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Mervyn King Calls For Bank Compensation Scheme

It may be one of the more sensible ideas to come out of the Bank of England for some time but it seems likely that Mervyn King’s idea for a new banking sector funded compensation scheme will not go down well with the larger of the UK banks. Mervyn King used the British Bankers Association (BBA) conference to announce his plans which were not well received by those in attendance.

The banks argue that they already contribute £4 billion a year to an existing compensation scheme, even though the recent Northern Rock debacle has shown this amount to be wholly inadequate in the current situation. However, it will be interesting to see how the Treasury react to the call by Mervyn King as it seems highly unlikely that they were not aware of his idea before it was announced.

On the surface the idea seems to be a well balanced approach to a new era in UK banking, but underneath there are concerns that this will in affect be a form of stealth tax on the banks, with the UK consumer set to cover the cost. There have been signs of late that the government is looking to increase its influence over the Bank of England, something which is not going down too well in the City.

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