FSA consults on changes to FSCS framework

8th January 2009

The Financial Services Compensation Scheme (FSCS) welcomes the publication by the FSA of a consultation paper setting out proposals for speeding up the payout of compensation to make it possible for customers to get back their money more quickly if a bank fails.

The critical importance of the FSCS in paying out compensation to depositors has been emphasised by the events of recent months. As part of the wider banking reform work the Tripartite authorities and FSCS have committed to ensuring faster payout from the FSCS.

Loretta Minghella, Chief Executive at the FSCS said: "Recent events have confirmed the importance of the role FSCS plays in protecting depositors and helping to maintain consumer confidence. We welcome the FSA's proposals to strengthen the compensation framework for FSCS. We have worked closely with the FSA on the proposals which, if implemented in full, will enable the FSCS to pay compensation more quickly if a bank fails."

The FSA's consultation paper makes the following recommendations:

  • Simplifying eligibility for deposit compensation to include all private individuals and small entities;
  • Gross payout, which would ignore any debts the depositor has with the same firm;
  • Ensuring the firm holds up to date information to allow quick processing of claims;
  • Ensuring firms provide information on the existence and basic coverage of the FSCS for deposits; and
  • Requiring firms proactively to tell consumers which trading names are covered by a particular authorisation.

The consultation paper also includes proposals on plans to increase the awareness and understanding of the FSCS among consumers.

The consultation will be open for responses until 6 April 2009.

Jargon Buster

  • Deposits

    money placed in a bank or similar institution to earn interest or for safe-keeping.
  • FSA

    Financial Services Authority, was previously the UK's regulator for the finance industry. It was replaced by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) on 1 April 2013.