Banks will have to publicise clearly how their customers' savings are protected, under new rules issued yesterday by the financial regulator.

The rules, which take effect from August 31 and also apply to building societies and credit unions, require all banks to give prominent display to posters and stickers in their branches and on their websites advertising compensation details and limits.

The Financial Services Authority regulations mean customers using the UK branch of a foreign bank from the European economic area (EEA) will have to be made aware they will be covered not by the Financial Services Compensation Scheme (FSCS) but by the national scheme of the bank's host nation.

The FSA's director of UK banks and building societies, Andrew Bailey, said: "Too many people assume that because their branch is located on a local high street in the UK, they are covered by the FSCS. This is not true for UK branches of EEA banks, where the home country's deposit guarantee scheme applies."

He added: "Customers need to feel confident about their money, and to do this they need to know what the compensation limits are and which scheme would provide cover in the event of a bank, building society or credit union failure."

Mark Neale, chief executive of the FSCS, said: "The banking crisis shows how important it is for consumers to have clear information – we never again want to witness the run on a bank because people do not know their money is protected. Since then, the industry has improved the quality of information it gives to consumers about FSCS, however, it needs to do much more to provide clear, accurate information."

He added: "This is essential to building consumer confidence, and is not limited to deposits. It is something that is normal in other parts of the world."