Customers with savings accounts through merged building societies are likely to experience cuts of up to £15,000 by the end of this year, thanks to new rules being enacted across the EU.
From December 31 and on into 2011, regular and high interest savings accounts with balances of up to €100,000 (or almost £85,000) will be ensured and covered at any building society and bank in the UK. Any balances below that figure will be fully reimbursed to banking customers if their financial institution fails.
Most UK savers will benefit from this re-adjusted coverage since the government’s Financial Services Compensation Scheme limits reimbursement at £50,000 for every individual personal or business bank account, but due to a vagary of the new regulations, any customers who have substantial sums of cash deposited in more than one merged building society with differing brand names may be in for difficulties.
While during the 2008 economic downturn many banking customers split their total savings between two building societies that had just merged at the time, such as the Yorkshire and Chelsea Building Societies, in order to double the financial protections they had at their disposal, the new EU rules will interpret the merged building societies as one individual entity, capping their total coverage at £100,000.
Other recently merged building societies that would be subject to the regulations would be the former Britannia BS, which merged with Co-op Bank, and the scheduled merger between Stroud & Swindon and Coventry, which becomes official on September 1 of this year.
New new regulations put in place by the EU were designed in regards to standardised savings account compensation limits throughout the Euro Zone, resulting in estimates of 95 per cent of all existing savings receiving coverage if a building society or bank fails catastrophically in the future.
In order to preserve the compensation limit at a value that will be able to handle any volatility in regards to exchange rates, the EU plans to announce a fixed rate in regards for transferring the Euros to pounds Sterling. The exchange rate will undergo a review at a rate of at least one year out of every five, in order to take inflation into account.
The current Financial Services Compensation Scheme in place in Britain will continue to oversee any claims that arise, promising to expedite the payment process to within one calendar week by 2011 April.