June 17, 2014 / 2:20 PM / 4 years ago

Bank of England to beef up consumer safeguards at banks, insurers

LONDON, June 17 (Reuters) - The Bank of England will step up efforts to ensure bank customers and insurance policyholders suffer no loss of service if their lender or broker goes bust, its regulatory arm said.

Such efforts are seen as crucial by policymakers to avoid taxpayers having no choice but to bail out a failing bank or insurer in order to avoid huge disruption to customers.

The Bank’s Prudential Regulation Authority (PRA), formally launched last year to tighten supervision of financial firms, sketched out the plans in its annual report published on Tuesday.

For insurance, the watchdog said it was looking at ways policies might be transferred to another insurer to ensure seamless coverage for customers.

To better protect policyholders, it added it might need to adapt supervision from looking at an insurer in general, to putting particular focus on certain types of policies or policyholders.

The withdrawal of insurance, for example, would especially be a problem when cover is mandatory, such as car insurance for drivers and building insurance for mortgage-holders.

“Such a framework would suggest greater focus on compulsory insurance, any disruption to which would have an impact on the real economy, and long-term life insurance products which are difficult to transfer,” the PRA report said.

The watchdog said it had also started work on ensuring Britain’s deposit protection scheme paid out more quickly to customers when a lender fails.

Under existing rules, the aim is to pay out within seven days of a deposit-taking bank failing. However, regulators think this length of time could cause disruption to households that need to pay bills and buy food.

“Work has also progressed to explore how continuity of access to deposits can be provided in the event of a failure as an alternative to pay out,” the PRA said.

The watchdog, which had 1,045 staff at the end of February, said it forced 33 of the firms it supervises to pay for reviews by an outside person - often from a big consultancy - to check internal controls, IT infrastructure or other parts of the business in the financial year that ended in April.

This was up from 27 in the prior year period, but the average cost per report was lower, it added. (Editing by Mark Potter)

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