The ABI says it welcomes today's increase on cover for deposits to 100% of the first £35,000 of each depositer's claim but says this rise has gone far enough.
The FSA announced an increase to the limit of Financial Service Compensation Scheme (FSCS) cover for deposits, up from a maximum of £31,700 (100% of the first £2,000 and 90% of the next £33,000 of depositors' eligible claims). This increase applies from October 1 2007.
The regulator also said it was working closely with the Government on further changes to compensation scheme arrangements designed to give consumers confidence their savings and deposits are safe and secure.
However, the ABI is concerned about the impact on the industry as a whole if further changes are made on top of today's increase.
Stephen Haddrill, director general of the ABI, says: "We agree that savers should be offered the possibility of 100% compensation up to a higher limit than at present. That is one of the lessons of Northern Rock. But the Government has now set the limit at the upper end of what is sensible.
"A limit of £35,000 will cover well over 98% of all savers and is broadly in line with arrangements for investments and other savings. If the Government pushes the limit further upwards it risks distorting the savings market, providing a guarantee for risky investment strategies and adding to costs for customers. It should not be forgotten that it is the financial services sector that pays for the compensation scheme and not the taxpayer.
"We await the Government's consultation. At this stage we believe that a higher limit is neither necessary or desirable."
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