Increased protection planned for savers
Plans to increase the protection available to consumers who lose money when a bank collapses were announced today.
The Chancellor Alistair Darling is calling for people who lose their savings to be paid compensation within a week, while the amount of money that is protected could be increased from £35,000 to £50,000.
But he stopped short of calling for the Financial Services Compensation Scheme (FSCS) to be pre-funded, instead saying it would have the power to borrow money from the public sector to enable it to pay savers quickly.
The banking industry had expressed concerns about earlier proposals to pre-fund the scheme, warning that this would divert vital capital away from banks at a time when they were already under pressure from the credit crunch.
But the Government decided to keep its options open, saying it would include powers in the legislation that would enable it to introduce a pre-funded element if this was thought to be appropriate in the future.
The proposals aim to increase confidence in the UK's banking system following the near-collapse of Northern Rock last year, which sparked the first run on a bank for 150 years.
The Government plans to introduce legislation on the issues this autumn, following a further period of consultation.
It said today that enabling people to have quick and ready access to their savings was "crucial" for them to be able to continue paying bills and carrying out everyday financial transactions.
Under the current system it typically takes around one month to process claims relating to relatively small firms that fail, while consumers who lose money held by bigger institutions can face waits of several months for compensation.
But under today's proposals people would receive at least a portion of their money after seven days, with the balance paid within the next few days.
The Government said it would be introducing a range of measures to help speed up the process, including no longer requiring consumers to lodge a claim in order to get compensation.
Much of the consultation document covered new rules to be introduced to reduce the chances of another bank running into problems.
These include increasing the FSA's powers to obtain and share information on banks with the other authorities, as well as introducing legislation to enable the authorities to take control of a bank or building society that is judged to be failing.
The Government also outlined plans to increase the role played by the Bank of England in maintaining financial stability, including creating a Financial Stability Committee, as well as moves to ensure there is co-ordination between the Bank, Treasury and FSA.
It is also consulting on whether banks which receive liquidity support from the Bank of England should have to disclose it immediately.
Mr Darling said: "No system of regulation can or should prevent the failure of each and every institution, but we must do everything possible to prevent problems which could pose a wider threat to stability.
"The challenge is to ensure that the authorities can act quickly and decisively where necessary to support financial institutions. These proposals will give the authorities the full range of powers they need."
The British Bankers' Association said it supported the need for the public to be confident that their savings were safe.
But it said: "To focus on a specific amount of depositor protection is to miss the most important point - it is better not to need it at all.
"We have been talking with the Government and regulators about intervening earlier should a bank get into difficulties to prevent a banking problem becoming a crisis."
Liberal Democrat shadow chancellor Vince Cable said: "If there is to be confidence in the banking system it is critical that there is rapid repayment from the Financial Services Compensation Fund when a bank goes under.
"The only way this can happen is for the banks to make 'up front' payments into the fund so that there is a pool of funds to draw on.
"We must be clear that deposit protection is the responsibility of the banks, not the taxpayer."
Vera Cottrell, personal finance campaigner at consumer group Which?, said: "These proposals still won't offer enough protection to people with savings.
"Payouts must be faster than the proposed seven days to minimise the disruption to people's lives."
Martin Lewis, creator of MoneySavingExpert.com, said: "Any rise in the amount (covered by the FSCS) is very welcome, hopefully not because it'll ever be practically needed, but more importantly, to persuade savers that their cash is safe.
"With growing mutterings about keeping cash under the mattress, over the last year we've run the risk of returning to the Victorian era. This latest announcement should help quell fears."
Peter Vipond, director of financial regulation at the Association of British Insurers, said: "It is vital that any change in legislation should not undermine the FSA's role of supervising financial institutions and promoting financial stability.
"There has to be clarity in the roles of the Treasury, the FSA and the Bank of England.
"Depositor protection is an important element in restoring confidence and making payments faster and raising awareness of the protection available will help. However, the best form of depositor protection is top-class supervision."
Mark Dampier: 'We're on our own in retirement. They've pulled pensions to pieces'
Questions of Cash: I don't use Amazon Prime, but my credit card bill says I do
Donald MacInnes: 'I have to have £500 a month spare from now until at least 2035'
Crippling PFI deals leave Britain £222bn in debt
Pension freedoms: How to deal with cold calls from scammers
- 1 BBC election debate: The one photo that summed up the whole 90-minute leaders debate
- 2 18th century sex toy found in 'toilet of sword fighting school' in Poland
- 3 US? China? India? The 10 biggest economies in 2030 will be...
- 4 'I wish my teacher knew...': Young students share their 'heartbreaking' worries in notes
- 5 Rebecca Francis accuses Ricky Gervais of using 'influence' to target female hunters after receiving barrage of death threats
The only black face in the Ukip manifesto is on the page about overseas aid
If I’m being racially abused I don’t need a stranger with a saviour complex to rescue me
Ukip is the only main political party to not address LGBT rights in its manifesto
BBC election debate: The one photo that summed up the whole 90-minute leaders debate
Religion isn't growing, it is becoming vigorous in its demise, says philosopher AC Grayling
Food banks: One million Britons will soon be using them, according to Trussell Trust
iJobs Money & Business
£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...
£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...
£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...
£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...
Day In a Page
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000