PS24/25 – Depositor protection

1: Overview

1.1 This Prudential Regulation Authority (PRA) policy statement (PS) provides feedback to responses the PRA received to consultation paper (CP) 4/25 – Depositor protection, and contains final rules relating to the limits for deposit protection available from the Financial Services Compensation Scheme (FSCS).^{footnote [1]} It also contains the PRA’s final policy, as follows:

• amendments to the Depositor Protection Part of the PRA Rulebook (Appendix 1);
• amendments to supervisory statement (SS) 18/15 – Depositor protection (Appendix 2); and
• amendments to the statement of policy (SoP) 1/15 – Deposit guarantee scheme (Appendix 3).

1.2 This PS is relevant to PRA-authorised UK banks, building societies and credit unions; overseas firms with permission to accept deposits where the deposits are held by a UK branch or subsidiary of the firm; the FSCS; and depositors.

Background

1.3 The FSCS is the UK’s deposit guarantee scheme. It protects eligible deposits by providing compensation to depositors if a firm fails, up to limits set by the PRA. In CP4/25, the PRA proposed amendments to the depositor protection framework in connection with the level of protection available from the FSCS. In particular, the PRA proposed to:

• increase the deposit protection limit from £85,000 to £110,000 with effect from 1 December 2025;
• increase the limit applicable to certain temporary high balance (THB) claims from £1 million to £1.4 million with effect from 1 December 2025;^{footnote [2]}
• require firms to update disclosure materials and deposit compensation information by 31 May 2026;
• update SS18/15 – Depositor protection with the PRA’s expectations on the proposed rule changes, and to correct references and delete expired text, with effect from 1 December 2025; and
• update the SoP1/15 – Deposit guarantee scheme to reflect the proposed rule changes, with effect from 1 December 2025.

Accountability framework

1.4 In determining its policy, the PRA considers representations received in response to consultation, publishing an account of them and the PRA’s responses (feedback), including details of any significant changes to the policy consulted on. In this PS, the ‘Summary of responses’ contains a general account of the representations made in response to the CP and the ‘Feedback to responses’ chapter contains the PRA’s feedback.

1.5 In carrying out its policy making functions, the PRA is required to have regard to various matters. In CP4/25, the PRA explained how it had regard to the most relevant of these matters on the proposed policy. The ‘Changes to draft policy’ section of this chapter refers to that explanation, taking into account consultation responses where relevant. Where the final rules differ from the draft in the CP in a way which is, in the opinion of the PRA, significant, the Financial Services and Markets Act 2000 (FSMA) requires the PRA to publish:^{footnote [3]}

• details of the differences together with an updated cost benefit analysis (CBA); and
• a statement setting out in the PRA’s opinion whether the impact of the final rules on mutuals is significantly different from: the impact that the draft rule would have had on mutuals; or the impact that the final rule will have on other PRA-authorised firms.

Summary of responses

1.6 The PRA received 22 responses to the CP. The names of respondents who consented to their names being published are set out in Appendix 4. The feedback was largely positive about the PRA’s proposals. We also received constructive feedback, as set out in Chapter 2. The key points of feedback covered by respondents related to the appropriate increase in the deposit protection limit; the length of the transition period for its implementation; and some suggestions in relation to the Depositor Protection Part (DPP) rules and SS18/15.

Changes to draft policy

1.7 The final policy is as set out in CP4/25, with the following changes (more detail on these changes is provided in the ‘Feedback to responses’ section of this PS):

• the deposit protection limit is to be increased to £120,000, rather than £110,000 as consulted on;
• further amendments have been made to the DPP rules in light of feedback received; and
• further amendments have been made to SS18/15 in light of feedback received.

1.8 The PRA considers that the changes made to the draft rules and related policy materials do not substantially amend the substance of the proposals in CP4/25. In particular, while the new deposit protection limit is higher than the figure the PRA consulted on, the rationale for increasing the limit – to account for inflation since the limit was last changed – remains as stated in the CP. Instead, the further change reflects developments since the consultation. Therefore, the PRA objectives analysis, opinion on the impact of its proposals on mutual societies, and consideration of have regards for these proposals remain the same as set out in CP4/25.

1.9 The changes are also judged to not have a significant impact on the PRA’s CBA included in CP4/25. Potential compensation costs could be higher in the event of a firm failure as a consequence of the additional increase in the deposit protection limit, but an update of the analysis presented in the CP suggests that they are unlikely to be substantially so.^{footnote [4]} The expected implementation costs will not change as a result of the change in the limit.

