FSA amends savers’ compensation for merged building societies

by Gill Montia

Story link: FSA amends savers’ compensation for merged building societies

A wave of consolidation among UK building societies has led the Financial Services Authority (FSA) to amend compensation rules for savers who discover they have deposits with mutuals that are undergoing a merger.

As a result of the change, when Nationwide completes its merger with Derbyshire and Cheshire building societies next month, a saver with £50,000 in accounts with all three building societies will be covered for the full £150,000, in the event of a collapse.

Unlike banks, building societies that merge have been obliged to have only one listing with the Financial Services Authority (FSA), leaving dual savers exposed.

However, under the new regime, societies that join forces will need to continue to trade under separate names for customers to benefit from the added protection.

The measure is temporary as the FSA is currently undertaking a consultation on depositor protection and further changes are expected next year.

The move will not only protect depositors but in addition, prevent building societies losing out; savvy savers have already raised concerns over compensation issues and mergers between building societies.

Without the rule change, many would have moved their cash to a new account to avoid the danger of exceeding the £50,000 limit.