Following the collapse of banks across Europe and the world during the global economic crisis, the Law Society says more must be done by the EU Commission to protect customers’ money.
In a letter to Commissioner Barnier, Law Society President Robert Heslett calls for a number of reforms, including greater protection for bank customers’ money, particularly where they have deposited large funds into a bank which subsequently collapses.
Speaking in London, Robert Heslett said: "Solicitors frequently encounter situations where a large amount of client's money is deposited in a bank for a short period of time. These can include proceeds from house sales, sums left as part of an inheritance or compensation payments for personal injury.
“What worries us is that if a bank fails and a consumer has deposited a large sum of money on a temporary basis for a specific purpose they could be ruined financially or find they have lost their home if there is no adequate compensation available. There will be no compensation beyond the amount prescribed by the EU.”
The Law Society says that the EU has already come a long way in increasing the guarantees given to bank deposits when a bank fails. From 1 January 2011, deposits of up to €100,000 will be guaranteed thanks to EU legislation.
The Society fears that this amount is insufficient as it would not protect, in particular, large amounts of client money deposited in a bank for relatively short periods, such as in relation to property transactions or litigation settlements.
Heslett added: “The current guarantee threshold will not be sufficient to protect what may be thousands of consumers at difficult and stressful times of their lives. The Financial Services Authority's proposals address this problem and we urge the EU to adopt this position. The EU should be more ambitious or should let Member States be so.
"That is why I have written to the Commissioner to ask him to ensure these short-term deposits, which are often transactional in nature, may benefit from greater protection."
