London April 17 2023: The Bank of England is considering an overhaul of its deposit guarantee scheme after the recent global banking crisis, the Financial Times reported, citing people briefed on the central bank’s plans.
Reforms under consideration include raising the amount covered for businesses from the current £85,000 ($105,500) limit, as well as forcing banks to pre-fund the system to a greater extent to speed up payouts, the newspaper reported.
The report didn’t have details on what the new limit could be. The BOE declined to comment when reached Sunday by Bloomberg News.
The BOE’s deposit guarantee scheme came under scrutiny recently following the collapse of Silicon Valley Bank and its UK arm. HSBC Holdings Plc eventually purchased Silicon Valley Bank’s UK business for £1 to contain the fallout and protect the lender’s clients.
The US Federal Deposit Insurance Corp. guarantees deposits up to $250,000.
Governor Andrew Bailey has hinted at a possible increase in the deposit guarantee scheme, saying on Wednesday that regulators need to look again at how much protection they extend to depositors at smaller banks.
Speaking in Washington on the sidelines of the International Monetary Fund’s spring meetings, Bailey expressed confidence in the health of the financial system but said the collapse of Silicon Valley Bank indicated a shortfall in the depositor protection program for smaller institutions.
BOE Governor Says Small Bank Depositors Need More Protection
“The idea behind deposit protection is to set a level below which the assurance of value holds, and above which it does not,” Bailey said. “Practice, I would suggest, points to the difficulty of this principle