Robert Peston on the BBC thinks that Northern Rock losing unlimited government backing means caveat emptor for the entire banking system:
While Northern Rock’s savers benefited from a formal guarantee from the government, the Treasury was also in effect promising that no saver in any British bank or building sociey risked losing a penny.
So in withdrawing the Rock guarantee, the chancellor is in effect restoring an element of caveat emptor to the entire banking market.
To be clear, the banks’ insurance scheme – the Financial Services Compensation Scheme – provides cover up to £50,000 per customer.
But if you have more than that in a single bank, well that increment is at risk. You can lose money if your bank has insufficient assets to meet its liabilities.
But that hardly applied last time, did it? You remember, when HMG bailed out UK deposits in Iceland?
