FSA introduces deposit guarantee compensation rules
The UK regulator creates a scheme to hasten compensation payouts
LONDON - The UK Financial Services Authority (FSA) is introducing new rules for the Financial Services Compensation Scheme (FSCS) aimed at broadening the number of people protected and requiring banks, building societies and credit unions to pay out compensation more quickly if an institution defaults.
Consumers and small businesses will receive compensation within a target of seven days, and within a maximum period of 20 days, in compliance with the European Union's Deposit Guarantee Schemes Directive. The new rules will come into force on December 31, 2010.
The rules also mean that if a depositor has savings and loans with the same firm, an outstanding loan or debt cannot be deducted from the gross payment, which must now be paid in full, up to the maximum £50,000 depositor protection ceiling.
From January 1, 2010 banks and firms will also have to publish information on the FSCS and their compliance with it to customers, as well as having to disclose to customers additional trading names under which the firm operates.
"The FSA, along with HM Treasury and Bank of England, have set the FSCS a challenging target of delivering payout in seven days," said Hector Sants, chief executive of the FSA. "The systems requirements that the rules introduce for banks are crucial to enable the FSCS to deliver fast payout."
Other key requirements include that firms must keep up-to-date information on customers to allow quick processing of claims by the FSCS if needed, described as a "single customer view".
The regulator decided to extend, until December 30, 2010, interim rules to allow separate compensation cover for customers with deposits in two merging building societies, as well as for customers of a building society that merges with a subsidiary of another mutual society, and for customers whose deposits are transferred from a failed firm to another deposit taker with whom they already have an account.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Banks fret over vendor contracts as Dora deadline looms
Thousands of vendor contracts will need repapering to comply with EU’s new digital resilience rules
EU banks lose relief on model test after FRTB delay
Deferment of new trading book regime to January 2025 eats into transition period for “erratic” P&L attribution test
Sunday night football and the Basel III endgame
Big banks, political advocates and housing organisations are unlikely allies in race to dropkick new capital regime
Futures exchanges seek clarity on China licensing regime
Hazy details on landmark Futures and Derivatives Law breeds legal uncertainty, unnerving operators
Some EU banks wanted option to start FRTB on time
Representatives of member states raised possibility with European Commission at July meeting discussing the delay
For US Treasury troubles, treat the cause not the symptom
Regulatory alarm about hidden risk in the Treasury futures market misses the point, fund association execs write
Iosco delays pre-hedging consultation to November
Review into controversial practice splits industry
Honey, I shrunk the Fed. (Not a sci-fi fantasy)
Promoting the discount window may be the Fed’s key to shrinking its $7trn balance sheet, says Bill Nelson