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Wednesday, November 07, 2007

Deposit Protection

The government, during yesterday's Queen's speech, outlined its plans to bring in legislation to strengthen protection for bank depositors and institutions "in distress". This is in response to the Northern Rock debacle.

However, as with many political promises, no date has been set.

The Treasury issued a statement:

"The government is committed to extensive discussion and consultation before bringing forward legislation in the forthcoming session of parliament." Noting that the government would do nothing until is was "assured that the benefits of the proposed changes exceed the costs".

The reform would have to meet five preconditions set down by the government:

1 It must be clear and provide consumer confidence

2 Transparent on how it would work in the event of another crisis and credible within the wider market

3 Preserve "critical" retail banking services while customers find another provider

4 Maintain the UK's reputation as a financial services centre

5 Protect taxpayers' interests and ensure "appropriate cost sharing"

A consultation exercise will begin next year, therefore don't expect anything in the near future; unless of course there is another Northern Rock waiting in the wings.

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