UK banks have been told by the Financial Services Authority (FSA) that they should spend almost 1 billion on new IT, which is needed to speed up compensation payments to savers in case a system fails.
According to a new consultation paper, the set up and maintenance costs of new IT systems for quick claims processing is estimated at 891.8 million over five years for all banks across the UK. The FSA proposed that the system changes should be implemented over a period of 18 months, with the system being live from the end of 2010.
The FSA also outlined the specific changes which were needed. The body called for data cleansing', which was needed because the data that banks held was often not accurate or complete enough to enable a fast payout.
Without data cleansing, the Financial Services Compensation Scheme would need to contact a large number of claimants to seek further details and to check the accuracy of banks' information, which the FSA said was unmanageable.
"Experience in the last year highlighted how essential compensation is and that it is imperative consumers understand and trust that they will be reimbursed if a bank, building society or credit union fails," said Hector Sants, chief executive at the FSA.
"Our current scheme has worked well in these unprecedented times, compensating hundreds of thousands of savers in a matter of weeks... But today's consultation paper seeks to learn the lessons from those events to produce an even better system."
He added: "We recognise that to help underpin confidence in our banking system consumers must feel confident that their money is well protected regardless of whether they ever have to claim compensation."
