Banks should warn savers they’re unprotected, MPs say

Banks should warn savers they’re unprotected, MPs say

It has raised concerns that awareness about compensation limits is still too low, with a previous study in December finding that just 12pc of people know exactly how much of their money would be protected if their bank went under.

The lack of awareness has persisted despite rules coming into force last August which mean that banks, building societies and credit unions must prominently display stickers or posters publicising compensation levels.

The savings safety net’s latest research also found that more than three-quarters of MPs believe that banks and building societies should include information about the FSCS in their advertising and four-fifths agree that increasing awareness of the body would boost consumer confidence and financial stability.

Mark Neale, FSCS chief executive, said that awareness about savings compensation is generally high in the United States, where financial institutions routinely include such information in their advertising.

He said: “It’s too late for people to find out about FSCS when a run on a bank starts. We believe firms can, and should, do more.

“Importantly, MPs and the public also support people being told when they exceed the compensation limit. We hope firms will take up the challenge and continue working with us to improve awareness of the Financial Services Compensation Scheme.”

The FSCS has helped more than 4.5 million people and paid out more than £26bn since 2001.

While the scheme covers deposits held with UK banks and subsidiaries of foreign banks which operate in the UK, it does not cover money held with UK branches of European banks, which are covered by the relevant compensation scheme in the country where the bank has its head office.

The issue of savings protection was recently highlighted by the crisis in Cyprus, when it was announced last week that around 15,000 savers in the UK arm of stricken Cypriot bank Laiki would have their deposits transferred to Bank of Cyprus UK, which operates as a fully-fledged stand-alone bank in this country, meaning that its deposits are protected by the FSCS.

The FSCS’s findings are based on a survey of more than 150 MPs and 1,000 consumers.

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