![The governor of the Bank of England, Andrew Bailey (right), at a meeting in Washington on Wednesday.](https://media.guim.co.uk/af459c5fdb98f56be01f872b7bc2378602bbd0a4/0_200_6000_3600/1000.jpg)
The Bank of England is considering raising the amount of savers’ money that is guaranteed if their bank goes bust, after a crisis of confidence that led to the failures of Silicon Valley Bank and Credit Suisse last month.
Its governor, Andrew Bailey, said the Bank was considering “improvements” to the way customers of smaller lenders were paid out in the event of a collapse, after the US announced it was reviewing its own deposit insurance scheme.
UK banks guarantee up to £85,000 of a saver’s funds in any single account, through a government-sanctioned but bank-funded pool of cash.
However, that figure is less than half of the $250,000 (£200,000) that is guaranteed under US rules, and is lower than the EU’s guarantee that covers up to €100,000-worth of deposits.
US authorities are discussing raising that limit even further, after making an exception following Silicon Valley Bank’s collapse that meant all its tech and venture capital customers were guaranteed their deposits in full.
“The US authorities have announced a review of their deposit insurance system,” Bailey said in a speech to the Institute of International Finance on Wednesday. “In the UK, the Bank is also considering improvements to our approach to depositor payouts for smaller banks.”
He said the Bank had so far focused on the speed at which customers could receive their funds after a bank failed. While increasing deposit protections for UK savers was also being considered, he said it would come at a cost for lenders, the long-term effects of which were not immediately clear.
“Going further and considering increasing deposit protection limits could have cost implications for the banking sector as a whole. As with all things relating to bank resolution, there is no free lunch,” Bailey said.
The EU is also reportedly considering ways to strengthen rules that would make it easier to transfer savers’ money from the accounts of troubled lenders to more healthy banks in an emergency.
But Bailey played down the risks of a system-wide banking crisis, and said on Wednesday that efforts to make banks safer after the 2008 global financial crisis had worked. However, he added that the growth of the non-bank financial sector, which includes hedge funds and pension funds, had injected risks into the financial system and needed to be monitored.
Still, the governor argued that the recent turmoil in the financial sector – sparked by a series of interest rate rises over the past year – should not impact the path of monetary policy, meaning further increases were still likely.