Britain's financial regulator said Friday it would raise its compensation limit for bank deposits by 43 percent and indicated more protection may be coming, as it moved to calm consumer concern about the global credit crisis.
The change announced by the Financial Services Authority would boost the compensation limit to $88,500 per customer from $62,000 effective Tuesday.
Prime Minister Gordon Brown had indicated the limit would be raised. The move comes after the Irish government this week offered an unlimited guarantee on deposits at its domestically owned banks.
Banks and other savings institutions had reported that nervous British savers were flocking to Irish banks to take advantage of that offer, which the British Bankers' Association said was unfair competition.
Hector Sants, the chief executive officer of the Financial Services Authority, said that the change to the British rules was aimed at "providing clarity" to savers after the extensive public debate about compensation levels.
"It is also appropriate given the consolidation that has taken place in the banking sector," Sants added.
The British government earlier this week nationalized its second bank this year, putting struggling mortgage lender Bradford & Bingley under its protective umbrella along with Northern Rock. B&B's savings business, including its entire retail branch network, was sold to Spain's Banco Santander, which also owns Britain's Abbey.
Earlier this month, mortgage lender HBOS PLC agreed to a rescue takeover by rival bank Lloyds TSB Group.
The FSA added that it will consult on further reforms to the banking system, including whether the compensation limit should be higher still and the speed at which it pays compensation.
Brown had said earlier this week that the increase in the compensation limit would come under a banking bill due to be introduced to Parliament next week.