Prudential Regulation Authority Rulebook

2.1

The provisions in Depositor Protection 2.2 determine whether a deposit is an eligible deposit.

2.2

Regarding Depositor Protection 1.3A, a firm must confirm in SCV field 39 of Depositor Protection 12.9 that a deposit has been assigned to a UK or Gibraltar establishment.

2.3

The definition of deposit in the Depositor Protection Part includes savings products evidenced by a certificate of deposit made out to a named person and which existed in the UK, Gibraltar or a Member State of the EU on 2 July 2014. For the avoidance of doubt, the PRA expects the certificate itself to have existed on 2 July 2014 (not merely the product).

2.4

The definition of deposit excludes a credit balance where the principal is not repayable at par. The PRA considers that, for a deposit to be ‘repayable at par’, the depositor must be entitled to repayment in full of sums deposited. For the avoidance of doubt, the PRA considers that capital at risk structured deposits are not classed as deposits for the purposes of deposit protection.

2.5

However, where the depositor accepts investment risk on the calculation of interest on a deposit because it is, for example, determined by reference to a financial index, but the principal is repayable at par, the PRA expects that such product will generally be classed as deposits for the purposes of deposit protection.

2.6

The PRA expects that a deposit may generally be considered as being ‘repayable at par’ if repayment of it is subject to the deduction of fees by the firm.

2.7

Further information on the scope of depositors eligible for Deposit Guarantee Scheme (DGS) protection from 3 July 2015 is set out in Table A.

2.8

Regarding Depositor Protection 2.2(4)(j), it is acceptable for firms to rely upon a reasonable estimate provided by the local authority of its annual budget, which could for example be based on the previous year’s budget. The PRA expects a firm to take reasonable steps to ascertain a local authority’s budget, but where a firm has been unable to determine if a local authority is eligible, it should be treated as a public authority.

2.9

The PRA considers that the fact that a person has created a charge or equivalent security interest over his/her interest in a deposit does not (in most cases) prevent it being treated as a deposit for the purposes of the Depositor Protection rules, even where the person who has taken the security interest is the DGS member with whom the money has been deposited.

Table A Eligibility for DGS cover of certain classes of depositors from 3 July 2015

Depositor	Eligible or ineligible from 3 July 2015
Natural persons	Eligible
Corporates	Eligible (regardless of size) (unless the Corporate falls under any other exclusion)
Partnerships	Eligible (regardless of size) (unless the partnership falls under any other exclusion)
Mutual associations/unincorporated associations	Eligible (regardless of size) (unless the association falls under any other exclusion)
Credit institutions (banks, building societies and credit unions)	Ineligible
Investment firms, insurance undertakings and reinsurance undertakings	Ineligible
Collective investment schemes	Ineligible
Pension schemes and retirement funds	Ineligible with the exception of deposits by: personal pension schemes; stakeholder pension schemes; and occupational pension schemes (of micro, small or medium enterprises)
Public authorities	Ineligible with the exception of small local authorities
Persons whose claim arises from transactions in connection with which there has been a criminal conviction for money laundering	Ineligible

2.10

In the event that identity verification has not been carried out in accordance with the relevant anti-money laundering requirements referred to in Depositor Protection 2.2(4)(f) ahead of the firm’s compensation date, the PRA considers that Depositor Protection 2.2(4)(f) would allow the relevant insolvency practitioner appointed by the court to facilitate the identity verification for the purposes of determining eligibility for FSCS (Financial Services Compensation Scheme) protection.^[2]