You would think if accounts were denominated in pounds appreciation wouldn't matter.
The British FDIC (I love that it's called a scheme) collects funds to reimburse customers of failed financial institutions by taxing those institutions. From the annual report (pp. 32-33) it looks like these levies are in pounds, and I also wonder why changes in the euro would affect their ability to provide coverage. FSCS says "The change results from the European Union Deposit Guarantee Schemes Directive, which reset the limit in July. The limit is the UK equivalent of €100,000." But the pound is gaining against the euro, so it is still confusing why the pound-based limit would drop. What's more, the EU deposit limit has been rising, not falling, from 20,000 ECU in 1994, to €50,000 after 2009, and €100,000 by the end of 2010.The maximum compensation across the European Union is set at €100,000, and the British level was reduced as a result of the pound gaining strength against the euro.