1.10 On the benefits side, the revised deposit protection limit would not have a material impact on the proportion of depositors currently fully protected relative to the proposal that was consulted on. Nonetheless, the PRA considers that the new deposit protection limit will help ‘future proof’ the limit to some extent, helping to secure the consumer confidence and financial stability benefits associated with the policy change.^{footnote [5]}

1.11 More generally, considering that this consultation has provided an opportunity to refine certain elements of the depositor protection framework for the first time since the UK left the European Union, the feedback the PRA received from stakeholders has been invaluable in helping the PRA to improve that framework for the benefit of both depositors and the financial services industry.

1.12 In line with the Deposit Guarantee Scheme Regulations 2015 (DGSR), HM Treasury has confirmed its approval of the change to the deposit protection limit.^{footnote [6]}

Implementation and next steps

1.13 The new deposit protection and THB limits will apply from 1 December 2025 (for firm failures occurring on or after that date). Firms are required to update their single customer view (SCV) systems – which provide information about eligible deposits to enable the FSCS to quickly compensate depositors in the event of a firm’s failure – to reflect the new limit from that date. The updated versions of SS18/15 and SoP1/15 will also apply from 1 December 2025.

1.14 Deposit takers will then have up to six months to make changes to disclosure materials, which will need to be completed no later than 11.59pm on 31 May 2026.

1.15 The FSCS will make available information on its website to assist firms in connection with the new limits and information requirements.^{footnote [7]}

2: Feedback to responses

2.1 Before making any proposed rules, the PRA is required by FSMA to have regard to any representations made to it in response to the consultation, and to publish an account, in general terms, of those representations and its feedback to them.^{footnote [8]}

2.2 The PRA has considered the representations received in response to the CP. This chapter sets out the PRA’s feedback to those responses, and its final decisions.

2.3 The responses have been grouped as follows:

• the deposit protection and THB limits;
• the implementation date and transition period;
• other amendments to the DPP rules and SS18/15; and
• other points raised.

The deposit protection and THB limits

2.4 In CP4/25, the PRA proposed to increase the deposit protection limit from £85,000 to £110,000, with effect from 1 December 2025 (for firm failures occurring on or after this date).^{footnote [9]} The proposed increase considered consumer price inflation (CPI) since the limit was last changed in 2017 and was judged to help maintain consumer confidence by ensuring that the limit was not eroded in real terms.

2.5 Nineteen respondents referred to the proposed increase in the deposit protection limit. All respondents supported some increase to the limit, as follows:

• twelve respondents supported the proposed increase to £110,000;
• two respondents supported an increase to £115,000, to more closely align to the unrounded figure of £113,669 that uprated £85,000 for CPI inflation between 2017 and the end of 2024, as referenced in the CP;
• four respondents argued for a limit of between £130,000 and £155,000, on the basis that it would account for inflation since the £85,000 limit was first introduced in 2010. Two of those respondents suggested that a higher limit would be preferable for small and medium-sized enterprise (SME) depositors and would support competition by increasing the attractiveness of placing deposits with challenger banks; and
• a trade body explained that most of its members supported an increase to £110,000, although some had suggested a limit of £100,000 would be more memorable and some argued for a higher limit up to £125,000.

2.6 The PRA has considered the appropriate figure for the updated limit taking into account the feedback received and that the CPI used in the inflation calculation has continued to increase since the proposal in the consultation was agreed. As a result, the PRA has decided to increase the deposit protection limit to £120,000. Based on the September 2025 CPI (the latest available monthly figure), £85,000 in January 2017 has increased to £116,770 in real terms. This points to a revised limit of £120,000 if rounded to the nearest £10,000.

2.7 While some consultation respondents suggested that the PRA should increase the limit even further to reflect the effect of inflation from 2010 when the £85,000 limit was first introduced, the PRA considers that 2017 represents the most appropriate starting point for the inflation calculation, as it was the last time the limit was reviewed and updated. Furthermore, the PRA does not consider that there is a strong justification for increasing the limit by more than inflation, considering the high proportion of depositors that would be protected by the £120,000 limit, and given the extra prospective burden on firms associated with a higher increase. The PRA also notes that some respondents suggested the possibility of increasing the limit to £100,000 or supported the original proposal to increase to £110,000. As a result, the PRA considers the change to £120,0000 reflects the balance of consultation feedback received.

2.8 The PRA did not receive any feedback questioning the proposal to increase the THB limit to £1.4 million. Furthermore, the latest inflation calculation used to determine the new THB limit continues to point to a revised limit of £1.4 million.^{footnote [10]} Accordingly, the THB limit has been increased to £1.4 million with effect from 1 December 2025, as consulted on.

