Banks urged to show cash protection

The savings safety net has urged financial firms to give clearer information to customers about how much of their cash will be protected if the company goes bust.

Banks are to be compelled to display notices in branches and on their websites to make people more aware that their deposits are protected up to £85,000 if the bank goes bust, under plans outlined by the Financial Services Authority (FSA) in December.

The Financial Services Compensation Scheme (FSCS), which protects consumers when financial institutions go bust, said the plans are a "step in the right direction", but urged firms to go beyond the FSA's minimum requirements.

Building societies and credit unions will also need to put posters and stickers up and foreign banks with branches in the UK which are not covered by the scheme have to state this as well as saying which other national scheme is providing protection, the FSA has said previously.

The FSA is publishing its new minimum requirements for deposit takers to display information about the scheme.

Mark Neale, FSCS chief executive, said: "The banking crisis shows how important it is for consumers to have clear information about FSCS protection. We never again want to witness the run on a bank because people do not know their money is protected. Since then, the industry has improved the quality of information it gives to consumers about FSCS.

"However, it needs to do much more to provide clear, accurate information about the protection we provide. This is essential to building consumer confidence, and is not limited to deposits. It is something that is normal in other parts of the world."

The FSCS protects consumers if banks, building societies or credit unions go under. The safety net has paid out more than £26 billion in compensation to over 4.5 million people since 2001.

Mr Neale added: "We encourage all banks, building societies and credit unions to have a sticker on display, posters and information in branch and on their websites."

The FSCS recently launched a £4 million publicity campaign in a bid to raise the scheme's profile, but later acknowledged that awareness had not been raised to the levels hoped.