Government lifts guarantee for savers

By Steve Slater and Christina Fincher

LONDON (Reuters) - Bank savings of up to 50,000 pounds will be guaranteed by the government from next week and the sum could be further increased as regulators battle to restore confidence in the banking sector.

Britain's Financial Services Authority said on Friday it had raised the compensation limit for savings to 50,000 pounds per customer claim from 35,000 pounds, after signs of bank customers withdrawing cash to put into perceived safe havens.

Separately the Bank of England said it would accept a wider range of collateral, including some triple-A rated corporate and consumer loans, from banks under strain from a lack of cash in funding markets.

Several countries have attempted to restore confidence among savers this week amid a credit crisis which has raised fears that more bank failures could result in savers losing money, though Britain's move fell short of Ireland's complete guarantee for all savers.

One industry source in Dublin told Reuters on Thursday he expected strong inflows into Irish banks because of the blanket guarantee, with British depositors unsettled after the state had to rescue Northern Rock and Bradford & Bingley and broker a takeover of HBOS.

The FSA said the new compensation ceiling would take effect from October 7 and customers with joint accounts will be eligible to claim up to 100,000 pounds.

"The Chancellor has made clear that the authorities will do whatever is necessary to maintain financial stability and protect depositors," FSA Chief Executive Hector Sants said in a statement.

The British Bankers' Association welcomed the moved and said it "will bring welcome certainty for customers" and cover about 98 percent of customers.