Most savers know that the Financial Services Compensation Scheme (FSCS) protects their deposits if a bank fails. Fewer know that the protection is capped, and that the cap is why a large balance at a single bank carries a risk that is easy to miss.
The limit per banking licence
FSCS protection covers up to £120,000 per eligible depositor, per banking licence. Any amount above that under one licence falls outside the scheme. For an individual with a modest balance this rarely matters. For a client with a large balance, a charity, or a firm holding money for others, it matters a great deal.
Brands that share a banking licence also share the limit. Several well-known high-street brands do, so moving money between two of them adds no protection. Knowing which brands sit under which licence is part of doing this properly.
Spreading deposits across banks
The answer is to spread a large balance across several banks, keeping the amount at each within the protected limit. Each bank brings its own FSCS eligibility, so a client with £600,000 spread across five banks can have the whole amount protected.
- £120,000 at one bank: £120,000 protected
- £600,000 spread across five banks, £120,000 at each: up to £600,000 protected
- The client holds an account at each bank and sees all of them in one consolidated view
Why few people do it by hand
Doing this manually means opening an account at each bank, completing onboarding and identity checks each time, tracking where every balance sits, rebalancing as interest accrues or limits change, and checking for brands that share a licence. For most clients the administration outweighs the benefit.
A deposit sweep does this work automatically. Through one relationship, the client holds accounts at several banks on the panel, operated for them by the platform. Balances are allocated so that each bank’s holding stays within the protected limit, rebalanced when needed, and the client sees everything in one place.
The caveats
Protection depends on the depositor being eligible, on the deposits being held with FSCS-covered institutions, and on the limit in force at the time. A sweep is infrastructure and does not replace advice. It removes the concentration risk that large balances often carry unnoticed.