The Financial Services Compensation Scheme has extended its protection for consumers with temporary deposits of up to £1m amid concerns surrounding access to banking services in the aftermath of the coronavirus crisis.
Later this week the financial lifeboat body will temporality increase the length of time for which it will protect temporary high balances of up to £1m from six to 12 months.
The protection will apply in scenarios where deposit-takers fail handling temporary balances such as funds deposited in preparation for buying a main residence, those paid in relation to a divorce, redundancy payout or compensation when someone dies.
The extension will only apply to deposit-takers which fail after August 6, when the extra protection comes into force.
Caroline Rainbird, chief executive at the FSCS, said: "The coronavirus pandemic has been very worrying for everyone, and people are understandably concerned about the possibility of losing their temporary high balance should their deposit taker fail.
"The temporary extension of FSCS's protection from six to 12 months will do much to reassure them should the worst happen during these uncertain times."
The FSCS said the move comes in response to the impact of Covid-19 on the residential property and investment markets, with some consumers facing reduced access to banking services.
Where a deposit-taker fails after August 6 the extension will apply to both new and existing temporary high balances received.
Funds deposited into an account with an authorised UK bank, building society or credit union in February 2020 - with the six-month coverage due initially to end in August 2020 - will now be protected until February 2021.
The levy which funds the FSCS has hit the headlines in recent weeks, with some advisers warning its increasing bill could force them to increase their fees in an attempt to balance the books.
It comes amid frequent concerns raised by the industry that the current levy set-up means the "polluter" often fails to pay for consumer compensation, with firms remaining in the industry left to pick up the bill.
rachel.mortimer@ft.com
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