Published on 04 August 2020
Financial Services Compensation Scheme – Temporary High Balance Coverage Extension - PS19/20
Overview
This Prudential Regulation Authority (PRA) Policy Statement (PS) provides feedback to responses to Consultation Paper (CP) 6/20 ‘Financial Services Compensation Scheme – Temporary High Balances Coverage Extension’. It also includes final policy in the form of amendments to:
- the Depositor Protection Part of the PRA Rulebook (Appendix 1); and
- the updated Statement of Policy ‘Deposit Guarantee Scheme’ (Appendix 2).
This PS is relevant to retail financial consumers who are currently, or who may become, Temporary High Balance (THB) depositors. This PS is also relevant to the Financial Services Compensation Scheme (FSCS) and to all PRA-authorised deposit takers.
Summary of proposals
The PRA received two responses to the CP, both welcoming the proposals. One respondent requested clarification, details of which are set out in section 2 of the PS. The PRA does not consider that the responses to the CP raised issues that would lead to any alteration of the proposal as consulted.
Implementation
The rule change and updated SoP will be effective on Thursday 6 August 2020. Coverage for THBs will revert to six months from Monday 1 February 2021.
The policy set out in this PS has been designed in the context of the UK’s withdrawal from the European Union (EU) and entry into the transition period, during which time the UK remains subject to European law. The PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework at the end of the transition period, including those arising once any new arrangements with the EU take effect.
The PRA has assessed that the policy would not need to be amended under the EU (Withdrawal) Act 2018 (EUWA). Please see PS5/19 ‘The Bank of England’s amendments to financial services legislation under the European Union (Withdrawal) Act 2018’ for further details.
Policy Statement 19/20Appendices
- Appendix 1: PRA RULEBOOK: CRR FIRMS, NON CRR FIRMS AND NON-AUTHORISED PERSONS: DEPOSITOR PROTECTION (TEMPORARY HIGH BALANCES) INSTRUMENT 2020 (pdf)
- Appendix 2: Update to Statement of Policy ‘Deposit Guarantee Scheme’
Published on 09 July 2020
Financial Services Compensation Scheme – Temporary High Balance Coverage Extension - CP6/20
Overview
This consultation paper (CP) sets out the Prudential Regulation Authority’s (PRA’s) proposal to extend coverage under the Financial Services Compensation Scheme (FSCS) for Temporary High Balances (THBs), from six months to twelve months from the date of deposit, or the first date the THB becomes legally transferable to the depositor. The proposed extension of coverage would be for a temporary period, and is being proposed in response to the impact of Covid-19 on residential property and investment markets, and access to banking services for some depositors. THB coverage would revert back to six months from Monday 1 February 2021.
The policy proposals included in this CP are as follows:
- to extend THB coverage up until, and including, Sunday 31 January 2021, from six months to twelve months; and
- to revert back to a six-month THB coverage on Monday 1 February 2021.
The extension in THB coverage would be accompanied by consequential changes to the Depositor Protection Part of the PRA Rulebook (‘Depositor Protection’) (Appendix 1), and to paragraphs 30, 47a, and 47b of the Deposit Guarantee Scheme Statement of Policy. The PRA would not require firms to update the information sheet in Annex 1 of Depositor Protection to reflect the extension to a twelve-month THB coverage. If firms do decide to amend their information sheets, then the PRA would expect firms to ensure that the information sheet is changed back before Monday 1 February 2021.
This CP is relevant to retail financial consumers who are currently, or who may become, THB depositors before Monday 1 February 2021. This CP is also relevant to the FSCS and to all PRA-authorised deposit-takers.
Responses and next steps
This consultation closes on Thursday 23 July 2020. The PRA invites feedback on the proposals set out in this consultation. Please address any comments or enquiries to CP06_20@bankofengland.co.uk.
The proposal to extend coverage for THBs from six months to twelve months from the date of deposit, or the first date the THB becomes legally transferable to the depositor, until and including Sunday 31 January 2021, has been designed in the context of the UK’s withdrawal from the European Union (EU) and entry into the transition period, during which time the UK remains subject to European law. The PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework at the end of the transition period, including those arising once any new arrangements with the EU take effect.
The PRA has assessed that the proposal would not need to be amended under the EU (Withdrawal) Act 2018 (EUWA). Please see PS5/19 ‘The Bank of England’s amendments to financial services legislation under the European Union (Withdrawal) Act 2018’ for further details.