PRA consults on depositor protection

PRA is proposing a number of changes to its rules, supervisory statements and statements of policy to:

• delete the Dormant Account Scheme part of the PRA Rulebook;
• amend the Depositor Protection Part of the PRA Rulebook; and
• make minor changes to policy documents.

PRA proposes:

• to delete the Continuity of Access Rules, which were designed to ensure depositors still had access to deposits and banking services while the deposit taker was undergoing resolution. Many banks had then been excluded from these Rules by a waiver by consent which is now due to expire.  BoE and PRA feel that the work now being done to develop alternative services to help depositors means that the Rules can be deleted before the waiver expires. This would reduce disproportionate cost for the relatively few firms that the rules were designed to cover;
• to remove the DAS rules from its rulebook, given the wider Dormant Assets Scheme Act 2022 which has had the effect that PRA no longer has the power to provide FSCS protection on repayment claims made in connection with a dormant account fund operator in default, meaning that the DAS rules are obsolete;
• to amend the rules on Temporary High Balances to reflect underlying policy intent and remove ambiguity, specifically on whether a trust can claim a THB on behalf of a beneficiary, and on how the rules apply to joint account holders when one holder dies;
• to make FSCS depositor protection available to eligible customers of an EMI or Payment Institution in respect of relevant proportions of safeguarded funds if the credit institution holding the funds fails.  This will provide the protection PRA had assumed would apply, but which it now wants to clarify in light of recent court cases;
• to clarify that when a UK branch of an overseas deposit taker has its deposit taking permission and authorisation removed, deposits with it will no longer benefit from FSCS protection;
• to clarify when firms need to make notifications of a withdrawal right to depositors;
• to remove the requirement that firms with depositors who are not entitled to FSCS protection notify these depositors annually of the fact; and
• to amend its statement of policy on calculation of risk-based levies.

PRA asks for comments on the Continuity of Access Rules and the Dormant Account Scheme by 21 October, and all other comments by 16 December.