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BoE to raise deposit 'insurance' after pound's Brexit plunge

Reuters , Monday 21 Nov 2016
Views: 1388
Views: 1388

The Bank of England has proposed raising "insurance" on bank account deposits back to 85,000 pounds ($105,000) from Jan. 30, 2017, to reflect the sharp fall in sterling following Britain's decision to leave the European Union.

The level of deposit account protection is set under EU rules at 100,000 euros or its equivalent in member states that do not use the single currency.

It was cut to 75,000 pounds in 2015 following a regular five-year adjustment under the bloc's rules. A weaker euro against the pound was the reason for the cut.

The BoE's Prudential Regulation Authority, which regulates banks in Britain, said a change in the pound's value against the euro after Britain voted in June to leave the EU, means it can be adjusted.

Sterling lost about a fifth of its value against the euro in the aftermath of the June referendum, and the EU rules allow for adjustments due to unforeseen events.

"Restoring the limit to 85,000 pounds – the level in effect for almost five years prior to 3 July 2015 – is intended to provide a measure of memorability and consistency," the PRA said in a statement.

Lenders would have until the end of June 2017 to implement the necessary changes to systems.

"The PRA will continue to monitor fluctuations in the exchange rate but, barring unforeseen events, will seek to avoid making further adjustments to the deposit protection limit," the watchdog said.

Andrew Tyrie, chairman of parliament's Treasury Select Committee, described the cut in 2015 as absurd.

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