Banks, building societies and credit unions will soon be required to prominently display the degree to which customers and their savings are protected by the Financial Services Compensation Scheme (FSCS).
According to new regulations proposed by the Financial Services Authority (FSA) the high street banking providers will need to clearly state to customers that their savings are protected up to £85,000 should the bank fail or go bust. The disclaimers are to be clearly displayed in all banks and on all associated websites.
Update: From 1 Jan 2016 the FSCS compensation limit has been reduced to £75,000 – please see see this page for details.
The new rules, intended to improve consumer awareness and confidence in banking institutions, will apply to all FSA authorised banks operating in the UK.
Banks authorised by the European Economic Area (EEA) will be required to state the terms of the compensation scheme that they operate under.
Hector Sants, Chief Executive of the FSA, said:
"It is vitally important that customers have confidence in the banking system and that is why we are taking this step of making it obligatory for firms to prominently display compensation information. Consumers must understand how their money is protected and be clear about the limits - any money over £85,000 in a deposit account is not protected by the scheme and is at risk.
"Customers should also know which compensation scheme they are relying on, which country it is based in and understand how it would work - for example how long it would take to get your money back.
"The posters and website notices we are going to be mandating will help to prompt consumers to get more information and to make informed decisions about how much money to deposit with one bank."
The FSCS will provide up to £85,000 in compensation on a per person per bank basis.
If you hold deposits with two different banks you may be eligible for £85,000 for each deposit separately. However, it s often the case that two differently named banks will operate under the same banking licence (e.g. Lloyds TSB and Cheltenam & Gloucester). If this is the case you deposits will not be covered separately, which can make matters confusing for customers who seek increased protection for their money by spreading deposits across several different bank accounts.