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October 1, 2008

New promise on £50,000 deposit guarantee

by Gill Montia

Story link: New promise on £50,000 deposit guarantee

The crisis in the banking sector has prompted Prime Minister Gordon Brown to hasten moves to raise the amount guaranteed in individual savings accounts from the current £35,000 to £50,000.

The proposed rise has been under discussion since the collapse of Northern Rock over a year ago and in July of this year, Chancellor of the Exchequer Alistair Darling confirmed plans to revise the Financial Services Compensation Scheme (FSCS).

Speaking to the BBC yesterday, the Prime Minister indicated that a change was imminent and would form part of his “whatever it takes” pledge to the nation.

However, the UK will not follow the Irish Republic, which yesterday implemented a 100% guarantee for deposits across six banks and buildings societies, for two years.

Under current UK rules, the first £35,000 of an individual’s savings is guaranteed by the Government should a bank collapse but consumers should be aware that if they have savings and loans with the same financial institution, in the event of a collapse their savings could be offset against the outstanding debt to produce a net claim to the FSCS.

Prior to the Northern Rock crisis, savers were guaranteed 90% of their savings between £2,000 and £35,000 and nothing thereafter.

 

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1 Comment »
  1. Politicians Principally to blame for the Impending Financial Collapse of the World Economy

    Why is it that governments around the world did nothing until financial death was knocking on the door?
    For they were told at least five years ago about the dire state of the international financial markets. In this respect clear examples of this knowledge that they had at the time were,
    1. In 2003 the former US Federal Reserve chairman Alan Greenspan warned of the forthcoming financial collapse if Fannie Mae’s activities were not reined in. The government did nothing and Fannie Mae was allowed to continue operating until only last month, some five-years after the warning from the US’s top banker was given. Indeed, the 30% of mortgages in the US, which are toxic mortgages, equates to losses for the banks of $3.1 trillion. Therefore how could politicians overlook such a failure it has to be asked? The only answer can be incompetence and complacency at the highest level.
    2. In 2006 the Bank for International Settlements, the world’s most prestigious financial body and the central banker’s ultimate bank, stated that the financial world was in a diabolical state and that it had to change its current ways and activities. No government throughout the world intervened until it is was too late and where caution was not on the agenda for them just a mere two years ago.
    Clearly therefore it is the politicians who are to blame for all the mess that we all now find ourselves and due to them not taking any action years ago. Indeed, the dire problems that we are now starting to witness are a direct result of their total complacency for years and where eventually it will cause the worst financial crash that we have ever witnessed. For this is already transferring into the economy and where the wheels of industry are now steadily but surely starting to slow to a full stop.

    It is not only the bankers therefore who need sorting out but their bed pals the politicians as well. For both have made enormous financial benefit out of this unprecedented, irresponsibility and appalling personal greed.

    Dr David Hill
    World Innovation Foundation Charity (WIFC)
    Bern, Switzerland

    Comment by dr david hill — October 1, 2008 @ 6:46 pm

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