The Financial Services Authority (FSA) has ruled that all banks, building societies and credit unions must declare the deposit compensation scheme that a customer's savings are covered by.
Financial institutions must 'prominently display' posters and stickers, both in branch and online explaining whether deposits are covered by the Financial Services Compensation Scheme (FSCS) or another European scheme.
The FSA requires UK branches of foreign banks within the European Economic Area (EEA) to give information that deposits are not covered by the FSCS. The bank or building society would instead have to specify which national scheme savings are covered by.
The rules will come into effect from 31 August this year.
Andrew Bailey, director of UK banks and building societies at the FSA, says customers need to know what compensation scheme they are covered by in the event of a default.
"Too many people assume that because their branch is located on a local high street in the UK, they are covered by the FSCS," he says. "This is not true for UK branches of EEA banks where the home country's deposit guarantee scheme applies."
As an example, deposits in Dutch bank ING Direct are covered by the Dutch Central Bank Deposit Guarantee Scheme, despite the bank having a UK presence.
This article was written for our sister website Money Observer