Banks question savings protection by Finance News Bulletin

Published: 12/12/07

The cost of rising the level of savers' deposit protection would be passed onto customers, most important banks have warnedThe government announced a review of the present recompense arrangements after the sprint on Northern RockThe British Bankers' Association (BBA) said the present £35,000 limit enclosed 96% of money in savings accountsIt argued raising the limit would have "considerable" cost implications for banks, but advantage very few customers

Chancellor Alistair Darling indicated he would think a scheme to guarantee as much as £100,000As an interim measure he has already greater than before the amount protected to 100% of the first £35,000 of savers' moneybefore, the Financial Services recompense Scheme (FSCS) only covered 100% of the first £2,000, and then 90% of the next £33,000BBA Chief Executive Angela Knight said greater than before costs resulting from further expansion to the FSCS would "unavoidably" be passed on to customers

There is nothing more important than introducing a scheme that will shore up the sentiment over savingsAccording to research approved out for the BBA by the monetary consultants Oliver Wyman, 96% of customer deposits are already covered by the present £35,000 thresholdIncreasing the limit to £100,000 would make bigger protection to an extra 1% of deposits, but would twice the cost of the scheme, it foundConsumer campaigners said it was necessary that the government increased the defense for savers"After what's happened with Northern Rock, consumer confidence is at an unsurpassed low," said Martin Lewis, from consumer website Moneysavingexpert

com"There is nothing more important than introducing a system that will shore up the sentiment over savings"And he dismissed the caution that banks would pass on any increased scheme costs to customers by wounding interest rates on investments"Considering we are already in a highly competitive environment where the best savings accounts already pay more than the bottom rate, I think this is just balderdash and harangue from the banks

"In its response to the government's consultation on reforming the banking system after the Northern Rock disaster, the BBA called for an "unlock enquiry" into the recent financial turmoilIt said this could assist restore public confidence in the financial sector and the system whereby the Bank of England, the coffers and the Financial Services Authority share regulatory responsibilityMs Knight supposed the banks supported the basic framework of the tripartite agreement but that it had clearly been "found

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