Britain will raise its state guarantee on bank deposits to £85,000 at the end of the year, bringing it into line with a new European compensation limit, the country's financial regulator said.
The new guarantee, up from £50,000 per person currently, takes effect from December 31st, the Financial Services Authority said today.
The higher limit matches a new €100,000 compensation ceiling that comes into force on the same date across the European Economic Area, which covers most of Europe.
"The need to maintain customer confidence in the banking system is one of the key lessons from the financial crisis," FSA director of Conduct Policy Sheila Nicoll said in a statement.
She added that the new guarantee would protect "the vast majority of depositors."
Britain raised its deposit guarantee from £35,000 per person at the height of the banking crisis two years ago after the near-collapse of Northern Rock prompted thousands of savers to withdraw their cash from the troubled bank.
The FSA added that the majority of claimants under the new scheme would get their money back within seven days in the event of a bank failure, and all would be compensated within a week.
Claimants would also be repaid their bank deposits in full, in contrast to the current approach, where deposits are repaid minus any outstanding loans held with the same institution.
