Deposit protection under review

Post by Mearns & Company in News

The Bank of England is reviewing the deposit guarantee scheme, with a view to boosting protection for the nation’s savers.

The first £85,000 saved in a bank or building society is guaranteed by the Financial Services Compensation Scheme (FSCS) if that institution goes bankrupt. That safety net was increased to its current level after the 2007 financial crisis.

The Bank of England is now looking at whether this guarantee needs to be increased following a bank run on Silicon Valley Bank in the US, and the forced sale of Credit Suisse to its rival Swiss bank UBS. The governor of the Bank of England, Andrew Bailey, has pointed out that the FSCS is not as generous as its US equivalent, where savers now have $250,000 (£200,000) protected. There are also concerns that some people might have to wait to access their money, due to the way the FSCS is funded.

For most people the current scheme offers a decent level of protection. Those who have more significant savings should split funds between different banking institutions, not different accounts within the same bank, as they will have up to £85,000 protected with each organisation. It is worth remembering this is a per person limit, so couples will be fully protected if they each have £85,000 — even if it is saved with the same bank.