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UK bank savings guarantee urged UK seeks German savings clarity
(30 minutes later)
UK Chancellor Alistair Darling is coming under pressure to follow Germany and guarantee private bank savings to ward off financial crisis. The UK Treasury is trying to establish the details of a German plan suggesting it would offer a 100% guarantee of its private bank deposits.
Lib Dem leader Nick Clegg said it was "completely unavoidable" after Germany became the third European country to instigate the measure. The UK is to increase its cap on the amount of savings it would protect from £35,000 to £50,000.
Greece and Ireland have already announced similar commitments. A German decision to back all savings would be likely to increase pressure on the UK government to do the same.
But the BBC business editor Robert Peston said there is confusion over the specific details of Germany's plan. BBC business editor Robert Peston said there is confusion over the specific details of Germany's plan.
He said should German Chancellor Angela Merkel be offering to underwrite the retail liabilities of German banks, it would reverberate all over Europe.He said should German Chancellor Angela Merkel be offering to underwrite the retail liabilities of German banks, it would reverberate all over Europe.
He added in such a situation the UK would be expected to make a similar guarantee.He added in such a situation the UK would be expected to make a similar guarantee.
The Chancellor of the Exchequer Alistair Darling has repeatedly pledged that he will do "whatever is necessary" to maintain stability in the British financial system.The Chancellor of the Exchequer Alistair Darling has repeatedly pledged that he will do "whatever is necessary" to maintain stability in the British financial system.
Last week, the Financial Services Authority said it would be raising the limit to the amount of deposits that are guaranteed should a UK bank go bust, from £35,000 to £50,000 per banking group from this Tuesday.Last week, the Financial Services Authority said it would be raising the limit to the amount of deposits that are guaranteed should a UK bank go bust, from £35,000 to £50,000 per banking group from this Tuesday.
Paris meetingParis meeting
Mr Clegg said Mr Darling is under mounting pressure to take further steps: "Germany is Europe's economic superpower. Where it leads, others are bound to follow." Greece and Ireland have already announced they would guarantee all savings.
That Germany is the first of the major European economies to provide 100% insurance to private savers shows just how fragile its banks have become Robert PestonBBC business editor Peston's view: Full protection nighSend us your commentsNo business rush to Irish banks European governments are as dazed and confused by the mayhem in the global banking system as most of the rest of us Robert PestonBBC business editor Peston's view: Full protection nighSend us your commentsNo business rush to Irish banks
He added: "Ireland's action last week to guarantee all deposits made a common European approach to deposit guarantees necessary. The Lib Dems Treasury spokesman Vince Cable told the BBC Britain could resist following their lead but a German announcement would be more difficult to ignore.
"Germany's decision makes it completely unavoidable." "As long as it was the Irish and small countries, in a way this could be fended off, but Germany, of course, is a very big player and I fear that the British government may have to follow suit."
The Lib Dems Treasury spokesman, Vince Cable, told the BBC the UK was likely to follow Germany's lead. He added: "People are anxious, there is a danger that if one country, a major country like Germany offers blanket protection and others don't, you then get an out flow, so the British government will almost certainly have to follow. "
But he said such action would be "irrational" as 98% of depositors had less than £50,000 in savings in any one institution and would not be affected. Analysts believe Ms Merkel was forced into moving to reassure savers as the future of Germany's second-largest mortgage lender Hypo Real Estate was found to be teetering on the brink of bankruptcy.
He said: "People are anxious, there is a danger that if one country, a major country like Germany offers blanket protection and others don't, you then get an out flow, so the British government will almost certainly have to follow suit. "
Analysts believe Ms Merkel was forced into further action as the future of its second-largest mortgage lender Hypo Real Estate was found to be teetering on the brink of bankruptcy.
Leaders of the major European economies met in Paris on Saturday for talks to hammer out measures to halt the global credit crunch.Leaders of the major European economies met in Paris on Saturday for talks to hammer out measures to halt the global credit crunch.
Britain, Germany, Italy and France agreed to work together to support financial institutions and bring in more regulation.Britain, Germany, Italy and France agreed to work together to support financial institutions and bring in more regulation.