Darling aims to tighten bank protection
Alistair Darling has launched a discussion paper into the banking sector in the wake of the Northern Rock crisis.
Speaking to parliament, the chancellor admitted he and his wife had a mortgage with Northern Rock, before outlining the discussion paper Banking Reform – Protecting Depositors.
The paper will look at improving the way banks in financial distress are dealt with and will attempt to secure greater protection for depositors.
Mr Darling acknowledged there were serious lessons to be learnt from the Northern Rock bank-run last month, and said the investigation would be an “initial step towards more comprehensive change.”
The paper will look at increasing protection for savers from the current level of £35,000, and ways of speeding up the compensation process.
The Treasury is also looking at a new system of preserving critical banking functions – such as cash machines and direct debits – if a bank becomes insolvent.
Mr Darling said: “This regime would mean: depositors are insulated from a bank that has failed, greater compensation for them and certainty their compensation can be paid out quickly.”
The chancellor went on to outline action to be taken on an international level both with his European counterparts and G7 finance ministers to establish an “early warning system to strengthen financial sector surveillance, identify risks to stability and co-ordinate the regulatory response to them.”
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