Financial Services Compensation Scheme
The UK Financial Services Compensation Scheme (FSCS) can provide compensation if an eligible deposit (described below) is unavailable because a bank is unable to meet its financial obligations. Compensation is limited to a maximum of £85,000 per person and per bank.
All eligible deposits at the same bank are aggregated to determine the coverage level for each depositor up to a total of £85,000. If, for instance, a depositor holds a savings account with £80,000 and a current account with £20,000 at the same bank, he or she will only be compensated £85,000.
Important: This limit will also be applied where a bank operates under different trading names or intermediaries. ClearBank offers services through a number of intermediaries and for the purposes of compensation from the FSCS, if you hold deposits with ClearBank or through one or more of these intermediaries, including those listed below, these will likely be aggregated up to a maximum of £85,000.
- Archax Ltd.
- Bondsmith Savings Ltd.
- Chip Financial Ltd.
- eToro (UK) Ltd.
- Raisin UK
- Tide Platform Ltd.
- TigerWit Ltd.
- WealthKernel Limited
Funds placed with ClearBank through other ClearBank customers may also be covered by the FSCS. For example, if you use the services of an Electronic Money Institution (EMI) or Authorised Payment Institution (API), FSCS protection is available in some circumstances for the funds which these types of firms “safeguard” on your behalf (described further below).
We endeavour to keep the list up to date, but new customers may be added from time to time.
End users must review the terms and conditions of their direct financial services provider to check whether their funds are held at ClearBank under an arrangement that is eligible for FSCS protection. The particular arrangement that an end user has with its direct service provider may not always involve FSCS protection, particularly where the service provider offers multiple services. Examples include EMIs or APIs that provide additional investment services that do not involve ClearBank accounts, or where a transaction is being processed such that funds are moved out of FSCS protected accounts during the processing.
In summary, a deposit held at ClearBank will be an eligible deposit under the PRA Depositor Protection rules provided it does not fall into one of the following categories:
- a deposit made by a financial institution, an insurance or reinsurance undertaking, an investment firm, a collective investment undertaking, or another credit institution (with the exception of safeguarded funds (see below) and funds that are held on trust for an eligible end user);
- a deposit arising out of a transaction in connection with which there has been a criminal conviction for money laundering;
- a deposit of which the holder and any beneficial owner (as defined in regulation 3 of the Money Laundering Regulations (MLR)) have not had their identity verified at any time in in accordance with the MLRs;
- a deposit by a pension or retirement fund (but excluding deposits by personal pension schemes, stakeholder pension schemes and occupational pension schemes of micro, small and medium-sized enterprises); and
- a deposit by a public authority, unless it is a small local authority.
The categories listed above are not comprehensive. Other factors may prevent the deposit from being eligible. See Eligibility - Prudential Regulation Authority (prarulebook.co.uk) for further information.
If ClearBank becomes insolvent, money that a EMIs and APIs have correctly safeguarded in a safeguarding account will be covered by FSCS protection up to the applicable limits. Compensation under the FSCS is subject to the eligibility of the end user (ie the customer of the EMI or API) under the FSCS rules. For example, they will not be covered if they are a financial institution. The compensation is also subject to limits, typically £85k per depositor, per bank.
The details of the FSCS protection for safeguarded funds are set out here PS2/23 – Depositor Protection | Bank of England and here Depositor Protection - Prudential Regulation Authority (prarulebook.co.uk) and are still being finalised by the regulators.
The FSCS aims to pay out within 3 months in the case of safeguarded funds (Rule 9.3, Depositor Protection part of the PRA Rulebook).
Any safeguarded money exceeding the FSCS limit will not be covered by FSCS compensation. In this case, the EMI or API will need to recover the money exceeding the FSCS protection as a debt owed by ClearBank’s insolvent estate. Under the bank recovery and resolution rules, deposits fall into a special class of unsecured debt (defined as a ‘preferential debt’ under the Insolvency Act 1986) that will be recoverable before the claims of ordinary unsecured creditors, but after secured debts and certain other prioritised obligations.
End customers should speak to the EMI or API that is safeguarding their funds and consult their terms and conditions to check whether funds are held at ClearBank under an arrangement that is eligible for FSCS protection. It is the responsibility of the EMI or API to ensure funds are correctly safeguarded.