The deposit compensation scheme for UK banking customers is to increase to around £85,000 from the end of the year.

The Financial Services Compensation Scheme confirmed the rise from the current £50,000 limit on 22 September, following moves by the EU Commission to increase protection for savers.

The FSCS said the Financial Services Authority (FSA) was planning to issue a consultation in October on increasing the coverage limit to the equivalent of €100,000.

The FSCS deposit protection scheme applies to money placed in a bank or similar institution, regulated by the FSA, to earn interest or for safe-keeping.

Earlier this year, the European Union Commission revised the EU Directive on Deposit Guarantee Schemes to improve coverage of national schemes by making the EU wide protection limit €100,000.

At the time the Commission said the increased limit would mean 95 per cent of bank account holders in the EU would receive all of their savings back if their bank were to fail.

On 22 September, members of the European Parliament approved a package of reforms for regulation of banks and financial markets. 

The EU Commission said the final agreement would transform the current supervisory committees for the financial sector “into watchdogs with a bite”.

Amongst measures to improve consumer protection, the measures will mean the new European Supervisory Authorities can investigate financial institutions, financial products or stock market activities.

A European Systemic Risk Board will “develop a common set of indicators” to rate the riskiness of specific cross-border financial institutions, as well as monitoring general risk build-up on the EU economy.

© Fair Investment Company Ltd