PRA issued a consultation proposing to raise the deposit protection limit of UK FSCS from £85,000 to £110,000, the limit has not been raised since 2017.
If proposal is taken forward it would apply to firms that fail from Dec. 1, 2025.
The proposed increase in deposit protection limit considers consumer price inflation since last change in 2017, to ensure limit has not been eroded in real terms.
PRA sees value in setting a limit that does not change regularly, as approach supports awareness and confidence, minimizes costs to firms related to changes to the limit.
It would ordinarily expect to review the limit again in five years' time.
Consultation
Paper contains two sets of proposals, first set proposes to increase the limits on the protection available to a firm's depositors from the UK FSCS if the firm fails.
Includes proposal to increase the deposit protection limit from £85,000 to £110,000 per consumer per firm; increase the limit applicable to certain temporary high balance (THB) (e.g in relation to property purchase) claims from £1 million to £1.4 million.
And the provision of a transitional period for firms to update disclosure materials relating to the protection limits and the availability of protection more generally.
2nd set of proposals relates to updates to the rules that would be needed to facilitate the implementation of proposals made in the Bank Resolution (Recapitalization) Bill.
The Bill proposes a new resolution tool enabling industry funds, provided via the FSCS, to be used to recapitalize a failing firm to support its sale or transfer to a bridge bank, where the use of this tool is judged to be in the public interest, see #197598.
These proposals would result in changes to the Depositor Protection Part of the PRA Rulebook, and to the Deposit Guarantee scheme statement of policy.
Implementation
PRA proposes that the new deposit protection limits would apply from Dec. 1, 2025.
Deposit takers would then have until May 31, 2026 to update disclosure materials.
If new limit introduced firms will be required to update their single customer view (SCV) systems to reflect new limit, should ready themselves now for potential change.
Should ensure they can readily adjust their SCV system to allow for change to limit.
Effectiveness
The closing date for feedback on changes related to Bank Resolution (Recapitalization) Bill is Apr. 30, 2025, to ensure changes can be made should Bill receive Royal Assent.
Closing date for feedback on proposals on FSCS protection limits is Jun. 30, 2025.
PRA expects to issue policy statement re deposit protection limits in Nov. 2025.
The timing for policy statement re proposals in connection with Bank Resolution (Recapitalization) Bill would depend on when the Bill receives Royal Assent.
