Monday 24th September 2007
Britons could see the first £100,000 of their savings protected in light of the Northern Rock crisis, it has emerged.
Financial Times (FT) economics correspondent Scheherazade Daneshkhu claims that chancellor Alistair Darling is considering raising the current £31,700 threshold to the six-figure sum.
This would mean all consumers were protected to that level under the Financial Services Compensation Scheme, the FT states.
However, the correspondent notes that no formal announcement has formally been made - and that the £100,000 level could change even if the scheme goes ahead.
Mr Darling previously announced that all savings held in accounts with Northern Rock will be protected through the institutions current funding problems.
"Northern Rock is solvent and with a sound long-term loan book, but has had short-term liquidity difficulties," he said last week.
As such, the protection was "designed to overcome these short-term difficulties and to enable it to do its business in the normal way".
On Friday, the Bank of England added to the assistance offered to financial institutions with a £10 billion fund made available on more flexible terms than the short-loan facility already accessible to banks.
Loans obtained by financial institutions carry a three-month maturity and cover a "wider range of collateral" including mortgages, the Bank explained.
The first auction of such loans is scheduled for this week, with three further sales expected in subsequent weeks - although the precise value of these is yet to be decided.
Commenting on the announcement, British Bankers Association chief executive Angela Knight said: "The Banks willingness to lend for longer maturities than just overnight - against a wider range of collateral - should considerably ease the very tight conditions that we have been seeing in the money market over recent weeks."
©
