PRA Proposes to Extend Temporary High Balances Coverage Amid COVID-19
PRA issued a proposal, via the consultation paper CP6/20, to extend coverage under the Financial Services Compensation Scheme (FSCS) for Temporary High Balances, from six months to twelve months from the date of deposit or from the first date the Temporary High Balance becomes legally transferable to the depositor. The proposed extension of coverage would be until, and including, January 31, 2021. This extension is being proposed in response to the impact of COVID-19 on residential property and investment markets and on access to banking services for some depositors. Temporary High Balance coverage would revert to six months from February 01, 2021. The comment period for this consultation ends on July 23, 2020.
The Temporary High Balance rules of PRA extend FSCS coverage from GBP 85,000 to GBP 1 million for six months from the point of deposit for certain qualifying life events, including the purchase and proceeds from residential properties. Depositor Protection Part of the PRA Rulebook sets out the list of categories of eligible deposits that may benefit from Temporary High Balance protection. The extension in Temporary High Balance coverage would be accompanied by consequential changes to the Depositor Protection Part of the PRA Rulebook (Appendix 1) and to paragraphs 30, 47a, and 47b of the Deposit Guarantee Scheme Statement of Policy. PRA would not require firms to update the information sheet in Annex 1 of Depositor Protection Part of the PRA Rulebook to reflect the extension to a twelve-month Temporary High Balance coverage. If firms do decide to amend their information sheets, then PRA would expect firms to ensure that the information sheet is changed back before February 01, 2021.
CP6/20 is relevant to retail financial consumers that are, or may become, Temporary High Balance depositors before February 01, 2021. CP6/20 is also relevant to the FSCS and to all PRA-authorized deposit-takers. The proposal has been designed in the context of withdrawal of UK from EU and entry into the transition period, during which time UK remains subject to the European law. PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework at the end of the transition period, including those arising once any new arrangements with the EU take effect. PRA has assessed that the proposal would not need to be amended under the EU (Withdrawal) Act 2018.
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Comment Due Date: July 23, 2020
Keywords: Europe, UK, Banking, COVID-19, FSCS, PRA Rulebook, Deposit Guarantee Scheme, Residential Property, Credit Risk, CP6/20, Temporary High Balance Coverage, PRA
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