The implementation date and transition period

2.9 In CP4/25, the PRA proposed that the new limits would apply from 1 December 2025 and that firms would then have a six-month transition period to update disclosure materials. Firms would also be required to update their SCV systems to reflect the new deposit protection limit from 1 December 2025. Twelve respondents referred to the implementation date and transition period:

• seven of the respondents acknowledged or supported the implementation and transition proposals;
• one respondent suggested that the six-month transition period was too long, arguing that consumers should be given accurate information about the new limits straight away once they were implemented; and
• four respondents indicated that a longer implementation period was required, considering the challenges associated with implementing changes. This included a response from a trade body for credit unions, which argued that some credit unions would require longer than six months.

2.10 Having considered the responses the PRA has decided to maintain the implementation date and transition period that was proposed in CP4/25. Although some respondents raised concerns about the challenges that the proposed timings would cause, the PRA considers that the requirements are reasonable and should be manageable. Delaying the implementation date would delay the realisation of benefits that will arise from the policy changes, while extending the transition period could lead to greater customer confusion about what the protection limits are (although there would be no direct financial risk to depositors during the period). The timings are broadly in line with the time allowed for implementation following previous changes. For example, when the deposit protection limit was last changed in January 2017, firms were given five months to update disclosure materials. Furthermore, it is important that firms are ready to deal with an unexpected change to the deposit protection limit if it needs to be changed at short notice (and we consulted on guidance to be reintroduced into SS18/15 in CP4/25 to make this clear).

2.11 The PRA has also considered the point made by a trade body for credit unions, which stated that the six-month transition period would mean that many credit unions would need to issue updated disclosure materials outside their usual cycle. While the PRA recognises that credit unions might have different engagement cycles to some other firms, our CBA accounted for the cost of issuing updated disclosure materials, estimating average implementation costs of £1,000 for credit unions. Our CBA explained that the cost of our proposals was judged to be commensurate with the benefits – which would fall to credit unions along with other firms.

Other amendments to the DPP rules and SS18/15

2.12 While the PRA received general support on the proposals to update disclosure materials, 22 comments were received (with some respondents raising multiple points) about aspects of the proposed updated requirements. These included comments about the requirement to provide depositors with an updated version of the information sheet and exclusions list, and other matters relating to the DPP rules and SS18/15. The 22 comments were categorised into 16 individual themes. Following an analysis of the issues, it was decided that:

• In response to five of the themes raised, amendments would be made to the DPP rules (in addition to the change to the deposit protection limit). These include amending the requirement for firms to display the FSCS compensation sticker and poster to exclude branches where a firm does not deal with depositors in person, clarifying the scope of ‘third-party premises’ (to tighten the requirement and more closely reflect models such as banking hubs), and updates to the information sheet to address points raised about accessibility. These amendments are shown in rows 2-6 in Table A.
• In response to three of the themes, amendments would be made to SS18/15 to clarify existing requirements. In addition, new guidance is to be introduced on ‘third-party premises’, to support the new requirements for models such as banking hubs as mentioned above. See Table B.
• In response to eight themes, no amendments to rules or related policy materials would be made. See Table C.

Table A: Summary of amendments to DPP

Table B: Summary of amendments to SS18/15

2.13 Other than the above amendments – and the change to the new deposit protection limit – no other material amendments to the rules and accompanying policy materials consulted on have been made.^{footnote [11]} The PRA did not receive any feedback on SoP1/15; the version of that document which was consulted on has been updated to reflect the revised deposit protection limit and to address immaterial points of clarification suggested by the FSCS.

2.14 Table C summarises points of feedback that did not lead to changes to the DPP rules or related policy materials, and the PRA’s rationale.

Table C: Comments that did not lead to changes to DPP rules or related policy materials

Other points raised

2.15 The PRA received 17 comments which related to the FSCS’s communication activities regarding depositor protection. These included calls for clearer information for depositors and guidance for firms. Respondents also stressed the importance of a coordinated approach to industry communications. The FSCS will ensure that the suggestions are factored into the updates that it plans to make to its website and materials for firms ahead of the implementation of the new limits.

2.16 One respondent (a trade body) provided information on the implementation costs that would fall to credit unions in relation to the change to the deposit protection limit. The PRA considers that the costs referred to by the trade body were broadly consistent with the estimated implementation costs for smaller firms referred to in our CBA – which were considered commensurate with the benefits of the proposals. Furthermore, the trade body mentioned the cost savings which would be associated with sending disclosure materials electronically. Firms are permitted to discharge their DPP information providing obligations electronically in certain circumstances, in accordance with DPP 21.

2.17 The PRA also received feedback which was not directly relevant to the policy proposals that it consulted on. For example, one respondent queried the protection that is available for credit unions’ own deposits, and another respondent queried the availability of THB protection for charities. The PRA has not provided feedback to these responses in this PS but may consider the points raised in further policy development.