Mutual savers offered extra deposit protection

Building society savers have been offered additional deposit protection by the financial watchdog today, which takes into account the number of mergers across the mutual sector.

The Financial Services Authority (FSA) is introducing new rules that enable building societies that merge to keep their separate compensation limits.

Jon Pain, retail markets managing director at the FSA, says the rule change is designed to protect consumers as well as merging societies that fear a run on deposits.

“Following mergers this will help existing savers with the societies who want to keep below the deposit protection limit and also reduce withdrawals from the successor society driven purely by compensation considerations on the part of savers,” Pain explains.

However, the new rules only apply if a successor society decides to continue to operate the business of the dissolved society under the name of that society.