The FSCS could raise its deposit protection to half a million pounds in cases of temporarily high deposits, the FSA has revealed today.
The current maximum deposit protected by the FSCS is £50,000 per individual per bank or building society.
But some bank customers occasionally have balances far in excess of this at a single institution as a result of transactions such as selling a house, receiving an inheritance or pension lump sum, or an award for personal injury. The FSA has proposed increasing the amount protected to £500,000 in these exceptional circumstances, though there may be additional costs for financial services firms if such a plan were to be implemented.
"We are proposing that such transactional temporary high balances should have additional FSCS protection," says Thomas Huertas, director, banking sector, at the FSA.
"Our proposals will protect people who have little or no choice about holding a high balance for a limited period over the current FSCS limit of £50,000 before they can diversify it, if they wish, between different institutions. However, the FSCS is not intended to protect consumers who keep high account balances for a long period, so the extra protection will be time limited."
He adds: "This change would contribute to the banking reform objective of providing effective compensation arrangements in which consumers have confidence."IFAonline
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From 6 April 2019