UK Bankers Say £50K Savers Guarantee Not Enough

By David Prosser and Sean Farrell
The Independent

Treasury under pressure to guarantee all deposits; UK banks say Ireland’s move is unfair competition.

Gordon Brown’s pledge to raise the amount of savings protected in a banking failure to £50,000 may not be enough to restore confidence in Britain’s banks, senior industry executives have warned the Government. Senior bankers are pressing the Government to guarantee in full more than £2 trillion-worth of deposits, protecting all UK bank creditors completely.

The Prime Minister revealed last night that legislation this month will raise the maximum payout from the Financial Services Compensation Scheme from its current level of £35,000 to £50,000. However, with signs that the credit crisis is worsening, the Treasury is now coming under pressure to match the pledge made by the Irish government yesterday, which promised to stand behind all deposits held by Ireland’s six largest banks.

It emerged last week that more than a third of savers at Bradford & Bingley with more than £35,000 in cashdeposits had withdrawn their cash as speculation about the bank’s future mounted. Executives at several other banks have privately told ministers they are also seeing withdrawals of larger deposits because savers’ confidence in banking security has been so badly eroded.

No bank wants to push in public the case for a full guarantee, because such a move would spark speculation that it was losing depositors. However, Nick Clegg, the Liberal Democrat leader, led calls for a full guarantee, calling for an Irish-style “copper-bottomed” guarantee for British savers that all their deposits are safe.

Mervyn King, the Governor of the Bank of England, held discussions with the Prime Minister over how Britain should respond to the latest stage in the credit crisis at an emergency breakfast meeting yesterday morning.

A spokesman for Mr Brown said:

“We will do whatever is necessary to maintain stability and to protect the interests of savers.”