BoE mulls more coverage for savers

The Bank of England is considering increasing the amount of money guaranteed to savers if their bank collapses. The move comes after a number of high-profile failures, including Credit Suisse and Silicon Valley Bank last month, led to a crisis of confidence. At present, UK banks guarantee up to £85,000 of a saver’s funds in any single account, funded by a government-sanctioned pool of cash. This figure is less than half the amount guaranteed under US rules and lower than the €100,000 guaranteed in the EU.

Andrew Bailey, Governor of the Bank of England, said that the Bank is looking at ways to improve how smaller lenders pay out their customers in the event of a collapse. He noted that the US is reviewing its own deposit insurance scheme, and that the UK was also considering making changes. Bailey suggested that the Bank has been focused on the speed of payouts in the past, but now would consider increasing deposit protection for UK savers.

Bailey acknowledged that increasing deposit protection limits could be costly for lenders, and noted that there were no “free lunches” in bank resolution. However, he played down the risks of a system-wide banking crisis, saying that the measures implemented after the 2008 global financial crisis had worked. He did note, however, that the growth of the non-bank financial sector, which includes pension funds and hedge funds, had created new risks that needed to be monitored.

Bailey also said that the recent turmoil in the financial sector, caused by a series of interest rate rises over the past year, should not affect monetary policy. He suggested that further increases were still likely. The EU is also said to be considering ways to strengthen rules that would make it easier to transfer savers’ money from the accounts of troubled lenders to more healthy banks in an emergency.