Changes will be made to the scheme by the end of 2010
Savers will be compensated faster for lost savings if a bank, building society or credit union goes bust, the City watchdog has announced.
The Financial Services Compensation Scheme protects up to £50,000 per saver per institution if a bank goes under.
Now the Financial Services Authority (FSA) has announced that from 2011, compensation will be paid within 20 days, or preferably within a week.
The banking crisis prompted many savers to spread their funds for safety.
Since queues formed outside Northern Rock branches in 2007, the rules about deposit protection have come under scrutiny.
The Financial Services Compensation Scheme (FSCS) charges a compulsory levy on the UK's financial services industry that would cover compensation for savers if a UK bank were to go bust.
The compensation scheme has been tested following the collapse of high-profile banks such as Icesave.
At present, payouts for savers with failed banks can take up to six weeks. The new rules would mean that individuals and small businesses would receive compensation within a target of seven days and all payments within 20 days.
Current rules mean a bank customer or small business owner who had a debt with a bank, such as a loan, as well as savings could currently have the amount of debt deducted from any compensation for savings if the bank went bust.
Under the new rules, to come into force on 31 December 2010, savings would be protected to the £50,000 limit and would not be used to offset loans.
"To help underpin confidence in our banking system, individuals and small businesses must feel confident that their money is well protected," said Hector Sants, chief executive of the FSA.
Savers have been keen to keep up with the rules to ensure all their money is protected if a bank, building society or credit union fails.
At present, if you have up to £50,000 with different authorised institutions, then all your money is safe.
For example, you have £50,000 saved with Barclays and £50,000 with HSBC Bank, all of this would be protected as the rules stipulate cover for deposits per customer and per institution.
However, if you have £50,000 in accounts with two different brands (in the same block in the final column on the table below) with the same authorised institution, then only £50,000 is covered. This is because they are authorised with the regulator under one named institution.
For example, if you have £50,000 with HSBC and £50,000 with First Direct, then only £50,000 of your savings are in the safety net. The same would be true if you have £50,000 with the Halifax and £50,000 with Birmingham Midshires.
Under the new rules, institutions will have to make clear which trading names come under which authorisation.
|PARENT BANK ||AUTHORISED INSTITUTION ||BRANDS
* Unlimited protection until 24 May
||HSBC Bank||HSBC, First Direct
|HSBC Private Bank UK Ltd||HSBC Private Bank UK Ltd|
|HFC Bank||HFC Bank|
|Marks & Spencer Financial Services||Marks & Spencer Financial Services|
|HSBC Trust Company||HSBC Trust Company|
|Standard Life plc||Standard Life Bank|
|Barclays Bank Trust Company||Barclays Bank Trust Company|
|Royal Bank of Scotland Group
||Royal Bank of Scotland||Royal Bank of Scotland, Direct Line (savings), Child & Co, Drummonds, The One Account, Lombard, Holt's
|NatWest Bank||NatWest Bank|
|Coutts and Co||Coutts and Co|
|Ulster Bank||Ulster Bank|
|Adam & Company||Adam and Company|
|Lloyds Banking Group
||Lloyds TSB Bank||Lloyds TSB, Cheltenham and Gloucester Savings
|Bank of Scotland (HBOS)||Halifax, Bank of Scotland, Bank of Scotland Private Banking, Birmingham Midshires, Saga, Intelligent Finance, Capital Bank, St James's Place Bank|
|Scottish Widows Bank||Scottish Widows Bank|
|Lloyds TSB Scotland||Lloyds TSB Scotland|
|AMC Bank||AMC Bank|
|Lloyds TSB Private Banking||Lloyds TSB Private Banking|
|Abbey National Treasury Services plc||Abbey National Treasury Services|
|Alliance & Leicester||Alliance & Leicester, Alliance & Leicester Commercial Bank, Moneyback, Honeycomb|
|Cater Allen||Cater Allen|
|National Australia Group ||Clydesdale Bank ||Clydesdale Bank, Yorkshire Bank
|Allied Irish Banks ||AIB Group (UK) ||AIB Group (UK), AIB (GB), First Trust
||Co-operative Bank||Co-operative Bank, Smile, Britannia
|Unity Trust Bank||Unity Trust Bank|
|Northern Rock* ||Northern Rock ||Northern Rock
|Zurich Bank ||Dunbar Bank ||Dunbar Bank
|Nationwide Building Society ||Nationwide Building Society ||Nationwide, Derbyshire Building Society, Cheshire Building Society, Dunfermline Building Society
||Citibank International plc||Citibank International
|Egg Banking plc||Egg|
|Skipton Building Society
||Skipton Building Society||Skipton Building Society, Scarborough Building Society
|Tesco Personal Finance Group Ltd
||Tesco Personal Finance||Tesco Personal Finance, Tesco Bank, Tesco Banking and Insurance
|Yorkshire Building Society
||Yorkshire Building Society||Barnsley Building Society, Yorkshire Building Society