SVB Crisis Shakes UK Market... Bank of England Considers Raising Deposit Protection Limit

Current Deposit Protection Limit of About 100 Million Won
Internal Review Underway for Limit Increase
Discussions on Expanding Deposit Insurance Fund Reserves

The Bank of England (BOE) is reportedly considering a significant increase in the depositor protection limit and measures to require banks to deposit more funds with the Financial Services Compensation Scheme (FSCS).

Major foreign media outlets, including Bloomberg, reported on the 16th (local time) that the BOE is reviewing plans to raise the current depositor protection limit of ?85,000 (approximately 137.69 million KRW) and improve the FSCS’s pre-funded reserve system to enable customers to quickly recover their deposits in the event of a bank failure.

Bank of England, UK
Photo by Reuters Yonhap News

Earlier, on the 12th, Andrew Bailey, Governor of the BOE, attending the International Monetary Fund (IMF) and World Bank Spring Meetings in Washington DC, expressed concerns that raising the depositor protection limit could increase costs across the banking sector, but also stated that "regulators need to reconsider the amount of protection provided to depositors of smaller banks."

UK regulators have reportedly determined that there is a need to raise the limit, as only 65% of small and medium-sized enterprises’ deposit balances and about half of banks’ total deposit balances are currently protected. The UK’s depositor protection limit is only about half that of the United States ($250,000, approximately 370 million KRW). However, specific details on the extent of the proposed increase have not been disclosed.

Additionally, the BOE is considering requiring banks to deposit more funds with the FSCS to prepare for liquidity issues. Following the recent collapse of SVB’s UK branch, the FSCS’s pre-funded reserves were insufficient, resulting in a minimum seven-day delay for deposit withdrawals, highlighting the urgent need to expand the size of these reserves.

Jeremy Hunt, UK Chancellor of the Exchequer, also stated in an interview with major foreign media on the 14th, "Depositors need to have confidence that their funds are safe when entrusted to banks," adding, "If the limit needs to be raised, plans on how to finance the increase will be on my desk."

This content was produced with the assistance of AI translation services.