Make charities a specific compensation class, Treasury urged

Charity Finance Directors' Group calls for charities to be recognised as distinct under compensation scheme

The Charity Finance Directors' Group has added its voice to calls for a separate deposit class for charities under the scheme that provides compensation when organisations go bust.

The umbrella body made the recommendation in response to an HM Treasury consultation on the Financial Services Compensation Scheme, launched after the collapse of the Icelandic banks.

This month, a Treasury select committee report recommended that charities that lost money in the Icelandic banking collapse should be compensated (Third Sector Online, 4 April).

Giving evidence to the committee while it was preparing the report, John Low, chief executive of the Charities Aid Foundation, said a separate deposit class for charities should be set up.

The CFDG said charities were not recognised as distinct from other organisations and individuals under the scheme, which has led to many groups losing cash.

It said a separate depositor class would help recognise the contribution charities made to helping vulnerable people, and that charities often could not afford expert investment advice.

Kate Hand, policy and campaigns officer at the CFDG, said: "We believe the introduction of a depositor class for charities would substantially contribute to the long-term stability of charities, and ultimately to the wellbeing of all those they work to support."

She said the CFDG also supported a simplifying of FSCS rules, which she said did not make it clear who would and would not be compensated if a bank failed.

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