On 5 August 2020, the PRA published Policy Statement 19/20: Financial Services Compensation Scheme – Temporary High Balances Coverage Extension (PS19/20).

In PS19/20 the PRA provides feedback to responses to Consultation Paper 6/20: Financial Services Compensation Scheme – Temporary High Balances Coverage Extension (CP6/20). It also includes final policy in the form of amendments to the Depositor Protection Part of the PRA Rulebook (Appendix 1) and the updated Statement of Policy ‘Deposit Guarantee Scheme’ (SoP) (Appendix 2).

The PRA’s temporary high balance (THB) rules currently extend Financial Services Compensation Scheme (FSCS) coverage from £85,000 to £1 million for a period of six months from the point of deposit for certain qualifying life events, including monies deposited in preparation for the purchase and proceeds from the sale of residential properties, benefits payable on death, and life assurance payouts.

In CP6/20, the PRA proposed to increase the THB coverage period from six months to twelve months up until, and including, Sunday 31 January 2021. The PRA further proposed that the THB coverage period would revert back to six months on Monday 1 February 2021. The length of coverage for each THB would be determined by reference to the date on which a THB is credited to a depositor’s account (or to a client account on a person’s behalf), or the first date on which the THB becomes legally transferable to the depositor, whichever is later. These proposals were made in order to mitigate the consumer protection issues caused by the impact of the Covid-19 pandemic on residential property and investment markets, and access to banking services for some depositors.

In PS19/20 the PRA reports that it received two responses to CP6/20, both welcoming the proposals. The PRA does not consider that the responses raised issues that would lead to any alteration of the proposals consulted on.

The rule change and updated SoP will be effective on Thursday 6 August 2020. Coverage for THBs will revert to six months from Monday 1 February 2021.