Emma McAllister explains the process and limits of the FSCS protection scheme for banks, building societies and credit unions.
It’s reassuring to know that if your bank, credit union or building society fails, your money is protected. For most customers, FSCS will automatically return your money, up to £85,000, within seven days. You don’t have to do anything, because we use the data from the failed bank to return your money.
Simple as it sounds, many people have questions about what this means in practice. Emma McAllister, Deposits and Contingency Manager, explains the limits of FSCS protection, and how your money gets back to you.
‘It’s important to remember that some banks share the same banking license, and we can only pay each person up to a maximum of £85,000 per license,’ says Emma. ‘To work out what’s protected we would lump together all deposits held under one license: this includes all your current accounts, your share in any joint accounts, and any savings accounts. You can check this easily with our protection checker.’
FSCS protection is also available for children up to £85,000 per banking licence. This includes accounts where an adult is listed as an administrator for a child’s account. But as the adult is not a named account holder, these aren’t treated in the same way as joint accounts, so the balance does not count towards the adult’s protection allowance, and the child is not entitled to any further protection.
There are also occasions where we’d pay more than the £85,000 limit. Says Emma, ‘FSCS protects temporary high balances in your bank account of up to £1million for up to six months. The protection begins from the date the temporary high balance is credited to your account, or to a client's account on an individual's behalf.It’s important to note that this date may be earlier than the date the temporary high balance was credited to your account with the failed firm. And you don't need to tell us if you have a temporary high balance unless your bank fails.’
The events covered by our temporary high balance limit include:
- Real estate transactions (such as property purchase, sale proceeds and equity release – but relating to your main home only)
- Insurance policy payouts
- Personal injury compensation (unlimited)
- Redundancy (voluntary or compulsory)
- Inheritance
For a full list of events that would qualify under the temporary high balance rules, see our temporary high balance page.
New to the financial industry is the savings marketplace, cash platform or savings service. These firms let you spread your money across multiple accounts with different banks to get the best possible savings rates. We call these firms ‘deposit aggregators’ and if you used one to deposit your money with a bank that failed, FSCS would protect your money. The same compensation limits would be applied – up to £85,000 per bank – and again the process of returning your money is automatic. However, it may take longer than seven days.
FSCS protects companies too. ‘We generally protect companies’ deposits, regardless of the size of the company,’ says Emma. ‘We assess eligibility under the PRA’sDepositor Protection Rules, in particular rule 2.2, which excludes most types of regulated financial services companies.’
But what if you and your company both use the same bank or organisations that share a banking licence?
‘If your business is a separate legal entity, such as a limited company or LLP, you could claim up to £85,000 for each account,’ confirms Emma. ‘If you’re a sole trader (e.g., Mr Smith t/a Smith Motors) you wouldn’t be entitled to two separate claims – you could only claim up to £85,000 in total. As an exception, business partnerships are entitled to make two separate claims (but only one claim, not one claim per partner).’
Visit our compensation limits pages to see our coverage for other types of financial failure.
FAQs
Key takeaways. When a bank fails, the FDIC or a state regulatory agency takes over and either sells or dissolves the bank. Most banks in the US are insured by the FDIC, which provides coverage up to $250,000 per depositor, per FDIC bank, per ownership category.
What happens to my money if my bank collapses? ›
If your bank fails, up to $250,000 of deposited money (per person, per account ownership type) is protected by the FDIC. When banks fail, the most common outcome is that another bank takes over the assets and your accounts are simply transferred over. If not, the FDIC will pay you out.
How do you get your money from FDIC if a bank fails? ›
The funds will either be acquired by a new bank or paid back to you by the FDIC via check. Remember to look out for any uncleared checks or automatic payments in case the failed bank does not get acquired by a new one — those payments can't be drawn against a closed account.
Can banks seize your money if the economy fails? ›
It indicates an expandable section or menu, or sometimes previous / next navigation options. Your money is safe in a bank, even during an economic decline like a recession. Up to $250,000 per depositor, per account ownership category, is protected by the FDIC or NCUA at a federally insured financial institution.
Where should I put my money if banks fail? ›
If your bank is federally insured
- Stocks.
- Bonds.
- Mutual funds.
- Annuities.
- Life insurance policies.
- Safe deposit boxes.
- US Treasury bills, bonds or notes.
- Municipal securities.
The FDIC provides deposit insurance to protect your money in the event of a bank failure. Your deposits are automatically insured to at least $250,000 at each FDIC-insured bank.
Is your money protected if a bank collapses? ›
FSCS will pay compensation within seven working days of a bank or building society failing. You don't need to do anything, FSCS will compensate you automatically. More complex cases, including temporary high balance claims, will take longer and you'll need to contact us to request an application form.
Has anyone ever lost money at an FDIC-insured bank? ›
The FDIC is also warning consumers of recent scams where imposters are pretending to be agency representatives to perpetrate fraudulent schemes. Since 1933, no depositor has ever lost a penny of FDIC-insured funds.
What happens to a mortgage if the bank collapses? ›
If your mortgage lender goes bankrupt, all of your loan terms remain exactly the same and you must continue making payments. The process of changing loan servicers is usually seamless, requiring only that you set up a new account and payment method; sometimes account details transfer over automatically.
How much money is guaranteed if a bank fails? ›
According to the Reserve Bank of India (RBI), the DICGC insures principal and interest up to a maximum amount of Rs 5 lakh. For example, if someone has a bank account with Rs 4,95,000 as the main amount and they earn an extra Rs 4,000 as interest, the DICGC would protect all of their money, which will be Rs 4,99,000.
JPMorgan Chase, the financial institution that owns Chase Bank, topped our experts' list because it's designated as the world's most systemically important bank on the 2023 G-SIB list. This designation means it has the highest loss absorbency requirements of any bank, providing more protection against financial crisis.
Can banks refuse to give you your money? ›
Yes. Your bank may hold the funds according to its funds availability policy. Or it may have placed an exception hold on the deposit. If the bank has placed a hold on the deposit, the bank generally should provide you with […]
Where do millionaires keep their money? ›
Cash equivalents are financial instruments that are almost as liquid as cash and are popular investments for millionaires. Examples of cash equivalents are money market mutual funds, certificates of deposit, commercial paper and Treasury bills. Some millionaires keep their cash in Treasury bills.
How much cash can you keep at home legally in the US? ›
While it is legal to keep as much as money as you want at home, the standard limit for cash that is covered under a standard home insurance policy is $200, according to the American Property Casualty Insurance Association.
Should I take my money out of the bank in 2024? ›
FDIC insurance coverage guarantees up to $250,000 per depositor, per insured bank, for each account ownership category. This means that if you have multiple accounts with the same bank, each account is insured separately up to $250,000.
How many US banks are in danger? ›
Consulting firm Klaros Group analyzed about 4,000 U.S. banks and found 282 banks face the dual threat of commercial real estate loans and potential losses tied to higher interest rates. The majority of those banks are smaller lenders with less than $10 billion in assets.
Do you lose your money if a bank closes your account? ›
You'll get your money back (usually). You may receive a check in the mail for the remaining balance, unless the bank suspects terrorism or other illegal activities. You can also go to a branch and receive a cashier's check for the account balance.
How to withdraw cash when the bank is closed? ›
Shortcuts
- The Post Office.
- Banking hubs.
- Mobile and pop-up banks.
- Cash machines (ATMs)
- Your local shop.
- Online banking.
“The mortgage will be transferred to another bank if the first bank experiences problems and fails, and you will need to start making payments to the new lender. You might need to refinance your mortgage with the new bank, depending on the details of the transfer.”
