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Deposit Protection Limit increase to £85,000

The main purpose of our response is to indicate our support for the proposed approach to implementation of the new £85,000 deposit protection limit.  Credit unions are small firms which have limited resources due to their social mission.  As a result, they are disproportionately impacted by costs arising from member communication requirements.  As such, it is very welcome that the Prudential Regulation Authority will not require fresh standalone communications to customers to alert them to the change in deposit protection limit from 30 January 2017.  The ability to update advertising and disclosure materials and Single Customer View systems in a five month transitional period to 30 June 2017 is very welcome. 

We appreciate and acknowledge the PRA’s desire to see firms update their materials and systems to be consistent with the new limit as soon as possible after 30 January and to alert the PRA as soon as both materials and systems are updated in order that new rules can be applied to them.  ABCUL will actively encourage and support our members to undertake this work by providing guidance and assistance as part of our offer to members. 

In the past when disclosure requirements have changed or protection limts been adjusted, the Financial Services Compensation Scheme has provided sample printed materials to deposit takers.  In the case of most credit unions these are sufficient in quantity to meet branch disclosure requirements given their limited customer-facing operations. We hope that FSCS will do the same in this case.

We would also like to use the opportunity of this consultation to request that consideration is given to formalising the flexibility which PRA offered to credit unions in relation to proactive disclosure requirements where the limit decreased to £75,000.   In circumstances where the protection limit decreases we recognise the more-urgent need to communicate this to depositors since it potentially exposes them to a loss in the event of firm failure.  However, for many credit unions the PRA’s prudential framework limits their maximum deposit from individual members to well below the level of the FSCS deposit protection limit due to their small scale.  Similarly, many other credit unions – though they may have the regulatory ability to attract deposits in excess of the limit – either actively discourage such large deposits or simply have not attracted any such deposits.  In recognition of this fact, the PRA allowed flexibility to credit unions in proactively alerting their members to the reduction in the limit by waiving this requirement for any credit union which had no single depositor with balances in excess of £50,000.  This was a very welcome proportionate approach and we would welcome this discretionary approach being formalised in rules.

The full PDF version of this consultation response is available to download on the right-hand side