Finacial Services
Plans to safeguard consumer savings if banks collapse have been put forward by the government. One proposal would see banks having to pay billions of pounds into a compensation pot to fund up front the depositor compensation scheme. The chancellor’s consultation paper, Financial Stability and Depositor Protection: Strengthening the Framework, also questions whether the current level of saver compensation—100% of the first £35,000—should be extended. Farhaz Khan, a barrister at Outer Temple Chambers, says: “Raising the bar on protection in the present political climate is a relatively easy way to shore up consumer confidence in the banking sector generally because it does not fundamentally alter the mechanics, and legal basis, of the scheme.”
Khan says the Financial Services Compensation Scheme (FSCS) will still become assignee of the depositor’s legal rights against the bank when a claim is brought: “Importantly, the FSCS assumes the right to execute the claim in a way that is sensible and appropriate in the circumstances.”
