On April 17, the Financial Times reported that the Bank of England was considering major reforms to its deposit guarantee scheme, including increasing the amount of deposit guarantees for businesses and forcing banks to pre-fund the system to a greater extent to ensure Faster access to cash in case of bank failure.
Britain’s Financial Services Compensation Scheme (FSCS) is under urgent review following Silicon Valley Bank’s swift collapse last month, people familiar with the matter said.
Regulators are concerned that the current guarantee limit of 85,000 pounds covers only about two-thirds of deposits, and the relatively low level of pre-funding means there will be a delay of at least a week for customers to regain cash, the people said.
These deficiencies have undermined confidence in the FSCS and reduced its effectiveness in preventing bank runs.
However, raising the collateral threshold and raising pre-funding levels would be costly for banks, which have long lobbied the Treasury against the changes.