On November 21, 2016, the PRA published a consultation paper on proposals to reset the deposit protection limit at £85,000. The purpose of the update is to provide depositors with PRA-authorized firms commensurate protection to that of depositors with firms authorized by regulators in other EU Member States. The Deposit Guarantee Schemes Directive requires non-Euro Member States to adjust their deposit protection limits every five years to ensure they are equivalent to the euro limit of €100,000. The DGSD also requires that such countries, including the UK, must adjust their deposit protection limit to take into account currency fluctuations. Following the Brexit referendum on June 23, 2016, the PRA considers that a structural shift in the exchange rates has occurred and to comply with the DGSD, the PRA is proposing that the depositors' protection level be raised to £85,000 from January 30, 2017. This will require an increase of £10,000 pounds from the limit that was set in 2015. The PRA is also proposing a five-month transitional period until June 30, 2017 for firms to implement changes to their disclosure materials, advertising materials and Single Customer View (SCV) and Continuity of Access (CoA) systems to accurately reflect the new deposit protection limit. Prior to June 30, 2017, firms will be required to notify the PRA if they are ready to implement the rule changes and will become subject to the new rules from the next business day following notification. Separate notifications are available for: (i) SCV and CoA systems; and (ii) disclosure and advertising materials. The PRA notes that it will seek to maintain a stable deposit protection limit through uncertainty in foreign exchange markets resulting from the referendum, but will seek to avoid making further adjustments to the limit. Responses to the proposals are due by December 16, 2016.
The consultation paper is available at: http://www.bankofengland.co.uk/pra/Documents/publications/cp/2016/cp4116.pdf .
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