The Bank of England is drawing up reforms for its deposit guarantee scheme after weaknesses in the regime were amplified by the failure of SVB, The Financial Times reported.
When the US bank collapsed earlier this year, customers in the UK were warned that it could take three weeks until they got access to their cash.
The UK’s central bank also warned of potential losses on balances higher than the £85,000 insurance threshold, while, in comparison, US account holders were told they could access all their funds straight away.
The BoE is now considering upping the insurance threshold and ensuring that the return scheme is pre-funded so businesses can access their money instantly.
Under new proposals, the deposit guarantee scheme – known as the Financial Services Compensation Scheme (FSCS) – would also be able to provide capital to a failed bank so that it remained solvent until shutting down or being sold.
The new plans also consider allowing defaulted loans owed to the Bank of England to be charged to the FSCS.
No timeframe was mentioned for these changes but Governor, Andrew Bailey and Chancellor Jeremy Hunt are due to meet on Tuesday to further discuss the matter.
SVB’s collapse spooked many involved in the industry as it looked like UK depositors, which had £6.7bln in assets under the lender, might not get their money back.
HSBC subsequently bought SVB’s UK business and was able to secure the funds of all its clients.