Banks must disclose compensation scheme terms

The Financial Services Authority (FSA) has revealed plans to force banks, building societies and credit unions to prominently display how much compensation savers could claim in the event of an institution failing.

They will also have to explain where the compensation will come from, and details will need to be on show in every branch and on their website.

The move is part of an ongoing campaign by the FSA and the Financial Services Compensation Scheme (FSCS) to improve confidence around compensation by raising awareness of what is available.

FSA authorised UK banks or building societies that are covered by the scheme will need to display the words ‘Your deposits are protected up to £85,000 by the Financial Services Compensation Scheme, the UK deposit protection scheme. Any deposits you hold above this amount are not covered.’

While those with headquarters in the European Economic Area (EEA) will need to state that deposits are not protected by the UK FSCS, and will have to state any other national scheme that is applicable.

Commenting, Hector Sants, CEO of the FSA, said:
“It is vitally important that customers have confidence in the banking system and that is why we are taking this step of making it obligatory for firms to prominently display compensation information. Consumers must understand how their money is protected and be clear about the limits – any money over £85,000 in a deposit account is not protected by the scheme and is at risk.

“Customers should also know which compensation scheme they are relying on, which country it is based in and understand how it would work – for example how long it would take to get your money back.”