hold deposits with? Answer: see our answer to question 5 in our section on frequently asked questions about deposit claims.

Insurance compensation

What is your compensation limit if I have a claim against my insurance company because it has stopped trading and is insolvent? - Answer

Is a charity covered if the bank or building society it holds money with fails?

If a bank or building society authorised by the FSA is unable to pay back deposits held with it, the FSCS can pay 100% of the first £50,000 of an eligible depositor's claim, per authorised institution. FSCS protects private individuals and some small businesses. Whether a charity is covered will depend on how it is constituted. There is no requirement for charities to be established by way of a particular structure or form. According to section 1 of the Charities Act 2006, a "charity" is simply an institution established for charitable purposes only, which is subject to the control of the High Court in the exercise of its jurisdiction with respect to charities. There are as many permutations of charitable structures as there are types of legal personality. As charities are not specifically provided for in the eligibility rules of the COMP Sourcebook, their eligibility will be determined by their structure and legal personality.

For example, a charity can be constituted as a limited company, or an unincorporated association. In those circumstances, the eligibility test would be as follows:

A limited company would be treated as having a claim, and hence protection in its own right up to the £50,000 limit, if it fell within the definition of a "small company". A company qualifies as a "small company" under the provisions of section 247 of the Companies Act 1985 (which still applies to any company whose financial year commences before 6 April 2008) if it fulfils two of the following three criteria:

it has a turnover of not more than £5.6 million;
it has a balance sheet total of not more than £2.8 million; and
it has not more than 50 employees.

Similarly, a company qualifies as a "small company" under the provisions of section 382 of the Companies Act 2006 if it fulfils two of the following three criteria:

it has a turnover of not more than £6.5 million;
it has a balance sheet total of not more than £3.26 million; and
it has not more than 50 employees.

If the charity is an unincorporated association, it will be entitled to claim up to £50,000, unless it falls into the category of a "large mutual association" (see COMP 4.2.2(13)) - the test which applies is that it must have less than £1.4 million in net assets.

Insurance

Different rules apply in respect of the Insurance scheme.

In respect of the general insurance scheme, a charity would be treated as having a claim, and hence protection in its own right, if it fell within the definition of a "small business". A small business is defined as a partnership, body corporate, unincorporated association or mutual association with an annual turnover of less than £1 million (or its equivalent in any other currency at the relevant time). There is generally no size criterion in the case of life insurance (COMP 4.3.2R).

Is a business covered if the bank or building society it holds money with fails?

FSCS was set up mainly to assist private individuals, although some smaller businesses are also covered. Larger businesses are generally excluded, although there are some exceptions to this (for example for claims in respect of certain compulsory insurances). Our rules tell us which claims are eligible and form part of the FSA's Handbook of rules and guidance, under Redress, Compensation.

As an indicative guide only, for the purposes of deposit and investment claims, smaller companies are protected. A smaller company must meet two of the following criteria (as set out in section 247 of the Companies Act 1985 or section 382 of the Companies Act 2006 as applicable):

Turnover: not more than £6.5 million
Balance sheet total: not more than £3.26 million
Total number of employees: not more than 50

For claims made under an insurance contract, small businesses are protected. A small business under the COMP rules is one that has an annual turnover of less than £1m.

The same levels of compensation apply whether the claimant is a private individual, small business, or a small company.

More information

FSCS Statement - 1 July 2008

FSCS backs Tripartite proposals for strengthening compensation framework

The proposed changes to UK arrangements to deal with banks in difficulty, laid out in a consultation document published by the Tripartite authorities today, will do much to strengthen consumer protection and market confidence, the Financial Services Compensation Scheme said today.

Chief Executive, Loretta Minghella said: "The FSCS has been working closely with HM Treasury, the Financial Services Authority and the Bank of England on these wide ranging proposals for banking and compensation reform. We believe they will help to ensure we are in a better position to protect depositors, by paying compensation more quickly if a bank fails."

"The issues outlined in the consultation document are complex and finding the right solutions to the outstanding questions will be vitally important. We encourage people to respond to the consultation to make sure this is achieved."

The consultation document entitled, Financial stability and depositor protection: further consultation was published by the Tripartite authorities today. Copies are available from the Treasury website.

Northern Rock plc

On 18 February 2008, the Government decided to bring forward legislation to enable Northern Rock plc to be taken into a period of temporary public ownership. The bank will continue to function as normal and deposits with the bank are safe. You can find more information about the announcement on the Treasury website.

Consultation paper on financial stability and depositor protection

FSCS welcomes the consultation paper published on 30 January 2008 by the Tripartite authorities (the Treasury, the FSA and the Bank of England). More information on the paper, entitled Financial stability and depositor protection: strengthening the framework, can be found on the Treasury website.

Consultation announcement on banking reform and deposit protection by the Treasury, FSA and Bank of England

On 11 October 2007, the Chancellor launched a discussion paper entitled Banking Reform - Protecting Depositors. The paper was published by the Treasury, the FSA and the Bank of England. You can find more information on the Treasury website.