This Sub-scheme covers claims made against failed deposit-taking firms, for example banks, building societies and credit unions. The sub-scheme is triggered when a firm authorised to accept deposits by the Financial Services Authority goes out of business, for example if the firm goes into administration or liquidation, and is unable to repay its depositors. The FSCS can also be involved if the FSA considers that an authorised firm is unable, or likely to be unable, to repay its depositors. Once the FSCS is satisfied that a firm is unable, or likely to be unable, to pay claims against it, the firm is declared to be in default. A declaration of default opens the way for the firm's customers to make a claim for compensation.
The FSCS will meet a proportion of the costs of any deficit if the assets of a firm are insufficient to meet liabilities when depositors' claims are paid out. Prior to 1 October 2007, the scheme offered 100 per cent protection of the first aggregated £2,000 and 90 per cent of the next £33,000, up to a total compensation payable of £31,700 for each depositor. The limit was raised to 100 per cent of the first £35,000 on 1 October 2007, and raised again to 100 per cent of the first £50,000 from 7 October 2008.