Compensation for banking failure victims increases

January 16, 2011 at 4:26 pm

The global economic downturn that has affected consumers across the world to such a devastating extent over the past couple of years has raised awareness of just how fragile the banking sector can be. With consumer confidence now at an all-time low and anger towards the banking industry only intensifying with each passing day, the sector clearly faces an uphill struggle to get back on track over the next few years.

However, one small ray of light has emerged for concerned British savers. The Financial Services Compensation Scheme (FSCS) has revealed that it will now reimburse savers up to the sum of £85,000 for single accounts if a bank collapses. The FSCS was established for the purpose of compensating those who fall victim to banking failures but there was previously a £50,000 limit in place for the compensation scheme.

With the sum of £50,000 seeming like mere pennies to those affected by the collapse of a bank, it is hoped that the increased sum of £85,000 per saver will ease customer panic if another bank does crumble under the strain of the recession, hence reducing the damaging knock-on effects that can result from a lack of consumer trust.

New rules concerning the time-scale for compensation payouts have also been introduced, with the majority of claims hopefully settled within the space of a single week and all claims settled within a 20-day period.

The director of conduct policy at the Financial Services Authority (FSA), Sheila Nicoll, stated after the announcement that keeping “customer confidence in the banking system” intact, even during difficult times for the sector, is one lesson that must be taken from the global financial crisis.

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