LONDON, UNITED KINGDOM – The Bank of England's regulatory arm has announced a significant increase in the protection limit for customers of UK banks, building societies, and credit unions, raising it by 41% from £85,000 to £120,000. The new rule, confirmed by the Prudential Regulation Authority (PRA) on Tuesday, 18 November 2025, is set to take effect on Monday, 1 December 2025, offering enhanced security to millions of savers.

This move, officially managed by the Financial Services Compensation Scheme (FSCS), ensures that in the event of a financial institution's failure, eligible customers will be compensated up to the new £120,000 threshold per person, per institution. The PRA stated the decision to raise the limit higher than the initially proposed £110,000 was influenced by public consultation and the need to account for recent inflation data. The UK's inflation rate has been persistently above the government's 2% target, a key factor cited for the adjustment.

Sam Woods, the Chief Executive of the PRA, remarked that the change is designed to "help maintain the public's confidence in the safety of their money." This is the first increase to the UK's deposit protection limit since it was set at £85,000 in January 2017. Additionally, the protection for "temporary high balances," which can occur from life events like a house sale or an inheritance, will also rise from £1 million to £1.4 million.

Global Context and Kenyan Comparison

The UK's enhanced protection scheme places it ahead of the European Union's harmonised limit of €100,000 but still below the $250,000 provided in the United States. This international variance in depositor protection highlights differing national strategies for maintaining financial stability and consumer confidence.

For Kenya, this development in a major global financial hub offers a crucial point of comparison. Kenya's own safety net, the Kenya Deposit Insurance Corporation (KDIC), currently provides a coverage limit of Sh500,000 per depositor, per bank. This limit was last updated on 1 July 2020, when it was increased five-fold from the previous Sh100,000, a level that had been in place since 1989.

According to the KDIC, the current Sh500,000 limit fully protects up to 99% of all deposit accounts in the country, focusing on safeguarding small, unsophisticated depositors who are less able to monitor the financial health of banking institutions. Membership in the KDIC scheme is compulsory for all deposit-taking institutions licensed by the Central Bank of Kenya (CBK), including commercial banks, mortgage finance institutions, and microfinance banks.

Implications for East Africa

While there are no direct regulatory links that compel an immediate change in Kenya's policy, the UK's decision reflects a broader international trend towards bolstering financial safety nets in response to economic volatility and inflation. The failure of institutions like Silicon Valley Bank in the US in 2023 demonstrated the importance of robust deposit protection in preventing bank runs and maintaining systemic confidence.

In Kenya, discussions about the adequacy of the Sh500,000 limit are already underway. In August 2024, the KDIC initiated a review of the coverage limit, commissioning a study to assess its adequacy in light of inflation and changes in the banking sector's deposit sizes. This review signals a proactive approach by Kenyan regulators to ensure the deposit insurance fund remains effective. As of September 2025, the KDIC was exploring a potential increase to enhance public confidence further.

The decision by the Bank of England will likely add weight to these local discussions. As Kenyan banks, including those with UK connections, operate within a global financial system, aligning with international best practices is crucial for maintaining the competitiveness and stability of the local banking sector. For Kenyan depositors, particularly those with balances exceeding the current limit, the UK's move serves as a reminder of the dynamic nature of financial regulation and the ongoing debate about what constitutes adequate protection in an ever-changing economic landscape.