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Financial Services Compensation Scheme pays out £21 billion

It has been revealed that the Financial Services Compensation Scheme (FSCS) has paid out an incredible £21 billion in the first six months of 2009. When you consider the scheme has only paid out £1 billion in the seven years prior to the current financial crisis it puts into perspective the seriousness of the collapse in the UK financial system.

The vast majority of the claims revolve around Bradford & Bingley, Icelandic group Landsbanki Islands, Heritable Bank, Kaupthing Singer & Freidlander and London Scottish Bank. When you consider that the vast majority of those mentioned in the above list could be considered as "non-mainstream" can you imagine how much the cost would have been if something like the Royal Bank of Scotland or HBOS had gone under?

The government has also announced plans to change the £50,000 compensation limit per saver per bank rule to now incorporate different divisions of one institution as being "separate" in the eyes of the FSCS. It was also interesting to see there was a threefold leap in enquiries from 73,000 to over 230,000 which again highlights the seriousness of the situation to hand. The worrying thing is that the £21 billion bill could rise yet further before the recession is over and the banking system returns to normal!

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