Large bank account deposits 'need better protection'

By Lucy Bower

Paul Tucker, the deputy governor of the Bank of England who is responsible for the stability of the bank, says specialist bank accounts should be created to protect consumers who make large bank account deposits, in case their bank failed.

It is an era of bank reform at the moment, following the taxpayer bailout of a number of large banks in the UK. Part of the reform is to give greater responsibility to the Financial Services Compensation Scheme to protect consumers if they deposited up to £85,000 into a bank account and the bank failed.

Not everyone has the opportunity to make an £85,000 deposit into their bank account every day, but imagine you had a large windfall, inherited money or sold your house. You would want that money to be protected too.

Mr Tucker says bank reforms should be brought in so that temporary large balances are also protected.

He said: "Of course, retail deposits - up to £85,000 in this country - will continue to be insured. And we probably also need measures - possibly segregated accounts - that can protect the temporary high balances that arise when, for example, a person sells a house or receives a legacy. But regular creditors of banks should be at risk."

He also spoke of other banking reforms that he would like to see, including tying banking managers' bonuses to the amount of debt their bank has, to encourage the management of risk.

Image © iStockPhotos / oversnap

Tags: bank, banks, banking, bank account, bank accounts, Bank of England, Paul Tucker, Financial Services Compensation Scheme, debt, banking reform

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