We are consulting on plans to restore the limit of protection provided by the Financial Services Compensation Scheme (FSCS) to deposits with firms authorised by the Prudential Regulation Authority (PRA) to £85,000. The protection limit is currently £75,000. It would be raised from 30 January 2017, but firms would have until 30 June 2017 to implement the necessary changes to systems and materials.
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Restoring the limit to £85,000 – the level which was in effect for almost five years until 3 July 2015 – is intended to provide a measure of memorability and consistency. The limit was previously reduced to £75,000 because the EU Deposit Guarantee Schemes Directive required non-euro member states of the European Union to adjust their deposit protection limits to the equivalent of €100,000.
The directive also requires that limits are adjusted outside of the five-year review cycle following unforeseen events such as currency fluctuations. Taking into consideration the developments in financial markets following the UK’s referendum vote to leave the European Union on 23 June 2016, including with respect to the GBP/EUR exchange rate, the PRA considers that a structural shift in the exchange rate has occurred. These events were unforeseen when the UK limit was reduced in 2015.
The PRA will continue to monitor fluctuations in the exchange rate but, barring unforeseen events, will seek to avoid making further adjustments to the deposit protection limit.
The consultation closes on 16 December 2016.