The new FSCS protection limit fell from £85,000 on 1 January to £75,000.

The previous limit was in place for almost five years and protected about 98% of consumers.

The FSCS said the new limit protects the “vast majority of people and businesses”.

The new limit will mean that more than 95% of retail depositors will be fully protected, officials said.

The limit must be reviewed every five years and the £75,000 figure is unlikely to change before then, unless there are unforeseen events such as significant currency fluctuations, the FSCS said.

An FSCS statement read: “The new limit results from the European Union Deposit Guarantee Scheme Directive, which reset the limit in July 2015.

“The change follows a six-month transition period that gave anyone with balances exceeding the new limit time to adjust their balances before it came in.

“The recast directive sets a €100,000 deposit protection limit across the EEA and requires those member states that convert the deposit protection limit into their national currency to set the limit using the exchange rate prevailing on 3 July 2015. The PRA set the new deposit protection limit according to this requirement.

“The PRA is required to review the FSCS limit every 5 years, and will manage any future changes in a way that seeks to minimise disruption for depositors.”

Mark Neale, FSCS Chief Executive, said: "The good news is that the new limit will protect some 97% of people, with about 93% of consumers having £50,000 or less in savings. What hasn't changed is the service FSCS provides consumers should the worst happen to their bank, building society or credit union. We continue to be there for them."

FSCS bosses said it had “come to the aid of millions of people” since 2001 while paying out more than £26bn in compensation. It protects deposits, insurance, investments and mortgage broking.