Business

Banks to advertise guarantee for savers

SEPTEMBER 15 2007: Customers of Northern Rock queue outside the Kingston branch
Image caption When Northern Rock went bust in 2007, the FSCS covered 100% of the first £2,000 and then 90% of the next £33,000.

Bank branches and websites will soon need to display prominent signs, telling customers that their savings are protected up to £85,000.

The requirement, being proposed by the Financial Services Authority, covers building societies and credit unions.

The deposit guarantee scheme, run by the Financial Services Compensation Scheme (FSCS), has been in place since 2001.

The FSA said it was worried that not enough people knew about the scheme.

"It is vitally important that customers have confidence in the banking system and that is why we are taking this step of making it obligatory for firms to prominently display compensation information," said Hector Sants, chief executive of the FSA.

"The posters and website notices we are going to be mandating will help to prompt consumers to get more information and to make informed decisions about how much money to deposit with one bank."

In October the FSCS admitted that a £4m publicity campaign had had little or no effect on the public's understanding of the protection that is available to savers.

At the start of 2011, the amount of money protected by the scheme was raised from £50,000 per person, per institution, to £85,000, in line with new rules for all countries in the European Economic Area.

That involves all countries in the European Union, plus Liechtenstein, Norway and Iceland.

UK banks and building societies will need to show a sign saying: "Your deposits are protected up to £85,000 by the Financial Services Compensation Scheme, the UK deposit protection scheme. Any deposits you hold above this amount are not covered."

People in UK branches of European banks should see a sign telling them their savings will be covered instead by that bank's own national compensation scheme.

The FSA's plan is going out to consultation and is likely to come into force at some point next year.

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