You are here: Home - Saving & Banking - News -

Savers will be exposed to losses unless loophole closed, warns bank boss

Written by:
A loophole in banking reforms could leave taxpayers shelling out billions in the event of another financial crisis, Bank of England governor Sir Mervyn King has warned.
Savers will be exposed to losses unless loophole closed, warns bank boss

According to a report in the Telegraph, King has warned there is a lack of protection for depositors whose savings temporarily rise above £85,000 – the current compensation limit.

He said this needs to be addressed or else the government could come under pressure to resort to a state bailout again.

Paul Tucker, the bank’s deputy governor and man tipped to take over from King next year, said it was a “huge issue” which was unresolved. 

He told MPs yesterday: “The best laid plans [could] get blown up.”

Under the new proposals, banks would not need a taxpayer bailout in future, with bondholders instead forced to take deep losses if a bank is on the bring of collapse. However, depositors would suffer equivalent losses on anything above £85,000 as they rank alongside bondholders.

“For any big bank on any given day, there will be thousands of people who – through no fault of their own – happen to have deposits in their bank of more than £85,000,” King said. “There will be people who are going through a house purchase, who have received inheritance, others with a divorce settlement who are just keeping it for a couple of weeks.”

Tag Box




Financial fitness

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Which ISA is right for you? A round up of the six products available in 2017

From cash to innovative finance to lifetime, here's our guide to the ISA products available to savers this yea...

Guide to buy-to-let tax changes

In late 2015, former Chancellor George Osborne announced a range of  tax measures aimed at landlords, which t...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Five fund tips for a 0.25% interest rate environment

With interest rates stuck at a record low 0.25% and expectations rates could fall to close to zero, here are ...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Investing your money

Alliance Trust Plc gives you smart insight into how to invest your money

Money Tips of the Week

Read previous post:
UBS facing record fine over Adoboli’s $2.3bn rogue trade

UBS could be hit with a record penalty by the Financial Services Authority (FSA) next week following the rogue trade...