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Britain to raise deposit insurance

October 01, 2007|From Bloomberg News

Britain's chancellor of the exchequer, Alistair Darling, aiming to restore consumers' confidence in the nation's banking system, will extend a government-backed guarantee for cash deposits of as much as $70,000 (35,000 pounds) in all accounts.

His announcement today will spell out details of how the government would reimburse savings in any failed banks. Darling said Sept. 17 that he would introduce the plans to stop a run on deposits at Northern Rock bank.

Currently, the banking-industry-funded program pays back 100% of the first 2,000 pounds of savings lost in a bank failure and 90% of deposits up to 33,000 pounds.

Northern Rock customers ignored assurances from Chief Executive Adam Applegarth and Darling that there was no need to withdraw money after the central bank provided emergency funding on Sept. 14. Savers lined up outside the bank to withdraw about 2 billion pounds of deposits until Darling's statement on Sept. 17.

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