July 23 2014 Latest news:
Adam Aiken, Editor
Wednesday, June 6, 2012
The body behind the financial sevices savings safety net has urged banks to give clearer information to customers about how much of their cash will be protected if the provider goes bust.
Under plans outlined by the Financial Services Authority (FSA), financial providers are to be compelled to display notices in branches and on their websites in a bid to make people more aware that deposits of up to £85,000 are protected if a bank goes bust.
The Financial Services Compensation Scheme (FSCS), which protects consumers when banks fail, said the plans were a step in the right direction, but it urged firms to go beyond the FSA’s minimum requirements.
Building societies and credit unions will also need to display posters and stickers, and foreign banks with branches in the UK which are not covered by the scheme have to state this as well as saying which other national scheme is providing protection.
“The banking crisis shows how important it is for consumers to have clear information about FSCS protection,” said FSCS chief executive Mark Neale.
“We never again want to witness the run on a bank because people do not know their money is protected. Since then, the industry has improved the quality of information it gives to consumers about FSCS.
“However, it needs to do much more to provide clear, accurate information about the protection we provide. This is essential to building consumer confidence, and is not limited to deposits. It is something that is normal in other parts of the world.”
The FSCS protects consumers if banks, building societies or credit unions go under. The safety net has paid out more than £26bn in compensation to more than 4.5 million people since 2001.
“We have been working with major firms in a bid to get them to go the extra mile in building awareness of the scheme,” said Mr Neale.
“We are grateful for their support and hope they will lead the way.
“We encourage all banks, building societies and credit unions to have stickers on display, posters and information in branch, and on their websites.
“Go the extra mile. Tell consumers about the FSCS. It is good for consumer confidence. And that is good for the industry, too.”
The FSCS recently launched a £4m publicity campaign in a bid to raise the scheme’s profile, but it has since acknowledged that awareness has not been raised to the levels hoped.
The scheme covers savings up to £85,000 for single accounts and £170,000 for joint accounts if an institution goes under.
While the scheme covers deposits held with UK banks and subsidiaries of foreign banks which operate in the UK, it does not cover money held with UK branches of European banks, which are covered by the relevant compensation scheme in the country where the bank has its head office.
The compensation limit applies to money lost per banking licence and not per individual brand, meaning that consumers who want to remain within the limit have to know which banking group owns any individual brand.