The Bank of England (BoE) and the UK Treasury are reportedly considering reforms to the depositor protection system that would give non-guaranteed depositors immediate access to their deposits in the event of a bank’s bankruptcy. This would include returning deposits to citizens holding bank accounts.
Sources indicate that the UK’s finance minister and BoE governor are reviewing options for reforming regulations on bank deposit guarantees. The consideration follows a wave of customer withdrawals from Silicon Valley Bank (SVB) in the US.
While the plan is still in its early stages, the UK Treasury and the BoE are exploring several options for improving the deposit guarantee system to protect bank customers’ deposits and prevent bank runs.
Recent collapses of banks such as SVB and Signature Bank (SB) have prompted regulators globally to take measures to protect depositors’ interests and ensure financial stability.
In March, the US Treasury Department and the Federal Reserve announced deposit protections for SVB and SB to ease the panic created by the collapse of the two banks.
The proposed reforms in the UK could alleviate concerns among bank customers and improve the confidence of the public in the banking system. However, it remains to be seen how these changes would be implemented and their impact on the overall banking industry.