Improving depositor outcomes in bank or building society insolvency

The Prudential Regulation Authority, PRA, has published a statement to provide an update on its work relating to the facilitation of prompt payments by the Financial Services Compensation Scheme (FSCS) to depositors in case of insolvency of a bank or building society. Specifically, the PRA states that it has been been working with stakeholders on the evaluation of three initial measures to help effect payments to depositors within a short period of time (seven days) to minimize disruptions caused by such insolvencies:
1. the creation of a web portal where a depositor could provide instructions to the FSCS as to the placement of funds in alternative bank accounts. As a consequence, the FSCS would no longer need to send out cheques, but could rather deposit the money in the alternative account provided by the depositor.
2. the utilization of the Current Account Switch Service (CASS) infrastructure to enable the redirection of payments and the sharing of payment information „made to / from the insolvent institution“.
3. the improvement of support for those customers that are forced to open a new account at another institution following the insolvency of their own institutions – particularly in cases, where customers are faced with barriers to opening a new account.
The PRA concludes by stating that the work is still at an early stage and that it will continue to engage with relevant stakeholders to „explore the feasibility, costs, and timelines for these three component parts“. Nevertheless, it will work towards the provision of a solution in 2023.