The FSA has confirmed the new deposit compensation limit will increase from £50,000 to £85,000 per person to tie in with new European Economic Area (EEA) regulations.
Coming into force from 31 December, the new deposit limit is the sterling equivalent of the €100,000 limit, effective for all EEA member states at the end of the year.
"Today's announcement completes a radical overhaul of depositor compensation," says FSA director of conduct policy Sheila Nicoll.
"In future, all the still-separate national compensation schemes across the entire European Economic Area will offer cover at €100,000 or the local currency equivalent - a limit which will protect the vast majority of depositors."
Further changes coming into effect on 31 December include faster payout rules, with a seven-day payout target for the majority of claimants, and the ring-fencing of customer deposits if they have savings and loans with the same firm.
This pan European requirement replaces the existing UK arrangement, in place since 2009, allowing for separate compensation cover for customers with deposits in two merging building societies.
The FSCS covers deposits with UK banks and subsidiaries of foreign banks operating in the UK, but deposits in branches of EEA banks operating in the UK will be covered by the scheme of the country where the branch is headquartered.
In the New Year, the FSCS will begin a publicity campaign informing customers of the compensation limits.
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