The Telegraph reports Sir Mervyn King said protection for depositors whose savings temporarily rise above £85,000 – the current compensation limit – was needed or the government would be under pressure to resort to a state bailout again.
“For any big bank on any given day, there will be thousands of people who – through no fault of their own – happen to have deposits in their bank of more than £85,000,” Sir Mervyn said.
“There will be people who are going through a house purchase, who have received inheritance, others with a divorce settlement who are just keeping it for a couple of weeks.”
Paul Tucker, the bank’s deputy governor and man tipped to take over from King next year, said it was a “huge issue” which was unresolved.
Tucker told MPs yesterday: “The best laid plans [could] get blown up.”
The Telegraph reports new plans would avoid a taxpayer bailout by forcing bondholder to take deep losses if a bank is on the bring of collapse. However, the paper reported, depositors would suffer equivalent losses on anything above £85,000 as they rank alongside bondholders.
