Ready but rough
IF YOUR bank shuts its doors on your money, you can get some of it back from insurance. This is the Deposit Protection Scheme. All the banks are required to chip into its fund, in proportion to their size, so that when one of them fails, its depositors can be paid three-quarters of their money. Not more than £15,000, though. It is a rough and ready scheme, and was meant to be. It favours the little fishes, but leaves them all, from shark to tiddler, with some responsibility for their choice of bank, and some penalty for picking a dud. We have seen in America what happens without the Penalty. Insurance simply diverted money to .bad banks, as depositors sat back to enjoy the high reward and passed the high risk on to others. (It is now coming back to them as taxpayers.) Our scheme, all the same, did not shine when British & Com- monwealth Merchant Bank shut its doors a year ago. Brokers in the B & C group proved to have parked their clients' money in their tame bank, and £15,000 is not much help to the client who had sold his share to buy a house. BCCI will show up harder cases — and evoke louder grumbles from the good banks who must now pay a levy to top up the fund. A better arrange- ment (which could be run alongside the present scheme) would be to encourage banks to insure their own deposits. Barc- lays could, I dare say, arrange cover at no great cost to itself or its customers. Second division banks and their customers would have to pay more. The scene at Lloyd's of London would have made a cartoon by H.M. Bateman: The man who wanted to place a comprehensive policy for BCCI'.
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