On 31 March 2025, the Prudential Regulation Authority (PRA) published a consultation paper, CP4/25, setting out proposed changes in relation to the deposit protection available from the Financial Services Compensation Scheme (FSCS). The PRA is responsible (under the Financial Services and Markets Act 2000) for making rules in relation to depositor protection.

There are two sets of proposals, which relate to:

  • Increasing the limits on the protection available to a firm’s depositors from the FSCS if a firm fails.
  • Updating the rules that would be needed to facilitate the implementation of proposals made in the Bank Resolution (Recapitalisation) Bill (the Bill).

Increase in depositor protection limit

The PRA’s proposals in relation to protection limits include:

  • Raising the deposit protection limit from £85,000 to £110,000 with effect from 1 December 2025 (for firm failures occurring on or after that date).
  • Increasing the limit applicable to certain temporary high balance (THB) claims from £1 million to £1.4 million, also with effect from 1 December 2025 (for firm failures occurring on or after that date).
  • Changes to the information firms are required to disclose to depositors and other consumers, both in relation to the updated protection limits and the availability of protection more generally. A six-month transitional period is proposed, until 31 May 2026, for firms to update their disclosure materials.

Updates relating to Bank Resolution (Recapitalisation) Bill

The Bill proposes to introduce a new resolution tool which would enable industry funds (provided via the FSCS) to be used to recapitalise a failing firm to support its sale or transfer to a bridge bank, where its use is judged to be in the public interest. Those proposals, which HM Treasury consulted on in January 2024, would expand the FSCS’s functions to include making recapitalisation payments and levying firms to recoup those payments.

The PRA is proposing to introduce new and amended rules to enable the FSCS to fulfil those new functions under the Bill. It explains that it is consulting on the proposals now on the assumption that the Bill remains in substantively the same form, so that the proposed consequential changes to the PRA rules can be made to implement the new mechanism as soon as possible. If the proposals set out in the Bill are not ultimately made, the PRA would not introduce its associated proposed changes.

Other changes

The PRA has also identified certain provisions that are now spent and references that are no longer required, and is proposing to modify or delete certain chapters of its Rulebook accordingly.

Next steps

The deadline for responses to CP4/25 is:

  • 30 June 2025 for proposals related to the FSCS protection limits.
  • 30 April 2025 for proposals related to the Bill. (This shorter consultation period is to ensure that the necessary rule changes can be made in time to allow the FSCS to fulfil its new functions should the Bill receive royal assent.)

The PRA expects to confirm its final rules (including final implementation dates) for the new deposit protection limits in a policy statement in November 2025. Any changes to the deposit protection limit will require approval from HM Treasury.

Timings for a policy statement on the changes relating to the Bill will depend on when it receives royal assent.