Banking System Needs Greater Protection for Small Depositors
The banking system needs to provide greater protection for small depositors, according to Bank of England Governor Andrew Bailey. In a speech delivered on April 12, 2023, Bailey argued that the current system of deposit protection is inadequate and needs to be improved.
Deposit Protection Scheme
The Deposit Protection Scheme (DPS) is a system of insurance that protects deposits held in banks and building societies in the United Kingdom. The scheme is administered by the Financial Services Compensation Scheme (FSCS). The FSCS is funded by a levy on the financial services industry and is designed to protect consumers in the event of a bank or building society failing.
Under the current system, the FSCS provides up to £85,000 of protection per person, per institution. This means that if a bank or building society fails, the FSCS will pay out up to £85,000 to each customer.
Small Depositors at Risk
However, Bailey argued that this system of deposit protection is inadequate for small depositors. He noted that the £85,000 limit is too low for many people, particularly those with larger families. He also argued that the system does not adequately protect those who have multiple accounts with different banks and building societies.
Bailey argued that the current system of deposit protection does not provide enough protection for small depositors. He suggested that the FSCS should increase the limit to £100,000 or more. He also suggested that the FSCS should consider introducing a system of “joint and several” protection, which would provide protection for multiple accounts held with different institutions.
Banking System Needs to Change
Bailey argued that the banking system needs to change in order to provide greater protection for small depositors. He suggested that banks and building societies should be required to provide more information to customers about the risks associated with their deposits. He also suggested that banks and building societies should be required to provide more information about the FSCS and the level of protection it provides.
Bailey also argued that the banking system needs to be more transparent. He suggested that banks and building societies should be required to provide more information about their financial health and the risks associated with their deposits. He also suggested that banks and building societies should be required to provide more information about the FSCS and the level of protection it provides.
Conclusion
In conclusion, Bank of England Governor Andrew Bailey argued that the current system of deposit protection is inadequate and needs to be improved. He suggested that the FSCS should increase the limit to £100,000 or more and consider introducing a system of “joint and several” protection. He also suggested that banks and building societies should be required to provide more information to customers about the risks associated with their deposits and the level of protection provided by the FSCS. These changes would provide greater protection for small depositors and help to ensure the stability of the banking system.