Bank of England considering urgent reform of deposit guarantee scheme, Financial Times reports
Business
The UK’s Financial Services Compensation Scheme is being urgently reviewed
(Reuters) - The Bank of England is considering a major overhaul of its deposit guarantee scheme, including boosting the amount covered for businesses and forcing banks to pre-fund the system to a greater extent to ensure faster access to cash when a lender collapses, The Financial Times reported on Sunday.
The UK’s Financial Services Compensation Scheme is being urgently reviewed after the rapid failure of Silicon Valley Bank last month, the FT added citing people briefed on the matter.
A BoE spokesperson declined to comment on the report.
The failure last month of Silicon Valley Bank and two other lenders in the United States, along with the forced takeover of Credit Suisse by UBS sent banking shares globally into a tailspin, but markets have since calmed.
BoE Governor Andrew Bailey said last week that the British central bank was considering improvements to its approach to depositor pay-outs for smaller banks with a focus on the speed of the pay-outs.
"Going further and considering increasing deposit protection limits could have cost implications for the banking sector as a whole," Bailey said on Wednesday in Washington where he was attending meetings of the International Monetary Fund. "As with all things relating to bank resolution, there is no free lunch."
The heightened concerns about the safety of banks globally have raised questions about how far authorities should go to shore up the sector if needed, particularly regional lenders in the United States.
The FT, quoting its sources, said regulators were worried the UK guarantee’s 85,000-pound limit covered only about two-thirds of deposits and that the relatively low level of pre-funding meant delays of at least a week for customers to regain access to their cash.
