In Industry Insights

What is the Financial Services Compensation Scheme (FSCS)?

The FSCS is a statutory compensations scheme offered to customers of financial services firms (most notably, banks), which will compensate clients in the event that the institution collapses. There is a set compensation limit of £85k (€100,000 or its equivalent) which is set by the European Deposit Guarantee Scheme Directive, and corresponding UK legislation.

The FSCS only protects the first £85k deposited with an “authorised deposit-taking institution”. Banks in particular can have more than one brand covered by their licence, and the deposit protection only applies per banking license. The £85k limit is the total covered under the scheme per individual per institution.

If you hold client money in a client account, you should explain the FSCS – and its limitations – to your client.

Who can claim under the FSCS?

Individuals, small local authorities and small and large companies can claim. Large and small companies are fairly new to the FSCS protection, but some exclusions may still apply to large companies.

What are the recent changes to the FSCS scheme?

Recent changes should speed up payouts under the scheme.

In 2016’s practice note, the FSCS’s aim was to pay within 20 working days, however now, the FSCS aims to pay within 7 days of the bank or building society failing, or within 20 working days for more complex claims.

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