Introduction to FSCS - Continuity of Access

To protect the interests of depositors, if a financial institution becomes bankrupt, the Financial Services Compensation Scheme (FSCS) Continuity of Access ensures that:

• There is no run on the financial institution from depositors: balances in the deposit accounts are frozen, not allowing depositors access to their funds.
• There is continuity of access to the funds for the depositor, in a short time, following the direction from the Prudential Authority which supervises the FSCS, for the financial institution to unfreeze the balances in the depositor’s accounts, up to the extent covered by the scheme.

To protect and safeguard the interests of the depositor, banks in the United Kingdom need to comply with the regulations under the Financial Services Compensation Scheme (FSCS) Continuity of Access (COA). There are two statutory requirements FSCS reporting and COA.

The purpose of COA is to allow customers to access their blocked funds as soon as possible (max 48 hours for FSTP classified accounts of eligible customers) to ensure that they do not face financial difficulties.

When COA is invoked, the funds in the customer's accounts are frozen, and the interest as of date is capitalised to the accounts. Further, the FSCS limit, as per regulation, is applied at a customer level. Funds of customers who are not eligible for compensation and funds exceeding the compensation limits for eligible customers are booked from the customers' accounts to an internal suspense account.

Subsequently, when the COA processes are completed, the frozen funds from the customer account will be made available to them, and the details of all such customers and accounts will be reported to the regulator.

This functionality allows banks to transfer the unprotected portion of funds on all the customers' accounts to an internal account for monitoring purposes. Also, this functionality enables bank users to enquire about the details of all such customers and their accounts along with the balances of unprotected funds.

The functionality support clients accomplishing the CoA process and help them to ensure that customers can access their accounts and their compensations as soon as possible.

Features:

• Interest capitalisation of all deposit account regardless of the interest capitalisation period.
• Freeze the funds on deposit accounts (current accounts, term deposits and savings).
• Automated compensation of all account fitting for straight through compensation (FFSTP).
• Case-by-case compensation of (eligible) account not fitting for straight through compensation (NFFSTP).
• Transfer of funds on account ineligible for compensation to an internal suspense account.
• Closing of all term deposits and maturity based savings.
• Transfer of unprotected funds on eligible accounts to an internal suspense account.
• Zero-setting of overdrafts on deposit accounts.
• Unfreeze funds and make accounts available to customers again.

The compensation rests on the calculation of transferrable amounts for creation of the FSCS reports. Hence the module and the creation of the FSCS reports is a pre-requirement.