UK Bank Deposit Protection Reduced - Preparation For Bail In?

The Prudential Regulation Authority, the Financial Services Authority successor with responsibility for regulation of banks, has announced a reduction in the levels of savings protected by the Financial Services Compensation Scheme.

The Financial Services Compensation Scheme is the compensation scheme in the UK for bank customers. designed to protect savings in the event of a bank failure.

Until yesterday, 3rd July, that compansation was set at a maximum of £85,000. As from yesterday, however, the level of compensation has been reduced to £75,000, a fall of just over 13%.

In parallel with the change, the Treasury put in place legislation which will maintain the previous level of £85,000 for a further period of six months for anyone already covered by the FSCS. So current bank customers will continue to have the higher level of protection until the 31st December this year.

The changes to the scheme also see the types of deposits covered by the scheme expanded to include corporate customers.

The changes have come about to bring the FSCS in line with the EU Deposit Guarantee Schemes Directive, which sets the FSCS coverage level at the sterling equivalent of €100,000, demonstrating once again that Britain has no opportunity to govern itself.

Andrew Tyrie MP, chairman of the Treasury Select Committee, said the FSCS was "defective".

"It is absurd that the 16% depreciation of the euro largely brought about by the crisis in the eurozone in general, and the Greek crisis in particular, should be forcing a reduction in the level of protection available to UK depositors," he said.

Of course, it is for exactly these reasons that a the level of protection have been reduced; in preparation for bail-in of Europe's bankrupt banks.