BRITISH savers would have less of their money protected if a bank fails next year, the government said on Friday, blaming EU rules which one senior lawmaker called “absurd”.
Relations between Britain and the EU are already tense. Prime Minister David Cameron, who is trying to reshape relations with the 27-member bloc before calling a referendum by the end of 2017 on whether to stay in, wants to ensure that Britain is not disadvantaged by not using the euro.
The EU bars governments from offering more than e100 000 (R1.9 million) of protection to savers if a lender collapses, and requires countries such as Britain that are not in the euro to adjust local currency limits once every five years.
Sterling has strengthened by around 20 percent since the last change, so the limit for depositor protection will fall by £10 000 to £75 000 from the start of 2016.
Andrew Tyrie, the Conservative legislator who heads the British parliament’s finance committee, said the EU directive which required this was “defective” and that he would ask Britain’s finance ministry to lobby the EU for changes.
“It is absurd that the depreciation of the euro, largely brought about by the crisis in the euro zone in general and the Greek crisis in particular, should be forcing a reduction in the level of protection available to UK depositors.”
Britain’s deposit protection scheme has paid out more than £26bn to 4.5 million people since it was established in 2001. Major claims include Northern Rock, which suffered a bank run at the start of the financial crisis in 2007.
Britain’s finance ministry said less than 5 percent of customers, building societies and credit unions would be affected by the lower limit.
The European Commission had no immediate comment.
Other changes to the deposit guarantee scheme are more favourable for savers. Deposits of up to £1m will gain protection for up to six months in some circumstances. – Reuters