Most savers left high and dry by a failed bank or building society will get their money back within seven days under changes to the deposit protection scheme, according to the City watchdog.

The Financial Services Compensation Scheme (FSCS) – which protects deposits of up to £50,000 – will aim to repay most savers within a week and all customers within 20 days, experts from the Financial Services Authority (FSA) have said.

Under the new regime – which will not come into force until the beginning of 2011 – deposits will be paid out ‘gross’ without taking into account any loans that the customer has from the same bank.

This will offer greater protection because under current rules, any outstanding loans would be deducted from the savings that are returned to the customer.

FSA chief executive Hector Sants said: “To help underpin confidence in our banking system, individuals and small businesses must feel confident that their money is well protected.

“The new rules announced today will help deliver that confidence.”

Key changes announced by the watchdog also include ensuring that banks keep up-to-date information to allow quick processing and payouts under the FSCS if needed.

The FSA will meanwhile require deposit-taking institutions to tell its customers about the FSCS scheme and the protection it offers, as well as informing savers about any other trading names it operates under.