Savings account protection extended for building society mergers

08 June 2009 / by Rebecca Sargent
The Financial Services Authority (FSA) has decided to extend the provision of separate saving deposit protection limits for customers with money in two merging building societies until December 2010.

The measures, which were due to expire at the end of September, were brought in following the merger of Nationwide with the Derbyshire and the Cheshire – both of which were struggling during the recession.

However, since then there have been a number of building society mergers, including Skipton and Scarborough, and the Yorkshire and the Barnsley. The extension also covers customers of a building society which merges with a subsidiary of another mutual, which will apply to Co-op and Britannia building society if the merger is confirmed.

And, as a result, customers with savings account deposits in both merging building societies will find that their money in both is protected up to the Financial Services Compensation Scheme (FSCS) limit of £50,000.

Jon Pain, the FSA's retail markets managing director said: "The interim rules were introduced on a temporary basis to reassure customers involved in particular mergers or transfers. They helped existing savers who wished to keep below the deposit protection limit and also served to reduce withdrawals by savers from successor firms driven purely by compensation considerations.

"We now propose to extend the operation of these rules until December 2010, by which time it should be clear what changes will be made to the EU Deposit Guarantee Schemes Directive. We will then be able to put in place permanent arrangements which will take account of any new EU requirements."

The Building Societies Association (BSA) has welcomed the move, its head of savings policy Brian Morris said that the, "announcement is a welcome, sensible move and means members of societies that have merged, or whose deposits have been transferred to another society, will continue to enjoy the same levels of protection as if the merger or transfer had not occurred.

"It would not be appropriate if moves, such as mergers, designed to reassure and protect members led to a reduction in the levels of FSCS protection for members who have savings in both entities," he added.

© Fair Investment Company Ltd