Confederation of British Industry responds to Treasury proposals on banking reform

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Confederation of British Industry responds to Treasury proposals on banking reform

Wed 2nd Jul 2008

Government proposals including compensating savers who lose money within a week if their bank goes under have been commented on by the Confederation of British Industry (CBI).

A consultation document launched by chancellor Alistair Darling, reported by the Guardian, also requests the Financial Services Authority to consult on raising the current limit of compensation from £35,000 to £50,000.

The Financial Services Compensation Scheme (FSCS) will not be pre-funded, as banks said they were already troubled by the credit crunch, but money would be borrowed from the public sector.

John Cridland, CBI deputy director-general, told Mortgage Introducer that pre-funding the depositor protection scheme would "take ages to build up to an amount which would deal with a failure of any size".

But he questioned raising the compensation limit, saying that £35,000 covers 96 per cent of deposits by number and was in keeping with limits elsewhere.

The proposal to allow the FSCS immediate liquidity through the National Loans Fund was "entirely sensible".

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