City watchdog recommends keeping consumer protection cap unchanged

The City watchdog today suggested the amount of money consumers can claw back if their bank, building society or investment company collapses should stay the same.

The Financial Conduct Authority (FCA) said in a new policy paper published today that the £85,000 limit is sufficient to solve the majority of cases.

The regulator did recommend reviewing the cap once every three years to ensure it keeps up with inflation.

The suggestion was outlined in a new paper in which the FCA is exploring ways to tweak the Financial Services Compensation Scheme, which provides consumers’ deposits with insurance if their bank fails.

“Generally, we consider the current levels, which were only recently changed, represent an appropriate level of consumer protection in that they are at an adequate level to cover a reasonable proportion of customers’ claims,” the FCA said.

In order for consumers to build up trust in the financial system, they need to “have an appropriate level of protection if things go wrong – and that [the FCA] find a fair and sustainable way of funding the cost of this protection,” said Sheldon Mills, the watchdog’s executive director for consumers and competition.