The British central bank will increase the amount of deposit insurance
After the Silicon Valley bank closed, the Bank of England was forced to tell clients of the ailing financial institution that they would have to wait a week at best to get their money and expect to lose their balances of more than £85,000. On the other hand, depositors fared better in America: the American Deposit Insurance Corporation temporarily suspended the limit, so SVB clients got back the full value of their deposits. The crisis was finally averted with the intervention of HSBC.
According to the plans, the first step in reforming the deposit insurance system will be to increase the insurance limit of 85,000 pounds, which is much lower than the $250,000 limit currently in force in the United States. The Bank of England will also increase the amount of advance funding given to the FSCS (English Deposit Insurance Corporation), so that depositors do not have to wait weeks for their money, but can receive it immediately.
The central bank is also pushing for new regulations that would allow the FSCS to provide capital to troubled banks on a temporary basis to keep them afloat until they are sold or closed.
Cover image source: Getty Images