New measures for increasing public confidence in the UK banking system
July 3, 2008
Chancellor Alistair Darling has come up with new measures for protecting savers in case a bank gets into financial trouble. The plans are aimed at increasing public confidence in the UK banking system in the aftermath of the near-collapse of Northern Rock last September.
As part of the plan, the threshold limit for guaranteed deposits is slated to go up to £50,000 from £35,000. Any changes are expected to come into effect early in 2009 or in the autumn. The chancellor presented to the House of Commons all his written proposals, just ahead of a consultation period. These measures are not going to cost banks any cash ‘up-front’. The banks will only be approached if any problem occurs.
Calls for the current deposit protection system to be altered increased after the problems emerged at Northern Rock leading to a run on the lender as customers queued to withdraw their money in fear.
Mr Darling stated: “No system of regulation can (or should) prevent the failure of each and every institution. However, we must do everything possible for preventing problems that could pose a wider threat to stability.”
A large portion of the 167-page report details about plans to prevent another ‘Northern Rock scenario’.
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