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The Financial Services Authority is consulting with UK High Street banks about the need to improve their IT systems so that consumers will get their money back more quickly if a bank should fail.

The FSA estimates that British banks would have to spend just under £1bn to upgrade systems so they could provide a comprehensive list of accounts within 48 hours as the first step to giving them their money back. Such payments are made via the Financial Services Compensation Scheme (FSCS).

But Peter Tyler, policy director for retail at the British Bankers Association, told the Register: "We agree with the broad thrust of the FSA proposals but not how they suggest we should get there. There is a problem which needs addressing here but the FSCS is not the best way to do it.

"The FSCS was not designed with the collapse of a large or medium-sized bank in mind. Rather than have a large bank send out millions of cheques to customers who must then open new accounts, people should have constant access to their accounts."

Tyler said Bradford & Bingley was an example of a better way to deal with such failures - the government effectively nationalised the bank and shifted its book of retail accounts to Santander so customers had continuous access to their money.

The FSA consultation suggested banks would need to upgrade IT systems and modify applications in four main areas - data cleansing, eligibility account flagging, creating a single customer view - bundling all a person's accounts into one place, and additional capacity in all systems should a fast payout be required. Such systems would take at least 18 months to put in place and would cost £891.3m over five years.

Tyler believes that a different approach would still require some bank spending on improved systems, but less than that proposed by the FSA.

The consultation is open until 6 April. The FSA release is here. ®

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