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New bank protection laws imminent | New bank protection laws imminent |
(about 3 hours later) | |
A new law will be introduced in the coming year to improve safeguards for banks in danger of going bust, and to protect savers' money. | A new law will be introduced in the coming year to improve safeguards for banks in danger of going bust, and to protect savers' money. |
The government wants to reform the current system which has been widely criticised in the wake of the near collapse of the Northern Rock bank. | The government wants to reform the current system which has been widely criticised in the wake of the near collapse of the Northern Rock bank. |
The new laws may include a higher level of protection for depositors and a new legal regime to rescue insolvent banks. | The new laws may include a higher level of protection for depositors and a new legal regime to rescue insolvent banks. |
Discussion on the shape of the new regulations started in October. | Discussion on the shape of the new regulations started in October. |
In her annual speech outlining the government's plans for new laws, the Queen said: "Legislation will be brought forward to protect depositors and ensure confidence in the banking system." | In her annual speech outlining the government's plans for new laws, the Queen said: "Legislation will be brought forward to protect depositors and ensure confidence in the banking system." |
More consultation | More consultation |
Details of what may be in the new legislation are still hazy but a formal consultation paper will be published early next year. | Details of what may be in the new legislation are still hazy but a formal consultation paper will be published early next year. |
"This [forthcoming] regime would mean depositors are insulated from a bank that has failed, greater compensation for them and certainty their compensation can be paid out quickly," Chancellor Alistair Darling told MPs last month. | "This [forthcoming] regime would mean depositors are insulated from a bank that has failed, greater compensation for them and certainty their compensation can be paid out quickly," Chancellor Alistair Darling told MPs last month. |
The British Bankers' Association said: "We are currently looking at the discussion paper and looking forward to working with the government over the consultation paper and the legislation when it comes." | The British Bankers' Association said: "We are currently looking at the discussion paper and looking forward to working with the government over the consultation paper and the legislation when it comes." |
In the immediate aftermath of the run on the Northern Rock, the government upgraded the existing Financial Services Compensation Scheme (FSCS). | In the immediate aftermath of the run on the Northern Rock, the government upgraded the existing Financial Services Compensation Scheme (FSCS). |
This means that savers now get 100% compensation for the first £35,000 of their savings if their bank becomes insolvent. | This means that savers now get 100% compensation for the first £35,000 of their savings if their bank becomes insolvent. |
Mr Darling had suggested that this might be raised to £100,000, but this idea now appears to have been dropped. | Mr Darling had suggested that this might be raised to £100,000, but this idea now appears to have been dropped. |
The government's ideas are now focused more strongly on introducing a new insolvency regime, just for banks and building societies, so that they can be taken over and rescued quickly. | The government's ideas are now focused more strongly on introducing a new insolvency regime, just for banks and building societies, so that they can be taken over and rescued quickly. |
Lack of clarity | |
One beneficial effect of that would be the swift return of money to savers. | One beneficial effect of that would be the swift return of money to savers. |
The government stressed that it "wants to be reasonably assured that the benefits of the proposed changes exceed the costs". | The government stressed that it "wants to be reasonably assured that the benefits of the proposed changes exceed the costs". |
But Martin Lewis, creator of Moneysavingexpert.com, criticised the lack of detail in today's announcements. | |
"The financial protection currently offered is abysmally confusing; and this has done nothing to help," he said. | |
He highlighted the anomaly under the current rules whereby the £35,000 threshold applies per bank, and not per account, adding that the rules of what constitutes a bank in these circumstances were "virtually impenetrable." | |
"If you've money in the Halifax, Bank of Scotland and Birmingham Midshires, all part of HBOS you've only £35,000 of protection. Yet if you've money in RBS and Nat West, both part of RBS Group you've £35,000 protected in each," he said. | |
"After a year of panic and confusion, with the first run on a bank in living memory; the one thing everyone wants, and still waits for, is clarity." |
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