Published on 16 January 2017
Deposit protection limit – PS1/17
This Prudential Regulation Authority (PRA) policy statement (PS) provides feedback to responses to Consultation Paper (CP) 41/16 ‘Deposit protection limit’ (the ‘CP’). It also contains final rules (Appendix 1) and an updated Supervisory Statement (SS) 18/15 ‘Depositor and dormant account protection’ (Appendix 2).
This PS is relevant to:
- UK banks, building societies, UK credit unions, as well as to overseas firms with PRA deposit-taking permission (hereinafter 'firms');
- dormant account fund operators;
- the Financial Services Compensation Scheme (FSCS), as the administrator of the UK's Deposit Guarantee Scheme (DGS) and Dormant Account Scheme (DAS); and
- depositors.
In CP41/16 the PRA proposed to:
- reset the deposit protection limit to protect depositors up to £85,000 as of 30 January 2017;
- provide a five month transitional period for firms to amend disclosure, advertising materials and posters and stickers and to update the Single Customer View (SCV) to reflect the new deposit protection limit;
- require firms to notify the PRA if they are ready to implement the rule changes prior to 30 June 2017; and
- update SS18/15 with the PRA's expectations in relation to the above rule changes, correct references and delete expired text.
Feedback on consultation responses
The PRA has made some changes to the rules consulted on in CP41/16 in response to feedback (see Chapter 2). Material changes to the proposals include: allowing firms more flexibility to make changes to customer-facing materials as soon as practicable during the transitional period and removing the requirement that firms notify the PRA. The PRA considers that the changes made to the draft rules are not significant in terms of the impact on mutuals and are likely to reduce costs to firms. Chapter 2 sets out feedback to responses received to PRA proposals.
Implementation
The new deposit protection limit is effective from 30 January 2017. Based on the final rules and expectations set out, firms:
- must make all changes to customer-facing materials required to implement the new deposit limit as soon as practicable after 30 January 2017 and in any event on or before 30 June 2017; and
- are expected to train their customer-facing staff to answer questions from customers about the change in the deposit limit, regardless of when a firm’s written materials are amended, by 30 January 2017 or as soon as practicable after 30 January 2017.
Policy Statement 1/17Appendices
- [PRA RULEBOOK: CRR FIRMS, NON CRR FIRMS, NON-AUTHORISED PERSONS: DEPOSITOR PROTECTION (COVERAGE LEVEL) INSTRUMENT 2017]
- Supervisory Statement 18/15 UPDATE
Published on 21 November 2016
Deposit protection limit – CP41/16
Background
This consultation paper (CP) sets out the Prudential Regulation Authority’s (PRA’s) proposals to reset the deposit protection limit at £85,000.
This CP is relevant to:
- UK banks, building societies, UK credit unions, as well as to overseas firms with PRA deposit-taking permission (hereinafter ‘firms’) ;
- dormant account fund operators;
- the Financial Services Compensation Scheme (FSCS), as the administrator of the UK’s Deposit Guarantee Scheme (DGS) and Dormant Account Scheme (DAS); and
- depositors.
The purpose of the proposals in this CP is to provide depositors with PRA-authorised firms commensurate protection to depositors with firms authorised by regulators in other EU Member States, as required by the recast Deposit Guarantee Schemes Directive (DGSD) which requires the United Kingdom to adjust the deposit protection limit following the occurrence of unforeseen events such as currency fluctuations.
Under the proposals depositors will be protected up to £85,000 as of 30 January 2017.
Between 31 December 2010 and 3 July 2015, the deposit protection limit was set at £85,000. On 3 July 2015 the DGSD became effective, and as required by the Directive the PRA reviewed the exchange rate on that date and set the deposit protection limit at £75,000 (see PS14/15 ‘Depositor and dormant account protection – the protection limit’ under Related Links). On 1 January 2016, the £75,000 deposit protection limit became applicable for all eligible depositors.
Summary of proposals
The PRA proposes to:
- reset the deposit protection limit to protect depositors up to £85,000 as of 30 January 2017;
- provide a 5 month transitional period for firms to implement the new deposit protection limit;
- require firms to notify the PRA if they are ready to implement the rule changes prior to 30 June 2017; and
- update SS18/15 ‘Depositor and dormant account protection’ with the PRA’s expectations in relation to the above rule changes, correct references and delete expired text in the SS.
The proposed amendments to the Depositor Protection Part of the PRA Rulebook are contained in Appendix 1 and the amendments to SS18/15 are contained in Appendix 2.
Responses and next steps
This consultation closed on Friday 16 December 2016.