LONDON (Reuters) -Britain’s Prudential Regulation Authority has proposed raising the protection limit for savers in case a bank fails to 110,000 pounds ($142,300), the Bank of England said on Monday.
The deposit protection limit is the maximum amount of money that is typically protected for savers should their bank become insolvent.
The limit has been set at 85,000 pounds since 2017, and an increase would take into account inflation since then, the BoE said, adding that a change, if implemented, would apply from December.
A hike in the UK’s guarantee would put deposit protection above that of the EU but below the United States. In the EU the level of deposit protection is harmonised at 100,000 euros across member states, while in the U.S. it is at least $250,000 per depositor.
“Confidence in our financial system is an essential foundation for economic growth. We want to support confidence in our banks, building societies and credit unions by raising the amount that people can keep in their account,” said Sam Woods, Deputy Governor for Prudential Regulation and CEO of the PRA, which is part of the BoE.
The BoE considered an overhaul of the deposit guarantee scheme in 2023, media reported at the time, after the rapid collapse of Silicon Valley Bank raised questions about how to ensure faster access to cash when a lender collapses, and about the appropriate level of protection.
The BoE said on Monday it was consulting on other changes, including introducing rules needed for a new resolution tool designed to enable industry funds to be used to recapitalise failing firms.
The bank also wants to increase the limit for certain temporary high balance claims such as buying or selling a house to 1.4 million pounds from the current one million pounds.
“Raising the deposit protection limit is a sensible decision to support consumer confidence in the financial service industry,” Rocio Concha, Director of Policy and Advocacy at consumer group Which? said in the BoE statement.
“At a time when the government and regulators are going for growth, this decision is a reminder that strong consumer protections and economic growth go hand in hand.”
UK Finance, an industry group representing banks, also welcomed the review of the limit. Eric Leenders, Managing Director for Personal Finance, said the scheme “underpins confidence in the UK’s financial system”.
($1 = 0.7730 pounds)
(Reporting by Sarah Young, Sachin Ravikumar and Tommy Reggiori Wilkes, Editing by Paul Sandle, Aidan Lewis)
