Consumer panic is both a consequence and a cause of financial crisis.
As we saw when Northern Rock got in trouble in 2007, people react very quickly to bad news – in that case by queuing outside Northern Rock branches to get their money back.
But those symptoms of crisis very rapidly then become a new contagion. Panic is infectious. And the consequences of panic can take years to address.
That is an important reason why FSCS exists. By insuring people’s deposits with banks, building societies and credit unions up to £85,000, we immunise the great majority of savers against bad news and, hopefully, panic.
And remember that our protection is much more comprehensive than it was in 2007. Back then we protected only the first £2 000 in full and 90% of the next £33,000. In other words, if you had more than £2,000 in a Northern Rock account in 2007, it was perfectly rational to queue.
Things are different now, and there is no consumer risk of the kind we had in 2007. For 98-99% of savers, it would no longer be rational to queue in response to rumours of a bank failure. We undertake to get the great majority of people’s money back to them within seven days if the worst happens.
This only holds, however, if people know that this protection is there. You can’t be reassured by what you don’t know about.
And the sombre reality is that only about half of savers know about FSCS protection now.
That is why one of FSCS’ core aims is to raise awareness of our protection and why, in pursuit of that aim, we shall be launching in the New Year the next stage of our awareness programme.
Now, I’m very conscious that there some out there who doubt the value of this. But those doubts are not shared by most of the industry which recognises how important consumer confidence is. Our research shows that consumers who know about our protection are more likely to buy financial services.
So this campaign is supported by the industry which has also helped to shape it through our advisory panel. They played a strong role in helping to set our strategy as they did in the first phase.
And the campaign is also different in important respects from last year’s: different in its message and different in its delivery.
The message is straightforwardly one of reassurance and focuses on the existence of the protection we provide for deposits, not the FSCS brand. We are promoting financial confidence, not FSCS.
We shall be delivering this message mainly through radio and the print and digital media, but not TV. We shall be targeting the people who are unaware of our protection. And we shall be doing so by getting the message across in contexts which are relevant to saving: alongside stories about weddings, home improvement, retirement and so on.
All this will complement what the industry itself is doing to raise awareness of our protection: through the prominent display of information in bank and building society branches and on websites, for example.
So look out for our campaign in January and let us know what you think.
The Financial Conduct Authority website includes a searchable database of all firms authorised and regulated by the FCA and the Prudential Regulation Authority (PRA).