Published on 31 July 2015
Depositor and dormant account protection – consequential amendments – PS18/15
Background
This PRA policy statement (PS) provides feedback to responses to CP23/15 ‘Depositor and dormant account protection – consequential amendments’. It sets out final rules intended to advance the PRA’s general objective of promoting the safety and soundness of firms by reducing the adverse effects the failure of PRA-authorised firms could be expected to have on the stability of the UK financial system.
The policy statement is relevant to:
- UK banks, building societies and credit unions as well as to overseas firms with PRA deposit-taking permission;
- the Financial Services Compensation Scheme (FSCS), as the administrator of the UK’s Deposit Guarantee Scheme (DGS) and Dormant Account Scheme (DAS);
- depositors; and
- dormant account fund operators.
This PS includes:
- new rules in the Depositor Protection Part to ensure depositors experiencing a decrease of deposit protection from the limit change are able to withdraw affected funds without charge, penalty or loss of interest until 31 December 2015;
- amendments to the disclosure rules in Chapter 17 of the Depositor Protection Part to provide clarity on how the information sheet should be provided and allow firms greater flexibility, particularly where no annual account statement is provided;
- amendments to the information sheet in Annex 1 of the Depositor Protection Part to address compensation arrangements for small local authorities; and
- an amendment to the Dormant Account Scheme Part in respect of the class J tariff base to ensure a funding approach that is consistent with the class A tariff base in the Depositor Protection Part (under which an amendment in respect of dormant accounts was confirmed in PS15/15 ‘Depositor and policyholder protection- technical amendments’).
Summary of rule changes
As a result of the feedback received from industry and retail depositors, this PS outlines the changes following consultation, including:
- an amendment to provide that any requests for withdrawals received before 1 October 2015 are treated as if they were received on 1 October 2015 (rather than requiring firms to action requests from 1 August 2015) to allow firms time to prepare their processes and systems;
- in cases where depositors have multiple accounts at the same firm, enabling firms to choose which account(s) the withdrawn amounts will be taken from, provided firms do not require the withdrawal from a transactional account;
- clarifying that depositors should not lose interest on remaining funds solely as a result of managing to the limit, except when the amount of the remaining deposit would put the deposit into a lower tier of interest rates under the original terms of the product;
- clarifying that where a firm’s processes do not support partial withdrawals, and closure of the entire product or account is necessary, the PRA considers that the effect of Depositor Protection 57 is that firms should not impose any early closure charges and customers should be offered a new product with the same characteristics for the funds not withdrawn pursuant to Depositor Protection 57.6; and
- amending the rule to calculate the amount that can be withdrawn with reference to the estimated value at maturity less the new £75,000 coverage level, to a maximum of £10,000.
The appendices in the PS set out:
- amendments to the Depositor Protection rules found in the Depositor Protection Part of the PRA Rulebook, as well as an amendment to the Dormant Account Scheme Part; and
- an updated version of SS18/15’Depositor and dormant account protection’.
Appendices
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Depositor Protection and Dormant Account Scheme (Amendment No. 6) Instrument 2015 (PRA 2015/62) - Supervisory Statement 18/15
History
For reference, this PS is part of a series of policy developments, details of which can be found in the FSCS '2015 updates page' available in the FCSC section of the website.
Published on 3 July 2015
Depositor and dormant account protection – consequential amendments CP23/15
Update: On 31 July 2015, the PRA published PS18/15 ‘Depositor and dormant account protection – consequential amendments’ which provides feedback to responses to CP23/15, final rules and an updated SS18/15 ‘Depositor and dormant account protection’.
Background
This consultation paper (CP) sets out proposed changes to the Depositor Protection and Dormant Account Scheme Part in the Prudential Regulation Authority (PRA) Rulebook. The proposed rules are intended to advance the PRA’s general objective of promoting the safety and soundness of PRA authorised firms by reducing the adverse effects the failure of PRA authorised firms could be expected to have on the stability of the UK financial system.
New requirements are proposed following the change to the deposit protection limit, covered in PS14/15 ‘Depositor and dormant account protection - the protection limit’, to ensure that all depositors experiencing a decrease in Financial Services Compensation Scheme (FSCS) protection are given the opportunity to adjust to the new limit, without incurring any penalties, charges or loss of interest.
Minor rule changes are also proposed following consideration of feedback to the disclosure rules consulted on in earlier PRA depositor protection consultations. These include CP20/14 ‘Depositor protection’, CP4/15 ‘Depositor, dormant account and policyholder protection - amendments’ and CP15/15 ‘Depositor and dormant account protection- further amendments’ (the CPs) published in October 2014, January and April 2015 respectively. Following the CPs the PRA published PS6/15 ‘Depositor and dormant account protection’ and PS9/15 ‘Depositor and dormant account protection- further amendments’ containing amended rules in April and May 2015.
The proposed rules seek to confirm and clarify arrangements around how firms should provide the information sheet and eligibility information to depositors, which is supported by amendments to SS18/15 ‘Depositor and dormant account protection’. An amendment to the Dormant Account Scheme rules is also proposed.
This package of proposed measures is being published alongside PS14/15 as a set of PRA publications designed to address the protection limit change and as such firms should refer to this CP, PS14/15, and SS18/15 together.
The consultation is relevant to
- UK banks, building societies and credit unions as well as to overseas firms with PRA deposit-taking permission;
- the Financial Services Compensation Scheme (FSCS), as the administrator of the UK’s Deposit Guarantee Scheme (DGS) and Dormant Account Scheme (DAS);
- depositors; and
- dormant account fund operators.
Summary of the proposals covered by the CP
This CP proposes:
- new rules in the Depositor Protection Part to ensure depositors experiencing a decrease of deposit protection from the limit change are able to withdraw affected funds without charge, penalty or loss of interest from 1 August 2015 until 31 December 2015;
- amendments to the disclosure rules in Chapter 17 of the Depositor Protection Part to provide clarity on how the information sheet should be provided and allow firms greater flexibility, particularly where no annual account statement is provided;
- amendments to the information sheet in Annex 1 of the Depositor Protection Part to address compensation arrangements for small local authorities; and
- an amendment to the Dormant Account Scheme Part in respect of the class J tariff base to ensure a funding approach that is consistent with the class A tariff base in the Depositor Protection Part (under which an amendment in respect of dormant accounts was confirmed in PS15/15 ‘Depositor and policyholder protection- technical amendments’).
The appendices in the CP set out:
- proposed amendments to the Depositor Protection rules found in the Depositor Protection Part of the PRA Rulebook, as well as an amendment to the Dormant Account Scheme Part; and
- an amended version of SS18/15.
Responses
The consultation closed on Friday 24 July 2015.
History
For reference, this CP is part of a series of policy developments, details of which can be found in the ‘Depositor, dormant account and policyholder protection – summary’ available in the FSCS section of the website.