Chancellor Jeremy Hunt has agreed with Bank of England (BoE) comments that the UK’s deposit insurance scheme should be updated following the recent spate of banking failures.
“We need to look at deposit insurance and keep that under review,” Hunt said on Thursday, implying the limit on guaranteed savings could be lifted from £85,000 in the UK.
“If there is a decision that we should increase, it will come across my desk as to how we finance that increase”, he said, though he warned any immediate change would need public money.
His comments echoed those of BoE governor Andrew Bailey, who warned on Wednesday that more needed to be done to protect deposits held by “smaller” lenders after the collapse of Silicon Valley Bank (SVB) collapse on 10 March.
US authorities protected savings at SVB, regardless of whether they were insured, after a social media-fuelled bank run led to a third of deposits being withdrawn in just one day.
SVB’s UK arm, meanwhile, was sold for £1 to HSBC, which took on its roughly £6.7bn worth of deposits through a deal facilitated by the government.
“The thing that was most noticeable about Silicon Valley Bank was the speed at which deposits were transferred,” Hunt said while at International Monetary Fund (IMF) meetings in Washington.
“Word gets round on social media. And so we need to make sure we are constantly updating our stress testing to deal with situations that might occur.”
Hunt assured the government would assess lifting the deposit protection limit if recommended to, adding the BoE would guide what the figure is raised to.
“I’m very confident that, notwithstanding the speed that deposits can move, we have a very resilient banking sector,” he stressed, but claimed SVB’s collapse, which preceded failures at Signature Bank and Credit Suisse, showed turmoil could hit more rapidly than in the 2008 financial crisis.