Prudential Regulation Authority Rulebook

12.

Depositor Protection 6.4 clarifies that certain types of pension, including the occupational pension schemes of micro, small and medium-sized enterprises, where the schemes are money purchase schemes, are to be compensated on the basis that each member has a separate entitlement to compensation. The deposits of occupational pension schemes of large enterprises are not eligible deposits.

13.

Where an account holds money for a trust fund that has been established under section 42 of the Landlord and Tenant Act 1987, the PRA considers that such accounts should be treated like other non-pension trusts with multiple beneficiaries in accordance with Depositor Protection 6.3–6.9.

14.

Depositor Protection Chapter 6 (paying compensation) allows the FSCS to pay compensation to a person other than the depositor (or to a person other than the person who is absolutely entitled to the deposit) in certain circumstances. The PRA considers examples of the circumstances covered by these rules to be:

1. (a) when personal representatives are entitled to receive compensation on behalf of the deceased;
2. (b) when trustees are entitled to receive compensation on behalf of beneficiaries (for further provisions relating trustees entitlement to compensation, see Depositor Protection 6.3 to 6.6);
3. (c) when the donee of an enduring power of attorney or a lasting power of attorney is entitled to receive compensation on behalf of the donor of the power;
4. (d) when the Court of Protection is entitled to receive compensation on behalf of a person incapable by reason of mental disorder of managing and administering their property and affairs;
5. (e) when a depositor dies before receiving compensation; and
6. (f) when e-money is ‘safeguarded funds’ in a UK credit institution. 

15.

If a depositor is an agent for one or more principals, the PRA expects that, under Depositor Protection 6.2(5)(a), the FSCS must treat the principal or principals as being the party entitled to receive compensation, not the depositor.

16.

The obligation to compensate arises when deposits with a DGS member are determined to be unavailable deposits. The PRA would make such a determination as soon as possible after being satisfied that either of the conditions under the ‘unavailable deposit’ determination (as defined in Depositor Protection Chapter 1) has been met.

17.

When the FSCS compensates a depositor, the subrogation rules in Chapter 28 are activated. These enable the FSCS to ‘stand in the shoes’ of the depositor to bring a claim against the failed firm to recover the costs of compensation. The FSCS can elect to exercise this right in Chapter 28 in relation to some, or all, of the depositor’s claim.

18.

Depositor Protection Chapter 30 sets out how the FSCS must act in relation to recoveries made from a credit institution or third party in respect of eligible deposits.

19.

Regarding Depositor Protection 9.6, where reasonably practicable, the PRA expects the FSCS to inform depositors (that do not fall under any of the categories of depositors excluded from the seven working day repayment obligation under Depositor Protection 9.4):

1. (a) if the FSCS considers they are unlikely to make compensation available within seven working days from the date on which deposits are determined to be unavailable; and
2. (b) that those depositors may request an interim compensation payment.

20.

In such circumstances, when the FSCS is required to make a payment to cover the cost of living in accordance with Depositor Protection 9.6(1), the PRA expects the FSCS to have regard to the following considerations when determining the appropriate amount to pay the depositor:

1. (a) the amount of time before the FSCS is able to pay the depositor the full amount;
2. (b) the total aggregated deposits held by the depositor; and
3. (c) whether the aggregated deposits include deposits held in the depositor’s primary current account (if known).

21.

In general the PRA expects that interim payments made in accordance with Depositor Protection 9.6(1)(a) should equal at least 75% of the covered amount up to a maximum of £5,000.

22.

In general the PRA expects that interim payments made in accordance with Depositor Protection 9.6(1)(b) should equal at least 75% of the balance or £85,000, whichever is lower.

23.

Depositor Protection 9.4 sets out the circumstances in which the FSCS may defer payment of compensation beyond the time period set out in Depositor Protection 9.3. The PRA expects that the FSCS should aim to pay out these deposits within three months where possible. The PRA recognises that circumstances where it may not be possible for FSCS to pay out within this timeframe may include:

1. (a) where the deposit remains subject to legal dispute after three months;
2. (b) where the deposit remains subject to restrictive measures imposed by national governments or international bodies; and
3. (c) where there remains uncertainty as to whether a person is entitled to receive compensation, or as to the amount of compensation due, despite investigation by the FSCS.

24.

Depositor Protection Chapter 5 sets out how the FSCS should calculate a compensation sum. In calculating the depositor’s overall compensation, the FSCS may rely, to the extent that it is relevant, on any determination by:

1. (a) a court of competent jurisdiction;
2. (b) a trustee in bankruptcy;
3. (c) a liquidator; and
4. (d) any other recognised insolvency practitioner.