Savers' deposit protection to be lifted back to to £85,000

The banking regulator wants to lift the level of protection on savers' deposits to £85,000 from £75,000 in the event of a bank's collapse.

The Prudential Regulation Authority has begun consulting on restoring the £85,000 deposit protection limit under the Financial Services Compensation Scheme.

Banks would have until 30 June next year to implement the necessary changes to their systems and published materials.

The limit was reduced to £75,000 from July 2015 because a European Union directive on deposit guarantee schemes required non-euro member states to adjust their deposit protection limits.

"The Directive also requires that limits be adjusted outside of the five-year review cycle following the occurrence of unforeseen events such as currency fluctuations. Taking into consideration the developments in financial markets following the UK’s referendum vote on 23 June 2016 to leave the European Union, including with respect to the GBP/EUR exchange rate, the PRA considers that a structural shift in the exchange rate has occurred," the PRA said in a statement on Monday.

"These events were unforeseen when the UK limit was reduced in 2015."

The regulator said it will continue to monitor fluctuations in the exchange rate but, barring unforeseen events, will seek to avoid making further adjustments to the deposit protection limit.