- 28
- Mar
It has been revealed that the Chancellor Alistair Darling has a mortgage with the beleaguered lender Northern Rock, however he does not have any savings with the bank.
The Chancellor admitted that he had a home loan with Northern Rock while making a statement to the House of Commons about greater protection for depositors to the bank.
The Chancellor has promised to introduce new legislation in 2008 in which investments and deposits of customers would be guaranteed in the event of a banking collapse.
While the Chancellor has not yet specified an exact figure it is predicted that savings up to the value of £100,000 would be covered. The current rules mean that the FSA’s compensation scheme covers 100% of deposits of up to £35,000. However Alistair Darling has called for a more comprehensive change.
The new legislation is designed to reassure depositors when there is a problem with the Bank the save with. The aim is also to help strengthen the UK’s position as a leading financial centre.
The current structure has come under heavy criticism in recent weeks following the run on Northern Rock. The confusion and lack of communication between the Financial Services Authority, the Bank of England and the Treasury which are all currently partly responsible for the present system has been blame for causing the first run on a bank in more than a century.
The banking industry is strongly against the new proposals however stating that a £100,000 guarantee is just too high. The credit crunch is having a nasty effect on both those with savings and those holding or seeking loans.
