The Financial Services Authority (FSA) today introduced a rule change which will enable a building society which merges with the subsidiary of another mutual society, which is not itself a building society, to keep its separate deposit or protection compensation limit providing the merging society continues to operate the business of the merged firm under its former name.
The rule change, which will operate on a temporary basis until September 2009, will help existing customers with savings in two merging firms who may find that their combined deposits in the successor institution exceeds the £50,000 maximum deposit protection limit for the Financial Services Compensation Scheme (FSCS).
The rule change is similar to one introduced by the FSA in November 2008, which also operates on a temporary basis until September 2009, which enables a building society which merges with another building society to keep its separate depositor protection compensation limit providing the merging society continues to operate the business of the merged society under its former name.
The amendment to the FSA Compensation Sourcebook has been made without following the normal consultation and cost benefit analysis procedures in line with the Financial Services and Markets Act 2000 ('FSMA') section155 (7), which provides that the procedures do not apply if the FSA “considers that the delay involved in complying with them would be prejudicial to the interests of consumers”.
The FSA is currently consulting on wider reforms to the FSCS, including rules surrounding whether deposits are covered on a legal entity, a ‘brand’ or an ‘account’ basis, and will put the appropriate permanent solution in place later this year.
Compensation Sourcebook (Building Society and Other Mutual Society Mergers) Instrument 2009 [PDF]
