FSA to force institutions to display compensation amounts

Savings and ISAs

Updated on 15 December 2011 | 1 Comment

Banks, building societies and credit unions will have to prominently advertise how much compensation customers will receive if the institution goes under.

The Financial Services Authority (FSA) is to force the UK-based banks, building societies and credit unions it regulates to display prominent information about compensation in all branches and on websites.

They will need to highlight the fact that up to £85,000 of customer deposits are covered by the Financial Services Compensation Scheme (FSCS) should the institution go under.

Any banks headquartered in the European Economic Area (EEA) but with branches in the UK will have to state that any money held with them is not protected by the FSCS. Instead, they will have to declare which other national scheme is providing protection. Compensation levels vary across the EEA.

Following an unsuccessful advertising campaign that cost a reported £4 million, the FSA and FSCS are stepping up efforts to increase awareness of the scheme. Research found that public knowledge of the FSCS has actually fallen since the financial crisis.

The amount of money protected by the scheme rose to £85,000 at the beginning of this year.

The FSCS has paid out nearly £26 billion in compensation in the decade since it was formed. This included £15.65 billion to Bradford & Bingley customers after it went under and £4.5 billion to people affected by the collapse of the Icelandic banking industry.

It increased the compensation amount from £35,000 to £50,000 in 2008 following the collapse of Northern Rock before increasing it again this year in line with EEA legislation.

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