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FSA extends building society deposit protection scheme

The Financial Services Authority (FSA) has today revealed that a scheme which allowed customers to protect both sets of savings where two societies merged will be extended until the end of the year. The scheme, which will see a maximum £50,000 protection level for each customer with merged building societies (protection of up to £100,000 where a client has an account with both merged parties), was set up in September but has now been extended. So what does this mean?

The FSA is literally in a no-win situation because if they had refused to act then they would have faced accusations of leaving UK consumers in the lurch. However, with many rumours and counter rumours circulating regarding the financial strength of some building societies no doubt some people will read more into today's announcement than they should. Do the FSA know something we don't know? Are we set to see the collapse of the building society sector?

The truth is that today's announcement is something which should be welcomed as a sensible move in difficult market conditions. While there is no doubt that some building societies have seen their financial strength weakened over the last few months the sector as a whole is still very strong and the leaders are certain to do their best to ensure it has a long term future.

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