On the 10th July, we wrote an article about how the FSA (Financial Services Authority) would be proposing an increase to the level of deposits protected by the Financial Services Compensation Scheme.
This scheme, and its current level of protection, is something on the CeMAP syllabus and is taught in the CeMAP training. It is something that mortgage advisors should be aware of.
Now, the FSA and the Bank of England have published their proposal to strengthen the UK’s financial stability and to further protect depositors.
Subject to a period of consultation, their proposals could be made into new legislation this autumn.
Their key objectives are to strengthen the UK’s financial system, both in the UK but also internationally; to reduce the likelihood of banks facing difficulties, such as Northern Rock and Bradford & Bingley earlier this year; to reduce the impact in the event of a bank getting into such difficulties; to provide effective compensation arrangements and to strengthen the Bank of England’s position.
As part of the consultation, they are asking the government to consider raising the deposit protection to £50,000 per person under the Financial Services Compensation Scheme.
Authorities will also consider whether depositors should be compensated per brand as well. Currently, a consumer is covered for £35,000 compensation for deposits per registration with the FSA. However, as some financial institutions have only one registration, this means that consumers are covered for deposits within that particular banking group and not per bank.
Where a financial institution has separate FSA registrations for each of their different brands, a depositor could claim compensation for savings with each one. It seems an important point to cover.
If this all sounds very complicated, do not worry as it is all covered clearly on the CeMAP training course.