FSCS limit and GBP/euro exchange rate

Chomeur

So the Financial Services Compensation Scheme limit was cut from £85,000 to £75,000 at the beginning of the year because of falls in the value of the euro against the pound. See e.g. http://www.telegraph.co.uk/finance/personalfinance/savings/11716470/FSCS-savings-compensation-rules-the-new-75000-limit.html. So now that the euro has risen against the pound, when does the limit go back up?

ColdIron

It's reviewed every 5 years. As the limit is an EU directive it's unclear what will happen going forward, it could even reduce

dunstonh

So now that the euro has risen against the pound, when does the limit go back up?

Now that we are leaving the EU and the next review date is due after we would be expected to have left, you can more or less forget about Euro-Sterling exchange rate adjustments now.

Going forward, the best guess is that exchange rates will have less influence in future as the figure will be set in the UK and not the EU.

alanq

The limit could be reviewed before 5 years.

"When will the limit be reviewed again?

The directive requires the PRA to review the limit every five years. The limit of £75,000 is unlikely to change before then, unless there are unforeseen events such as significant currency fluctuations. The PRA is required to review the FSCS limit every 5 years, and will manage any future changes in a way that seeks to minimise disruption for depositors."


http://www.fscs.org.uk/what-we-cover/questions-and-answers/qas-about-limit-changes/#question8

bowlhead99

alanq wrote: »

The limit could be reviewed before 5 years.

"When will the limit be reviewed again?

The directive requires the PRA to review the limit every five years. The limit of £75,000 is unlikely to change before then, unless there are unforeseen events such as significant currency fluctuations.

Maintaining the limit at £75k is not by itself going to cause significant capital flight to Europe and keeps the costs lower for the banks than if they increased it to say £85-90k.

So, from the industry's side there is no real push to change anything right now.

And consumers have not lost the ability to keep the £75k per institution protected, that they were planning for since last summer, so don't have to change any plans. Only a small minority of them come up against the limits anyhow.

So, while technically it wouldn't be breaking any rules to change the scheme limits for the second year in quick succession, it doesn't seem like anyone will have the appetite to do that.

The last thing financial services businesses want is more costs (including cost to inform customers of rule changes) for a limited benefit to a tiny minority of customers, when they are busy worrying about European market access and levels of business they will get in the coming years as the changing levels of business confidence pending brexit filter through the economy.