Restore Deposit Protection Limit to 85000

Restore Deposit Protection Limit to £85,000.

The Bank of England via the Prudential Regulatory Authority has this week announced a consultation that could restore the Financial Services Compensation Scheme (FSCS) limit for cash/bank account deposits to £85,000.

The compensation limit is set by the EU Deposit Guarantee Schemes Directive where it requires euro member states to have a €100,000 compensation and non-euro member states of the European Union to adjust their deposit protection limits to the equivalent of €100,000.

In the case of the UK, with a weaker pound,  the UK Compensation was set at £85,000 in 2010.  As the pound strengthened against the euro, the equivalent limit was reduced to £75,000 in January 2016 (announced 3 July 2015).

With the pound now weakened again after the Brexit vote, the Bank of England is consulting on plans to restore the limit of protection to £85,000.   The consultation period closes on 16 December 2016 and any change to the compensation limit, assuming it is passed, with be effective from 30 January 2017.

Comment

It makes sense that the UK increases compensation limits back to £85,000 as an equivalent to the €100,000 EU Deposit Guarantee Schemes Directive.