UK cuts deposit guarantees

UK cuts deposit guarantees

LONDON — United Kingdom regulators will reduce the guarantee covering bank deposits by 10,000 pounds (US$15,600) to take account of the decline in the euro against the pound.

Depositor protection provided by the Financial Services Compensation Scheme will cover up to 75,000 pounds as of Jan 1, the  Prudential Regulation Authority (PRA) said on Friday. The current limit is 85,000 pounds.

Under European Union rules, member states must insure deposits of up to 100,000 euros. Countries that use their own currencies must convert the amount every five years.

Sterling has strengthened by around 20% against the euro since 2010, obliging Britain to cut the previous 85,000 pounds of protection.

Authorities said fewer than 5% of customers of banks, building societies and credit unions would be affected by the lower limit.

Deposits of up to 75,000 pounds made by large companies and small local authorities will be covered by the guarantee.

Depositors with temporary high balances will be covered up to 1 million pounds for six months, the PRA also said.

"This is to ensure that depositors are protected when they deposit funds over the limit as a result of specified events, including following a house sale or funds received from a 'life event' such as a divorce settlement or inheritance, for a period of time until they have had sufficient time to spread the risk between institutions to appropriately protect these funds," the regulator said.

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