PS7/23 – Depositor Protection

On July 3, 2023, the Prudential Regulation Authority (PRA) issued new Policy Statement (PS7/23) in response to Consultation Paper (CP9/22) in connection with the Deposit Guarantee Scheme (DGS), the Authority’s dormant account and continuity of access provisions, and the Financial Services Compensation Scheme (FSCS) which was issued in September 2022 (please see EventID 17591 in this context for more information).
Specifically, this Policy Statement briefly summarizes the feedback the PRA has received to its consultation and publishes the final adjustments to above noted documents and rules as far as those issues are concerned that have not been dealt with already in PS10/22 and PS2/23. Such issues concern the temporary high balances (THBs), FSCS protection for firms in default, withdrawal rights during deposit transfers, and FSCS protection notification rights. In this context the PRA sought to
– clarify that trustees of bank accounts are considered account holders and thus can make a „temporary high balances“ claim which permits – up to six months after a merger or restructuring – a client of a depository institution to have its deposits protected up to £1 million;
– clarify that firms must be authorized at the time they default for depositors to be eligible for compensation;
– remove the annual notification requirements as regards the Financial Services Compensation Scheme for customers that are simply ineligible to take advantage of the FSCS; and
– only apply the withdrawal right of depositors to circumstances where the depositor protection has been reduced following the restructuring of an entity (up to now depositors were allowed to withdraw their funds from the entity regardless of whether the restructuring affected overall FSCS protection).
According to the PRA, the final changes will be (have been) implemented as proposed with some minor revisions to the rules pertaining to joint accounts and THBs to enhance clarity and readability. Consequently, the provisions concerning the extension of FSCS protection for a surviving joint account holder have been relocated from chapter 10 to chapter 4 of the DP Part and a new rule has been introduced to define „relevant person“ for purposes of the THB regime.
Also, the PRA has made some adjustments to the above noted supervisory statement and to the statement of policy as regards Deposit Guarantee Schemes which were deemed insignificant by the PRA as they don’t affect the intent of its policies. These changes are based on the PRA’s own initiative and do not correspond to any requests by commenters.
The final changes became effective on July 1, 2023.