Darling considers raising deposit protection limit

Source: Exec Digital UK

Date :22/09/2007 17:04:01

The chancellor has announced plans to make changes to the banking system in order to offer more protection for people's savings in the future.

Alistair Darling made the suggestions in the Times newspaper.

The changes would mean an increased guarantee for people's savings of up to £100,000 in the event of a bank crisis.

Mr Darling said he was considering a wide package of financial reforms in the light of the Northern Rock crisis - but that these were still in the early stages of development.

Writing in the Times today, Mr Darling said the rise in guarantees by the government was a "bullet that needs to be bitten" and would be paid for by a levy on banks.

More protection

The Bank of England has already called for more protection for customers' savings.

The bank believes that the current system - guaranteeing 100 percent of the first £2,000 and 90 percent of the next £31,000 - contributed to this month's run on Northern Rock.

Some of the planned changes to banking rules were already in the pipeline before the run on Northern Rock and would be announced when the House of Commons returns next month, Mr Darling said.

According to the Times, he is looking at an American-style system, where savers' money is guaranteed and paid out days after a bank collapses, funded by a levy on banks and other financial institutions.

The chancellor will himself be called before the treasury select committee to explain why the Bank of England and financial authorities failed to foresee the recent crisis.

Shadow chancellor George Osborne promised the Conservatives would help the government to push through any changes that were needed.

September 22 2007