banking and economics

improving protection for savers

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It was announced yesterday that Alastair Darling, Chancellor of the Exchequer plans for 100% of the first £35k of customer’s savings to be guaranteed in the event of a bank failure.  This is clearly in the wake of the Northern Rock crisis, although as I heard it they probably wouldn’t have needed the services of the insurance scheme.

There are also plans afoot to increase the level at which deposits are insured to as much as £100k. I think this is an attempt to prevent a panic in the event of another bank going into difficulties, rather than this having become any more likely.

I’m not really sure what to think about these proposals. I’m generally in favour of increased consumer protection, and persuading the risk averse to put their money into savings accounts rather than hiding it under the mattress is probably a good idea. On the other hand, there is a limited level of familiarity with risk and return in the UK. I wouldn’t like to see people continuing to believe that any action is risk free.

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