British savers are now protected up to £50,000 if a British bank fails and this guarantee could be increased further still, the financial watchdog has announced today.
The Financial Services Authority (FSA) increased protection up from £35,000 in light of continuing banking uncertainty, as well as the Irish government recently upping its protection guarantee to 100%.
This increase applies from Tuesday 7 October 2008, and means customers with joint accounts will be eligible to claim up to £100,000.
Hector Sants, chief executive of the FSA, says: “There has been extensive debate about the compensation levels. In the interests of providing clarity over the minimum level for the long term we have now decided to implement the move to a £50,000 limit from Tuesday."
The change ties in with the introduction of the government’s Banking Bill in Parliament, which is due next week.
Sants adds: “In addition, the chancellor has made clear that the Authorities will do whatever is necessary to maintain financial stability and protect depositors.”
The FSA and the government are also looking at other measures, which they say will enhance “consumer confidence” in the banking sector. At the same time, both have stated that people do not need to worry about how safe their money is, as British banks are solvent.
Other potential changes to the protection limit include increasing the protection limit beyond £50,000, ensuring compensation payments could be paid-out quickly, and changing protection to per customer per brand, rather than per bank. You can find out more about the proposals here.
Adrian Coles, director-general of the Building Society Association, has welcomed the move, estimating it will mean at least 97% of building society savers are fully covered by the FSCS.
“It is good that this new limit is to be implemented so quickly," he adds. "The financial services market is changing rapidly and there is no room for ncertainty or lack of clarity for consumers."
The change means that 98% of savers are now protected by the FSCS, according to the British Bankers' Association. Previously this was 96%.