Document Type

Case Study

Case Series

Account Guarantee Programs

JEL Codes

G01, G28


In mid-September 2007, as credit markets froze, Northern Rock, the United Kingdom’s fifth-largest mortgage bank, struggled to secure short-term funding and sought emergency liquidity assistance from the Bank of England (BoE). As word of that support leaked to the public, the bank suffered a run by its retail depositors. On September 17, Her Majesty’s Treasury (HMT) announced it would guarantee all of Northern Rock’s deposits. On October 1, 2007, the Financial Services Authority (FSA), then the UK’s lead financial regulator, announced that the UK’s deposit insurer would abolish co-insurance and cover 100% of eligible accounts, up to GBP 35,000 (USD 71,000). The insurance scheme, called the Financial Services Compensation Scheme (FSCS), had previously insured 90% of amounts above GBP 2,000, up to GBP 35,000. In October 2008, as the Global Financial Crisis (GFC) worsened, the FSA increased the deposit insurance cap to GBP 50,000. The FSCS ultimately paid GBP 23.6 billion to depositors at five banks that failed in 2008 and 2009. The FSCS borrowed from the BoE and HMT to fund these payouts. In December 2010, UK authorities further increased the deposit insurance cap to GBP 85,000 to match their European counterparts, as required by Directive 2009/14/EC.

Date Revised