Gordon Brown's pledge to raise the amount of savings protected in a banking failure to £50,000 may not be enough to restore confidence in Britain's banks, senior industry executives have warned the Government.
The Independent reports senior bankers are pressing the Government to guarantee in full more than £2trn worth of deposits, protecting all UK bank creditors completely.
The Prime Minister revealed last night that legislation this month will raise the maximum payout from the Financial Services Compensation Scheme from its current level of £35,000 to £50,000.
However, with signs that the credit crisis is worsening, the Treasury is now coming under pressure to match the pledge made by the Irish government yesterday, which promised to stand behind all deposits held by Ireland's six largest banks.
THE PIVOTAL DEAL BROKERED BY THE government for Lloyds TSB to rescue beleaguered mortgage bank HBOS was in jeopardy last night after a plunge in the value of HBOS' shares, reports The Guardian.
City investors fear that Lloyds is paying too much for the Scottish-based bank because its shares have collapsed since the deal was announced two weeks ago.
Yesterday HBOS, owner of the country's biggest mortgage lender Halifax, was again the biggest faller in the FTSE 100 index of leading shares, dropping 13%. HBOS is now worth just £6.4bn but Lloyds TSB has agreed to pay £9.8bn.
The differential in the price has heightened fears that the deal may not go through on the original terms which were agreed after the Prime Minister intervened to ensure the takeover could proceed.
Last night Gordon Brown was forced to throw his weight behind the transaction which is crucial to the survival of HBOS. Brown said: “This merger between HBOS and Lloyds TSB is a matter of great detail and I am confident from talking to people involved that this merger is going ahead.”
SAVERS ON BOTH SIDES OF THE IRISH Sea started to empty accounts of UK banks and put the proceeds into Irish-owned banks in the wake of a controversial plan by the Republic of Ireland yesterday to guarantee all deposits, The Times reports.
Dublin was accused of making matters worse for non-Irish banks, with corporate treasurers and large savers pulling money out and putting it into the safer haven of Irish banks.
“If this is legal, then I’m a banana,” one disappointed senior British banker said, arguing that the Irish guarantee amounted to unfair state aid.
Lord Lipsey, the chairman of the Financial Services Consumer Panel in the UK, said it was “a national disgrace” that British depositors might be worse compensated than their Irish counterparts in the event of a bank failure.
The dispute erupted as British bank chief executives were preparing to argue for policy changes to tackle the financial crisis. A conference call with Alistair Darling, the Chancellor, was scheduled for last night.
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