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Bank Services

Volume 480: debated on Friday 17 October 2008

To ask the Chancellor of the Exchequer (1) what provisions are in place to guarantee the funds of (a) individuals and (b) companies who have received the proceeds from the sale of their homes, or other large transactions, into law firms' client accounts in an insolvent bank; (228193)

(2) whether individuals will be able to claim the £50,000 deposit guarantee on the funds in their own account and on their deposits in a law firm client account in circumstances where such accounts are held with the same bank;

(3) whether the £50,000 bank deposit guarantee cap will apply to clients with funds in law firms' client accounts.

The Financial Services Authority (FSA) is responsible for making the rules of the Financial Services Compensation Scheme (FSCS), including the rule change which increased the compensation limit for bank deposits to £50,000, and the rules which set out how claims in respect of sums held in client accounts are to be treated. The increased compensation limit applies in relation to all claims in respect of protected deposits. The rules on the treatment of claims in respect of sums held in client accounts are set out in the FSA Handbook which is available on the FSA website and guidance is available on the FSCS website. The FSA consultation paper on the review of FSCS limits issued on 3 October includes a section discussing the issue of temporary high deposit balances.