Pressure from the government to avert another Northern Rock crisis has led to Alistair Darling announcing new proposals which have been put forward to the Financial Services Authority for approval.
The chancellor wants the current limit for compensation raised from £35,000 to £50,000. However Banks have already hit out at the idea of paying into a fund to cover the risk of collapse, claiming that they are already under enough pressure with the current credit crunch.
The government responded by saying that the scheme would have the power to borrow money from the public sector in the event of collapse, allowing it to repay savers quickly.
Since October 2007 the Financial Services Compensation Scheme (FSCS) has guaranteed all deposits up to £35,000. In November it was suggested that the amount should be raised to £100,000 to bring it in line with the USA protection levels, but as usual the governments response has been far less than impressive, settling on just half of the proposed figure.
The usual story of too little too late from the UK government.
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