Changes to the savings protection offered by the Financial Services Compensation Scheme (FSCS) were announced last week in an attempt to speed up the process.
The FSCS is a scheme which FSA regulated banks, building societies and credit unions must sign up to, and which guarantees protection for up to £50,000 of a person's savings per financial institution.
The scheme was put to the test late last year as savers with Icelandic bank Icesave watched the bank collapse under the pressure of the financial crisis, taking their savings with it.
The FSCS agreed to compensate Icesave savers under special circumstances, but compensation took as long as six weeks to be completed. The new rules announced last week will mean that individuals and small businesses receive compensation within a target of seven days, and all payments must be completed within 20 days – these rules will come into effect on December 31 2010.
Other changes to the FSCS include initiatives aimed at preventing financial institutions from deducting a person's existing debt from the compensation owed, and a requirement for financial institutions to proactively inform customers of any additional trading names which may affect the level of compensation paid.
Commenting, Hector Sants, chief executive of the Financial Services Authority (FSA) said: "To help underpin confidence in our banking system, individuals and small businesses must feel confident that their money is well protected.
"The new rules will help deliver that confidence, build on the successful role of the FSCS to date, and aim to further minimise the potential hardship faced by depositors if an institution defaults."
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