Legislation has come into effect to create a new class of debt
in insolvency, being "secondary preferential debts".
Secondary preferential debts are, in brief, those parts of a
deposit which do not fall within the protection of the Financial
Services Compensation Scheme ("FSCS"). Typically, parts
of a deposit might fall outside of the FSCS because (i) they exceed
the cap of £85,000 or (ii) because they were lodged with a
branch located outside of the European Economic Area and the new
class of debt is intended to address both (i) and (ii).
This extends the changes which took effect at the end of 2014,
which made bank and building society deposits covered under the
FSCS into preferential debts under the Insolvency Act 1986.
Existing types of preferential debts (as extended to include bank
and building society deposits which are covered under the FSCS)
will now be referred to as "ordinary preferential debts".
Ranking will remain pari passu (i.e. debts within each
