Skip to main content

BoE's reform on Bank deposit insurance.

 

BoE
Smaller banks in the UK may soon receive higher deposit guarantees due to a move by the Bank of England. The central bank is considering granting "earmarked" status to smaller banks, allowing them to offer their customers more excellent protection on deposits. This change could be a boon for smaller banks, which often need help competing with larger institutions to attract new customers. With increased deposit protection, these banks may gain a competitive edge and expand their customer base. However, some critics have expressed concerns that this move could lead to moral hazard, as smaller banks may take on more risk knowing that their customers are better protected. Ultimately, it remains to be seen how this change will play out in the UK banking sector.

The Bank of England's potential move to grant "earmarked" status to smaller banks is not without precedent. Several other countries already have similar programs in place. For example, the United States has the Certificate of Deposit Account Registry Service (CDARS), which allows customers of participating banks to receive FDIC insurance on deposits up to $50 million through a single bank relationship. Similarly, Canada has the Canada Deposit Insurance Corporation (CDIC), which provides deposit insurance for eligible deposits at member institutions. These programs have successfully promoted competition and stability within their respective banking sectors while giving customers peace of mind.

It is important to note that the Bank of England's potential move to grant "earmarked" status would not necessarily mean that all smaller banks would automatically receive more excellent deposit protection. Instead, it would be up to individual banks to apply for and meet specific criteria to qualify for this status. For example, the requirements could include the bank's size, financial stability, and risk management practices. This approach would allow the Bank of England to ensure that only qualified banks can offer their customers' increased deposit protection.

If implemented successfully, this change could help level the playing field for smaller UK banks and provide consumers with greater choice and security. However, it will also be necessary for regulators and industry participants alike to monitor any potential unintended consequences or risks associated with this new program.

www.sba.tax

Comments

Cloud Bookkeeping

US FED rate rise.

  The US Federal Reserve officials have indicated that they plan to resume increasing interest rates to control inflation in the world's biggest economy. During the June meeting, the Federal Open Market Committee reached a consensus to keep interest rates stable for the time being to evaluate whether further tightening of policy would be necessary. However, the majority of the committee anticipates that additional rate increases will be required in the future. The minutes of the meeting have recently been made public. According to the minutes, most participants believed maintaining the federal funds rate at 5 to 5.25 per cent was appropriate or acceptable, despite some individuals wanting to raise the acceleration due to slow progress in cooling inflation. Although Fed forecasts predicted a mild recession starting later in the year, policymakers faced challenges in interpreting data that showed a tight job market and only slight improvements in inflation. Additionally, officials gr...

India- UK trade deal.

  According to India's top trade official, talks with the UK regarding a trade agreement are progressing well, despite obstacles related to temporary work visas and the opening up industries like automotive and spirits. The Commerce and Industry Minister, Piyush Goyal, explained that India is seeking transition periods or greater market access in specific sectors due to its economy, which is slightly larger than the UK's and expected to outgrow it in the coming decades. If a trade deal is reached, it would be one of the most significant agreements for Britain since leaving the EU, and it would also be necessary for India, which surpassed the UK as the fifth-largest economy last year. Goyal stated that India aims to increase its economy from $3.5tn to $35tn by 2047, the country's centenary of independence. According to officials and diplomats in India, talks about a proposed trade deal may be finished by early September, just in time for the G20 summit in New Delhi. Nigel Hu...

EU business slide.

  S&P Global’s flash eurozone composite purchasing managers’ index, a key gauge of business conditions for the manufacturing and services sector, fell 1 point to 47.1, figures showed yesterday. That is its lowest level since November 2020 and the fourth consecutive month below the crucial 50 mark separating growth from contraction. One of the few bright spots in the survey was that companies in all sectors reported a slight easing of cost pressures, price growth and supply chain constraints. However, prices charged for goods and services still rose at the sixth fastest rate since such data started in 2002. Jobs growth increased marginally from October but remained low compared with the past 18 months. Following a few months of falling price pressure in manufacturing and services, the October print shows an overall stabilisation said Jens Eisenschmidt, chief European economist at Morgan Stanley. However, German businesses, at the hub of Europe’s energy crisis, reported that manu...