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Tuesday, July 08, 2008

Treasury Plans For Depositors' Savings Attacked

Alistair Darling revealed last week that the Government was planning to increase its guarantee on depositors' savings from £35K to £50K.

However, banks have rounded on the plans saying that they are unrealistic.

The plans would see taxpayers initially foot the bill for paying out deposits, within the first week of a bank going under. The cost would then be recouped by selling the failed bank's assets, and imposing a levy on other banks.

However, banks warn that the government would need to develop a costly centralised database that would store the details of every account and was updated constantly.

Additionally they have warned that transferring customers between banks generally takes three to four weeks, a failing of the banks rather than the government, as such the seven day deadline would be unworkable.

Another fault line within the plan is that it represents a change in the order of creditors when a company goes bust. As such, it would require a large amount of secondary legislation.

The best laid plans of mice and men!

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