Bank of England governor Andrew Bailey has hinted at potential reforms of the UK’s bank deposit insurance scheme, which could lift the limit on guaranteed savings.
£85,000 per bank is currently guaranteed, with Bailey suggesting at an International Monetary Fund (IMF) meeting in Washington that this could be raised in response to a host of bank failures in March.
Reforms put in place after the 2008 financial crisis had been effective, Bailey said, but more needed to be done to protect deposits, “especially in smaller banks”.
He highlighted rules requiring a distinct dividing line between insured and uninsured deposits, saying “practice, I would suggest, points to the difficulty of this principle”.
US authorities protected savings at Silicon Valley Bank (SVB), regardless of whether they were insured, after a social media-fuelled bank run led to a third of the bank's deposits being withdrawn in just one day, preceding its collapse on 10 March.
SVB’s UK arm was sold to HSBC for £1 meanwhile, which took on its roughly £6.7bn worth of deposits through a deal facilitated by the government.
Despite failures of US bank Signature and Credit Suisse in Europe, which was bought by Swiss rival UBS, Bailey reassured that he did not feel “a systemic banking crisis” was unfolding.
Bailey warned that increasing the £85,000 limit could “have cost implications for the banking sector as a whole” though, with any changes needing to be implemented by the Treasury.