[Dave Birch] I happened to be at an IT industry gathering with a question and answer session with someone from the British Bankers Association (BBA). It wasn’t about payments, directly, but about the legislative fallout from the current rash of bank debacles. The session concerned the government’s plans for something called the “The Financial Stability and Deposit Protection Bill” which went out for comment earlier in the year…

Banks have 12 weeks to persuade the Treasury to drop the idea or face a bill that investment bank UBS has estimated at up to £3bn a year for several years.

[From Banking reforms ‘to cost £3bn a year’ – Telegraph]

The government is proposing that deposits will be safeguarded up to some figure — maybe 50K or 100K for individual personal accounts and half a million or so for small business accounts — but we were discussing yesterday, a limit of £35K would cover almost all depositors (save for very rich people such as M.P.s). So, what has this got to do with payments?

Well every regulatory cloud has a silver lining for IT, doesn’t it. The BBA spokesman drew the assembled IT persons attention to the impending requirement for banks to pay customers quickly when they want to withdraw their money from collapsing financial institutions. The government are saying that all customers should get their money back by cheque within a week if, say, a building society goes bust. As one of the questioners pointed out though, this ridiculous 1960s world view could not possibly be implemented because there just physically aren’t enough cheques in the U.K. to fulfill the requirement (and the Post Office probably couldn’t cope either). A couple of people I spoke to said that there will be a bonanza for IT suppliers because none of the banks’ existing systems are up to scratch in this respect. Incidentally, the chance of a building society doing a Northern Rock is quite small, because

On average, building societies fund 70% of their lending through deposits. Savings inflows to building societies achieved a record for March of £1.2bn, a 70% increase.

[From Building society mortgage loans fall 68% | Money | The Guardian]

What puzzelled me, throughout the whole discussion, was why the government had bothered to save Northern Rock at all (using my money). I”m hoping, though, that if the Directors of small and specialist IT consultancies make a series of disastrous decisions that bankrupt their enterprise, then the government will step in to prop up the companies while allowing said Directors to leg it with the loot.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]

1 comment

  1. One situation where individuals can breach the £35k limit is using an offset mortgage where savings are added to a personal current account to act as a offset but can be drawn upon should the need arise. After running such a mortgage account for a while, quite a considerable amount can be built up exceeding the current guaranteed limit.

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