LONDON - The Financial Services Authority (FSA) has called on UK banks to spend an estimated £891.8 million on IT systems to speed up the process of consumer compensation in the event of a bank collapse. The FSA made the suggestion in a new consultation paper recommending enhancements to the existing Financial Services Compensation Scheme (FSCS).
The FSCS acts as the failsafe for deposit holders to the extent of £50,000 if their bank goes bust - as several have or have threatened to do in the past year. The IT recommendation would speed up the flow of information (customers' names and their deposits) from the bank to the FSCS within 48 hours, allowing compensation within seven days.
The FSA makes five suggestions. The first is for the simplification of eligibility requirements for deposit compensation to include all private individuals and small entities. The second is for gross payout, which would ignore any debts the depositor has with the same firm.
Third and fourth are for the firm to hold up-to-date information to allow quick claim processing, and that firms provide information on the existence and basic coverage of the FSCS for deposits.
The FSA also recommends requiring firms to tell consumers which trading names are covered by a particular authorisation. To read more, the consultation paper may be downloaded here.