Disclaimer: Our website and publications aim to give you general information to help you make financial decisions. It is not advice, nor can it take account of your own particular circumstances. For advice with a view to making decisions about your own circumstances you should consult a financial or other professional adviser.

© The Financial Services Authority.

Banking reform

July 2008 update

The Chancellor has announced updated proposals on banking reform. The Treasury, Bank of England and the FSA have published a joint consultation paper setting out these proposals and outlining planned next steps. The joint consultation will go on until 15 September.

One of the next steps for the FSA is to consult separately on how to make the current compensation arrangements more effective so depositors are more confident in the banking system. We are likely to consult in October. We are doing this separately because we are responsible for setting the rules that govern the Financial Services Compensation Scheme (FSCS) – the UK's statutory fund of last resort for customers of authorised financial services firms.

We intend to review the FSCS compensation limits for deposits and set out a broad range of options. One option could be to increase the current limit to £50,000, and this is why you may have seen this figure reported in the press. We also intend to look at how we can speed up compensation payments from FSCS if a bank were to go bankrupt.

30 January 2008 announcement

On 30 January 2008 the Chancellor of the Exchequer announced proposals for strengthening the current framework for financial stability and protecting depositors. These proposals are designed to:

  • strengthen the stability of the financial system, both in the UK and globally;
  • reduce the likelihood of banks facing difficulties;
  • reduce the impact if, nevertheless, a bank gets into difficulties;
  • provide effective compensation arrangements in which consumers have confidence; and
  • strengthen the Bank of England, and ensure effective coordinated actions by authorities, both in the UK and internationally.

What does this mean for consumers?

At this stage these are proposals. The Treasury, Bank of England and FSA are consulting on them widely, including with key consumer groups, to make sure they are workable.

In the meantime, all existing measures to safeguard depositors' money remain in place.

More information

I have an account with Northern Rock – how does this announcement affect me?
Today's announcement doesn't affect the existing guarantee for Northern Rock depositors – the statement made by the Treasury on 9 October still holds. See our Northern Rock page for more information.