FSA to speed up compensation payments to savers
by Gill Montia
Story link: FSA to speed up compensation payments to savers
New proposals from the Financial Services Authority (FSA) mean that should a bank fail, savers will receive compensation within seven days.
The move would be a marked improvement on the current arrangement, which can leave depositors waiting up to six weeks for their cash.
The new measures also include removing any debt obligation from the compensation calculation.
Currently anyone who has savings and a loan with the same bank or building society receives compensation based on the net balance, i.e. the debt is taken off the compensation claim when calculating the payout.
The Financial Services Compensation Scheme (FSCS) currently covers the first £50,000 of an individual’s savings per savings provider, although there is a grey area around different savings brands belonging to the same financial services group.
If the group has only one listing with the FSA the guarantee may apply only to the first £50,000 lodged with the entire group.
In practice, the Government has been guaranteeing savings above the £50,000 level, for example when Icesave collapsed in October.
The compensation system is paid for through a levy on banks and building societies which is being raised; the collapse of Icesave alone could cost around £800 million through the FSCS.
Building societies have been protesting about this because they have traditionally been conservative in managing their businesses and they want the levy to take into account the risk attitude of financial institutions.
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