Savings Protection 'To Be Increased'

The amount that savers can be compensated for by the government if their account provider collapses might be raised by the chancellor of the exchequer.

Alistair Darling said today that a consultation would be launched on raising the current compensation limit for customer savings from its current level of £35,000 to a likely level of £50,000. Such a move would mark the second strengthening of consumer protection in a year: until last October, only 90 per cent of savings above £2,000 and below £35,000 were fully guaranteed.

The change in compensation law has come about due to the Northern Rock crisis in summer 2007, the first bank run in the UK for over a century. Long lines of customers queued outside branches of the lending bank in order to withdraw their savings, following the firm's near-collapse in the credit crunch.

Mr Darling said: "No system of regulation can or should prevent the failure of each and every institution, but we must do everything possible to prevent problems which could pose a wider threat to stability.

"The challenge is to ensure that the authorities can act quickly and decisively where necessary to support financial institutions. These proposals will give the authorities the full range of powers they need."