The FSA has proposed setting the new FSCS deposit compensation limit for investors at £85,000 - but says it may revise this figure if the euro-sterling exchange rate deteriorates.
The new sterling limit, set out in today's quarterly consultation paper, will take effect from 31 December and follows on from the increase in the euro maximum amount to €100,000 after changes to European legislation.
Although the change does not come into effect until December, the regulator says it has a statutory obligation to consult on the proposed rules beforehand and, as such, calculated the sterling amount based on the rate of exchange on 1 October.
Using the Bank of England's daily spot rate, €100,000 equated to £86,971 on 1 October. The FSA then rounded off this figure to the nearest whole £5,000 to arrive at the new sterling limit.
It said the £85,000 figure would be easier for consumers to remember, is consistent with article five of the draft directive and is within the €2,500 tolerance level.
"We do not consider that rounding the currency conversion in this way compromises the equivalent protection offered by the UK scheme," it says.
However, the regulator does say if the exchange rate were to move "materially to the consumer's disadvantage", before implementation of final rules it could revise the limit.
Once the rules come into effect the sterling compensation limit will be reassessed and realigned with the euro every five years, as set out in the draft directive published in July
The regulator says fixing the compensation limit for a period of five years will give UK depositors a "degree of stability and certainty" and result in "greater confidence."
Currently investors are only protected on deposits up to £50,000.
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