£85k limit on bank customers’ protection ‘is enough’, says City watchdog

FCA urges lenders to support UK’s 47,000 ‘mortgage prisoners’

There should be no increase in the amount of money that customers can get back if their bank, building society or other investment company collapses, the City watchdog has said.

The Financial Conduct Authority said it believes the present £85,000 limit is enough to cover the majority of cases. However, it suggested the level be reviewed every three years to ensure it keeps pace with inflation.

The FCA said: “Generally, the current levels represent an appropriate level of consumer protection, in that they are at an adequate level to cover a reasonable proportion of claims.”

It is consulting on potential changes to the way the Financial Services Compensation Scheme (FSCS) works. It comes after a series of high-profile failures, some of which the scheme was unable to fully compensate.

Government ministers were forced to step in after only a proportion of those whose savings were trapped by the collapse of London Capital and Finance were told they would be compensated by the FSCS.

The FCA’s consultation suggests it believes it needs to catch problematic investment firms before any collapse. But the FSCS has been forced to step in time and time again in recent years.

Over the past decade the total amount needed to run the FSCS, most of which has gone on payouts, has soared from £277 million to £717 million. Most of this was spent on what the regulator calls “historic misconduct . . . in the investment sector” by firms which have then gone bust.

Sheldon Mills, FCA consumers and competition boss, said: “We want consumers to have trust in a thriving UK financial services sector, and businesses to be confident they can bring new products to market. It is vital that consumers have an appropriate level of protection if things go wrong.”