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UK seeks German savings clarity UK seeks German savings clarity
(about 2 hours later)
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. The UK Treasury is trying to establish the details of what intially appeared to be a German plan to offer a 100% guarantee of its private bank deposits.
The UK is to increase its cap on the amount of savings it would protect from £35,000 to £50,000. The UK is to increase its cap on the amount of savings it will protect from £35,000 to £50,000.
A German decision to back all savings would be likely to increase pressure on the UK government to do the same. But a German decision to back all its savings would be likely to increase pressure on the UK to do the same.
BBC business editor Robert Peston said there was confusion over the specific details of Germany's plan.BBC business editor Robert Peston said there was 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. Leaky borders
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. He added in such a situation, the UK would be expected to make a similar guarantee.
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. "If it turns out that [Germany] are guaranteeing all retail deposits, then I think it is inevitable that we will have to follow suit, because money leaks across borders like a sieve in these globalised markets.
"There is a risk money would flow from the UK to Germany if we didn't offer the same kind of protection."
Chancellor Merkel: Your deposits are safe
Ms Merkel's comments about German savings came after it emerged that the country's second biggest commercial property lender, Hypo Real Estate, was struggling to stay in business.
"We tell all savings account holders that your deposits are safe. The federal government assures it," she said.
But it remains unclear at this stage exactly how far those guarantees will go.
In the UK, 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 on 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
Greece and Ireland have already announced they would guarantee all savings. Greece and the Irish Republic have already announced they would guarantee all savings.
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 class="" href="http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/10/german_guarantee_lost_in_trans.html">Peston's view: Full protection nigh class="" href="http://newsforums.bbc.co.uk/nol/thread.jspa?forumID=5449&edition=1">Send us your comments class="" href="/1/hi/business/7652739.stm">No business rush to Irish banks Earlier, Lib Dem Treasury spokesman Vince Cable told the BBC that the UK could resist following their lead but a German announcement would be more difficult to ignore.
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.
"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.""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."
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. " 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. "
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. Analysts believe Ms Merkel was forced into moving to reassure savers as Germany's 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. Her move came a day after leaders of the major European economies met in Paris for talks on 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.