Page last updated at 12:47 GMT, Thursday, 2 October 2008 13:47 UK

Industry reaction to savings shifting

Northern Rock has stopped offering some savings accounts

Changes to the amount of protection for savers' deposits has prompted some strong reaction from the banking industry.

The issue has been brought into sharp focus by the Irish government's decision to guarantee 100% of savers' deposits for two years at various institutions.

Meanwhile, the UK government is planning to up protection from the first 35,000 to 50,000.

No savers have lost any money, even though there has been significant turmoil in the banking industry in recent months.

Northern Rock - which has a 100% government-backed guarantee on savings - has withdrawn some products to ensure it keeps to a pledge not to gain a competitive advantage from its safety net.


"The self-imposed framework is designed to ensure Northern Rock does not take unfair advantage of government support during the period of temporary public ownership."


"There is some evidence that savings are moving round, we have absolutely no problem with that," says Angela Knight, of the BBA.

"But what we are saying is that each and every government does have an ability to take certain actions themselves, but they must have a look at the broader competitive framework as well - the two are not inconsistent with each other."


Leigh Goodwin, of Fox Pitt Kelton, said that UK banks were clearly disadvantaged by the moves by the Irish government.

Alex Potter, Collins Stewart banking analyst, said that regulators needed to take a strong lead on the situation.


Sandra Quinn, of Apacs, said data from payments systems used by banks did not show huge spikes of people moving cash.

"Essentially if you throw a pebble into a very big pond, you get quite a small ripple," she said.

"In general volumes and values for the last month are as they'd expect. All the payment schemes do projections for likely volumes to ensure that they can handle volumes and there really is nothing overall out of the ordinary."


"A saver with an Irish bank in the UK should ask them how it is the Irish government, which cannot raise taxes in sterling and cannot print sterling, can protect deposits without limit," said the association's director general Adrian Coles.

"There is no significant immediate impact but significant concern over a period of time.

"It should not extend to deposits in a different currency and outside of Ireland."

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