Depositor protection and credit unions
The rules for deposit takers (i.e. banks, building societies and credit unions) and the Financial Services Compensation Scheme (FSCS) ensure that eligible depositors (including individuals and businesses) will be compensated up to £85,000 if a deposit taker fails.
The Deposit Guarantee Schemes Directive (DGSD) requires deposit guarantee schemes (i.e. the FSCS in the UK) to pay compensation to depositors in respect of covered deposits within 15 business days of the default of a deposit taker. By 2024 this will be reduced to seven days.
A key element in being able to compensate depositors quickly is the requirement for deposit takers to maintain a single customer view (SCV) and exclusions file, and to be able to provide them to the PRA or FSCS on request within 24 hours. Both files provide the FSCS with the information required to make a payout, with a target of seven days from default for most depositors and in any event within the timeframes prescribed by the DGSD.
Since the SCV requirements were introduced, there have been a small number of deposit taker defaults. In each instance, by utilising the SCV, the FSCS has been able to make payments to most eligible depositors in less than seven days.
Single customer view (SCV) requirements and guidance
SCV requirements are set out in the depositor protection part of the PRA Rulebook.
More information on the SCV is available in Chapter 8 of Depositor and dormant account protection - Supervisory Statement 18/15. Firms may also find the FSCS’s SCV guide useful when considering deposit protection issues.
Some of the requirements are summarised below. However, credit unions should refer to the PRA Rulebook and relevant supervisory statement for full details.
Exclusions file
The requirements for the exclusions file are also set out in the depositor protection part of the PRA Rulebook. They have been in force since 1 December 2016. The rules require deposit takers to provide this information in the same format and to the same timeframe as the SCV file.
The exclusions file will contain those accounts which contain or may contain eligible deposits to which the account holder is not absolutely entitled or accounts that might be inactive (e.g. beneficiary legally dormant, and legally disputed accounts).
Material changes to SCV systems
Credit unions are required to notify us of any material change to their SCV systems. A material change would include changes that would have a material impact on a firm’s SCV system. For example, there is likely to be a material change in a firm’s SCV system upon a merger or acquisition of a deposit book, or the introduction of a new IT system that relates to the firm’s SCV system.
SCV electronic reporting
All credit unions are subject to electronic reporting of SCV.
Dormant accounts
Some credit unions mark accounts as inactive/dormant after a period of inactivity. For the avoidance of doubt, any account that does not meet the legal definition of dormancy as defined in section 10 of the Dormant Bank and Building Society Accounts Act 2008 must appear on the SCV file. Legally dormant accounts are accounts that meet the specific definition of being inactive for 15 years – meaning that there has been no customer-initiated transaction in the last 15 years. Such legally dormant accounts must instead be included in the credit union’s exclusions file that accompanies its SCV file.
Newly authorised credit unions
We will contact newly authorised credit unions and expect them to undergo FSCS verification within six months of receiving their Part 4A permissions to accept deposits.
Ongoing SCV verification
As part of the ongoing work relating to SCV for credit unions, we have committed to a continuous review of a sample of credit unions’ SCV files as part of our usual supervisory work. The process will start with a request for the submission of a SCV effectiveness report and marking effectiveness report. This may be followed by a request for your SCV file from the FSCS. Credit unions will then receive feedback from the FSCS on the usability and quality of their SCV file and SCV policies and procedures.
