FSA increases savings guarantee to £50,000

03 October 2008

Old limit of £35,000 is increased by £15,000

The Financial Services Authority (FSA) has announced that it will be increasing the limit to which consumer’s savings are guaranteed should a bank collapse from £35,000 to £50,000.

The higher limit will come into effect on Tuesday 7 October.

A consultation will now take place at the FSA to decide if this limit should be increased further.

Earlier this week Ireland decided to introduce an unlimited guarantee to cover bank deposits.

The limit is per customer so up to £100,000 will be covered in joint accounts.

However, the limit currently only applies to each parent bank and not to each bank within the main bank’s group, i.e. if you had £50,000 in a Royal Bank of Scotland bank account and £50,000 in a NatWest bank account only one lot of £50,000 would be covered because both banks are part of the larger Royal Bank of Scotland Group.

If a bank were to go bust, the Financial Services Compensation Scheme would reimburse the account holder.

The FSA said that it will also be looking into reforming the scheme so that compensation will be paid back more quickly.

It is also set to consider whether accounts held with different banks belonging to the same parent group should be covered.

Hector Sants, FSA chief executive, said: “This change ties in with the introduction of the government’s Banking Bill in Parliament which is due next week.

“It is also appropriate given the consolidation that has taken place in the banking sector,” he added.

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