The Prudential Regulation Authority proposes raising FSCS deposit protection limit to £110,000

friolento

eskbanker said:

wmb194 said:

The question is whether banks, building societies and all the others who pay the FSCS levy will be happy about this.

In the past the £85k was set to match the €100k EU limit and I haven’t heard mention of the EU increasing it. At today’s exchange rate £85k is about €101.76k. Pointless goldplating? Most people won’t care.

I suspect that the responses to the consultation will be positive from consumers and negative from the industry, although if payouts for protected deposits are generally rare and small then I wouldn't have thought that the levy would increase much anyway?

I'm sure there are many who'd support divergence from the EU just because we can!

All EU countries are free to offer more than 100k Euros protection if they wish to do so. AFAIK, Germany, Austria, Italy and the Netherlands currently have additional voluntary protection schemes. 

What they cannot do is offer schemes with less than 100k Euros.

wmb194

friolento said:

eskbanker said:

wmb194 said:

The question is whether banks, building societies and all the others who pay the FSCS levy will be happy about this.

In the past the £85k was set to match the €100k EU limit and I haven’t heard mention of the EU increasing it. At today’s exchange rate £85k is about €101.76k. Pointless goldplating? Most people won’t care.

I suspect that the responses to the consultation will be positive from consumers and negative from the industry, although if payouts for protected deposits are generally rare and small then I wouldn't have thought that the levy would increase much anyway?

I'm sure there are many who'd support divergence from the EU just because we can!

All EU countries are free to offer more than 100k Euros protection if they wish to do so. AFAIK, Germany, Austria, Italy and the Netherlands currently have additional voluntary protection schemes. 

What they cannot do is offer schemes with less than 100k Euros.

There must be a list somewhere but the Netherlands is €100k with a temporary high balance of €500k for six months so doesn't look like anything special.

https://www.dnb.nl/en/reliable-financial-sector/dutch-deposit-guarantee/

"In some situations, the Dutch Deposit Guarantee offers additional protection of €500,000 for six months per person per bank, on top of the standard protection of €100,000 per person per bank."

wmb194

eskbanker said:

wmb194 said:

The question is whether banks, building societies and all the others who pay the FSCS levy will be happy about this.

In the past the £85k was set to match the €100k EU limit and I haven’t heard mention of the EU increasing it. At today’s exchange rate £85k is about €101.76k. Pointless goldplating? Most people won’t care.

I suspect that the responses to the consultation will be positive from consumers and negative from the industry, although if payouts for protected deposits are generally rare and small then I wouldn't have thought that the levy would increase much anyway?

I'm sure there are many who'd support divergence from the EU just because we can!

Piling on costs when they're already piling on doesn't seem like a great idea. I don't think there's been any public groundswell to see this happen either.

eskbanker

wmb194 said:

eskbanker said:

wmb194 said:

The question is whether banks, building societies and all the others who pay the FSCS levy will be happy about this.

In the past the £85k was set to match the €100k EU limit and I haven’t heard mention of the EU increasing it. At today’s exchange rate £85k is about €101.76k. Pointless goldplating? Most people won’t care.

I suspect that the responses to the consultation will be positive from consumers and negative from the industry, although if payouts for protected deposits are generally rare and small then I wouldn't have thought that the levy would increase much anyway?

I'm sure there are many who'd support divergence from the EU just because we can!

Piling on costs when they're already piling on doesn't seem like a great idea. I don't think there's been any public groundswell to see this happen either.

Agreed, there's little evidence of public pressure, but the review of the limit is driven by a legislative requirement for periodic review every five years, per The Deposit Guarantee Scheme Regulations 2015:

https://www.legislation.gov.uk/uksi/2015/486/regulation/7A

This envisages (but doesn't mandate) inflation-aligned adjustment, and sections 2.9 to 2.16 of the consultation document clarify the PRA's thinking:

As the deposit protection limit is set in nominal terms (ie as a set monetary amount), the amount of protection that it provides – in terms of the goods and services that those deposit savings can buy, for example – can ‘tighten’ over time as prices in the economy rise. The resulting real-terms reduction in the limit could lead to lower depositor confidence in the limit. It can also mean that the proportion of depositors protected can change, in ways which may not be in line with the PRA’s risk appetite. As a result, the PRA considers that the effect of consumer price inflation is an important factor to consider when reviewing the deposit protection limit, to ensure that the limit remains broadly stable in real terms.

[...]

not increasing the limit for inflation could be seen as a tightening of the PRA’s risk appetite, which is not the policy intention

masonic

Perhaps they should have a regular review of the firms that actually went under and whether any improvements could be made to the regulatory regime to avoid recurrence. It seems it's a couple of narrow sections of the market that consistently generate the majority of claims.

eskbanker

masonic said:

Perhaps they should have a regular review of the firms that actually went under and whether any improvements could be made to the regulatory regime to avoid recurrence.

Perhaps they do, although that's presumably more one for the FCA than the PRA?  I don't know if the fact that the only recent failures have been tinpot little credit unions signifies that (for example) the capitalisation requirements of banks are having the desired effect?

masonic

eskbanker said:

masonic said:

Perhaps they should have a regular review of the firms that actually went under and whether any improvements could be made to the regulatory regime to avoid recurrence.

Perhaps they do, although that's presumably more one for the FCA than the PRA?  I don't know if the fact that the only recent failures have been tinpot little credit unions signifies that (for example) the capitalisation requirements of banks are having the desired effect?

It was the PRA that placed capital restrictions on DotCon credit union after they got into trouble (the second time for those running this outfit), rather than the FCA. So I don't know if they generally supervise credit unions, but it is an integral part of the PRA's role to ensure adequate measures are in place to protect financial systems, whereas the FCA deals mainly with consumer interactions.

xylophone

DotCon credit union 

Play on words, typo or Freudian slip?

masonic

xylophone said:

DotCon credit union 

Play on words, typo or Freudian slip?

I can't claim credit for that moniker. It was used frequently in the relevant thread during the slow-motion train wreck.