Safety of savings to be tightened

Changes will be made to the scheme by the end of 2010

Savers will be compensated faster for lost savings if a bank, building society or credit union goes bust, the City watchdog has announced.

The Financial Services Compensation Scheme protects up to £50,000 per saver per institution if a bank goes under.

Now the Financial Services Authority (FSA) has announced that from 2011, compensation will be paid within 20 days, or preferably within a week.

The banking crisis prompted many savers to spread their funds for safety.

Since queues formed outside Northern Rock branches in 2007, the rules about deposit protection have come under scrutiny.

The Financial Services Compensation Scheme (FSCS) charges a compulsory levy on the UK's financial services industry that would cover compensation for savers if a UK bank were to go bust.

Tough test

The compensation scheme has been tested following the collapse of high-profile banks such as Icesave.

To help underpin confidence in our banking system, individuals and small businesses must feel confident that their money is well protected Hector Sants, FSA Spreading your savings for safety

At present, payouts for savers with failed banks can take up to six weeks. The new rules would mean that individuals and small businesses would receive compensation within a target of seven days and all payments within 20 days.

Current rules mean a bank customer or small business owner who had a debt with a bank, such as a loan, as well as savings could currently have the amount of debt deducted from any compensation for savings if the bank went bust.

Under the new rules, to come into force on 31 December 2010, savings would be protected to the £50,000 limit and would not be used to offset loans.

"To help underpin confidence in our banking system, individuals and small businesses must feel confident that their money is well protected," said Hector Sants, chief executive of the FSA.

Spread savings

Savers have been keen to keep up with the rules to ensure all their money is protected if a bank, building society or credit union fails.

At present, if you have up to £50,000 with different authorised institutions, then all your money is safe.

For example, you have £50,000 saved with Barclays and £50,000 with HSBC Bank, all of this would be protected as the rules stipulate cover for deposits per customer and per institution.

However, if you have £50,000 in accounts with two different brands (in the same block in the final column on the table below) with the same authorised institution, then only £50,000 is covered. This is because they are authorised with the regulator under one named institution.

For example, if you have £50,000 with HSBC and £50,000 with First Direct, then only £50,000 of your savings are in the safety net. The same would be true if you have £50,000 with the Halifax and £50,000 with Birmingham Midshires.

Under the new rules, institutions will have to make clear which trading names come under which authorisation.

PARENT BANK	AUTHORISED INSTITUTION	BRANDS
Source: FSA * Unlimited protection until 24 May
HSBC	HSBC Bank	HSBC, First Direct
	HSBC Private Bank UK Ltd	HSBC Private Bank UK Ltd
	HFC Bank	HFC Bank
	Marks & Spencer Financial Services	Marks & Spencer Financial Services
	HSBC Trust Company	HSBC Trust Company
Barclays	Barclays	Barclays Bank
	Standard Life plc	Standard Life Bank
	Barclays Bank Trust Company	Barclays Bank Trust Company
Royal Bank of Scotland Group	Royal Bank of Scotland	Royal Bank of Scotland, Direct Line (savings), Child & Co, Drummonds, The One Account, Lombard, Holt's
	NatWest Bank	NatWest Bank
	Coutts and Co	Coutts and Co
	Ulster Bank	Ulster Bank
	Adam & Company	Adam and Company
Lloyds Banking Group	Lloyds TSB Bank	Lloyds TSB, Cheltenham and Gloucester Savings
	Bank of Scotland (HBOS)	Halifax, Bank of Scotland, Bank of Scotland Private Banking, Birmingham Midshires, Saga, Intelligent Finance, Capital Bank, St James's Place Bank
	Scottish Widows Bank	Scottish Widows Bank
	Lloyds TSB Scotland	Lloyds TSB Scotland
	AMC Bank	AMC Bank
	Lloyds TSB Private Banking	Lloyds TSB Private Banking
Santander	Santander	Santander, Cahoot
	Abbey National Treasury Services plc	Abbey National Treasury Services
	Alliance & Leicester	Alliance & Leicester, Alliance & Leicester Commercial Bank, Moneyback, Honeycomb
	Cater Allen	Cater Allen
National Australia Group	Clydesdale Bank	Clydesdale Bank, Yorkshire Bank
Allied Irish Banks	AIB Group (UK)	AIB Group (UK), AIB (GB), First Trust
Co-operative Bank	Co-operative Bank	Co-operative Bank, Smile, Britannia
	Unity Trust Bank	Unity Trust Bank
Northern Rock*	Northern Rock	Northern Rock
Zurich Bank	Dunbar Bank	Dunbar Bank
Nationwide Building Society	Nationwide Building Society	Nationwide, Derbyshire Building Society, Cheshire Building Society, Dunfermline Building Society
Citi	Citibank International plc	Citibank International
	Citibank NA	Citibank
	Egg Banking plc	Egg
Skipton Building Society	Skipton Building Society	Skipton Building Society, Scarborough Building Society
Tesco Personal Finance Group Ltd	Tesco Personal Finance	Tesco Personal Finance, Tesco Bank, Tesco Banking and Insurance
Yorkshire Building Society	Yorkshire Building Society	Barnsley Building Society, Yorkshire Building Society

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