MPs to Banks: Be More Transparent on Savings Compensation Limits
Online, April 16, 2013 (Newswire.com) - Members of the British Parliament call on banks to be clearer to consumers about how much of their savings are protected under the compensation policy, according to a survey conducted by the Financial Services Compensation Scheme.
The FSCS, the UK's savings safety net agency, provides coverage of up to GBP85,000 for single depository accounts and GBP170,000 for joint accounts if a bank goes under.
About 81% of MPs surveyed believe that financial institutions should warn clients that their savings exceeded the limit set by the FSCS and that anything beyond that amount is not covered. About 76% of consumers who responded to the survey agree to the idea of compelling banks for a full disclosure of the compensation limits.
A separate study in December found out that only 12% of people are aware of how much of their savings are being protected in case the financial institution goes bankrupt.
Mark Neale, the FSCS chief executive, notes, "It's too late for people to find out about FSCS when a run on a bank starts. We believe firms can, and should, do more." He, thus, calls on firms to coordinate with the agency to increase the public's awareness about the compensation limits.
Based on the agency's study, three-quarters of MPs urge building societies and banks to include information about the FSCS in their advertisements. Four-fifths of the MPs surveyed also believe that increased awareness about the scheme would boost financial stability and consumer confidence.
The FSCS has made more than GBP26 billion pay-outs since 2001. The body only covers deposits held with UK banks and arms of foreign banks operating in the UK.
The recent crisis in Cyprus highlighted the issue on savings protection. Notably, about 15,000 depositors of Laiki, the UK arm of Cypriot bank, would have their savings transferred to the Bank of Cyprus UK, a stand-alone bank in the country that is protected by the FSCS.
About 150 MPs and 1,000 consumers participated in the FSCS's latest survey.
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