FSA proposes to speed up FSCS payouts

7 January 2009

The regulator has published a consultation paper today which encourages faster payouts to banking customers in the event that a financial institution fails.

The FSA want to simplify the eligibility rules for deposit compensation to include all private individuals and small businesses.

It is also recommending gross payouts, which would mean that any debts savers have with the firm would be ignored when payment was made.

The FSA estimates the cost of putting in place improved IT systems to allow faster claims processing to be £891.8m over five years.

Firms’ obligations to tell customers about the Financial Services Compensation Scheme would have estimated set-up costs of £34.6m and ongoing annual maintenance costs of £4.2m.

Hector Sants, chief executive at the FSA, says: “Experience in the last year has highlighted how essential compensation is and that it is imperative consumers understand and trust that they will be reimbursed if a bank, building society or credit union fails.”

He adds: “Today’s consultation paper seeks to learn the lessons from those events to produce an even better system.

“We recognise that to help underpin confidence in our banking system consumers must feel confident that their money is well protected – regardless of whether they ever have to claim compensation.”