Chancellor Alistair Darling is expected to propose new measures to protect savers in the event of a bank getting into financial difficulty.
Chancellor Alistair Darling is proposing new measures to protect savers in the event of a bank getting into financial difficulty.
The plans are intended to increase public confidence in the banking system in the wake of the near collapse of Northern Rock in September last year.
The plans are intended to increase public confidence in the banking system in the wake of the near collapse of Northern Rock in September last year.
The threshold for guaranteed deposits could rise from £35,000 to £50,000.
As part of the plans, the threshold for guaranteed deposits is expected to rise from £35,000 to £50,000.
The measures will not cost banks any cash up-front, only if problems occur.
A consultation period will begin after the proposals are made and any changes will come into effect in the autumn.
A consultation period will begin after the proposals are made and any changes will come into effect in the autumn.
The existing Financial Services Compensation Scheme guarantees all deposits up to £35,000. If more than one bank within a group failed, the maximum total amount that could be claimed per person would be £35,000 even though the customer may have separate accounts with different banks in that group British Bankers Association Experts view: Are your savings safe?
The chancellor is expected to raise this threshold to £50,000 or even higher.
He may also require banks to pay into the scheme up front, so that savers could receive compensation immediately from a prepaid fund.
Need for speed
The current scheme can take weeks or even months before savers get their money back.
The banking industry, however, would prefer to pay compensation when it is needed.
The British Bankers Association (BBA) argue that up front payments would tie up capital and would be an additional drain on liquidity already stretched by the credit crunch.
"It is important that people can get to their cash quickly," Angela Knight, of the BBA, told the Today programme.
She said that banks had always, and would continue, to pick up the cost of the scheme.
She added that there was a very strong banking sector in the UK, but that the repayment of deposits should be given priority if a bank went under.
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