As a result of the proposed changes, the FSA would be given the power to seize and protect customers’ money if their bank was experiencing difficulties, while the Chancellor also confirmed that the FSA would be given the power to set day-to-day cash limits for any ailing bank.
Announcing the plans, Darling said: “We need to give the FSA the power it needs.”
However, a broker, who wished to remain anonymous, said: “The FSA has done little good for the industry since its introduction and it seems to let the big banks get away with a lot. I don’t see how this will change anything.”
Andy Young, chief executive at The Business Mortgage Company, added: “Without knowing exactly what the new FSA powers are going to entail it is difficult to predict the impact this will have on the running of UK financial institutions. However, what is certain is that any measures designed to prevent another credit crisis are to be welcomed.
“It is important that lenders are more transparent if a similar crisis is to be avoided in the future and for this reason it makes sense for the FSA to have access to information about a bank’s liquidity situation. Certainly the expected new banking insolvency regime and a more generous deposit protection scheme would provide a greater degree of protection to consumers and instil greater confidence.”
Speaking to the Financial Times, Darling also suggested plans to revamp the current Tripartite system, while also making changes to the deposit guarantee scheme, which has a current limit of £35,000.
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