Bank of England Looks to Raise the Amount of Your Deposits it Protects to £85K, thanks to a Weaker Pound
The Bank of England is looking to raise the value of deposits protected under the Financial Services Compensation Scheme to 85K.
The current limit of funds that can be protected by the Prudential Regulation Authority (PRA) which oversees the FSCS is 75K.
The FSCS runs a compensation ‘fund of last resort’ for customers of the UK's major banks and building societies.
If your bank goes bust you will get compensated for any deposits held with that bank to the tune of £75K.
The idea is that as customer money is seen as protected the prospect of a run on a struggling bank is reduced.
However, that limit is ultimately determined by Europe - the EU Deposit Guarantee Schemes Directive required non-euro member states of the European Union to adjust their deposit protection limits to the equivalent of €100,000.
The limit was previously reduced to £75,000 because of a strengthening in the Pound to Euro exchange rate.
Now that Sterling has fallen in 2016 the Bank believes it is time to put the limit back to £85K.
“With respect to the GBP/EUR exchange rate, the PRA considers that a structural shift in the exchange rate has occurred. These events were unforeseen when the UK limit was reduced in 2015,” says a notice from the Bank of England.
The Bank of England are consulting on plans to restore the limit of protection to £85,000; it would be raised from 30 January 2017, but firms would have until 30 June 2017 to implement the necessary changes to systems and materials.
“Restoring the limit to £85,000 – the level which was in effect for almost five years until 3 July 2015 – is intended to provide a measure of memorability and consistency. The directive also requires that limits are adjusted outside of the five-year review cycle following unforeseen events such as currency fluctuations,” say the Bank.
The PRA will continue to monitor fluctuations in the exchange rate but, barring unforeseen events, will seek to avoid making further adjustments to the deposit protection limit.
