Laura WilesThe PRA has set out proposals to raise the deposit protection limit of the FSCS from £85,000 to £110,000.
The proposed increase takes into account inflation that has occurred since the current limit was introduced in 2017, as the PRA wants to maintain consumer confidence in the financial services industry by ensuring that it has not been eroded in real terms. Following consultation, the change would be subject to HM Treasury approval, and if pursued the new limit would apply from 1 December 2025 for firm failures occurring on or after this date.
There is a separate deposit limit for balances that are temporarily high (THB) because of specific ‘life events’ such as a residential property transaction. The PRA also proposes to increase the THB claims limit from £1m to £1.4m.
These proposals are part of a wide ranging consultation on FSCS deposit protection. Other proposals include:
- Rules to facilitate the Bank Resolution (Recapitalisation) Bill, which would introduce a tool enabling industry funds provided via the FSCS to be used to recapitalise a failing firm to support its sale or transfer to a bridge bank;
- Changing the information firms are required to disclose to depositors and other consumers to ensure they have clear information about the protection available and the updated limits;
- General changes to disclosure materials to ensure they remain clear and easy to understand;
- Requiring new depositor information to be displayed in third-party premises such as banking hubs; and
- A six-month transitional period until 31 May 2026 for firms to update disclosure materials.
The consultation closes on 30 June 2025 in relation to the FSCS protection limits, and on 30 April 2025 in relation to the Bank Resolution (Recapitalisation) Bill.