Savings up to £50,000 could be protected

The FSA is to increase the amount of savings protected by the government to £50,000, according to reports.

A report in the Guardian claims the Financial Services Authority (FSA) will announce plans to raise the limit for protection from £35,000 to £50,000 to prevent another bank run.

As banks cannot rely on money markets to access cash, deposits are a vital source of liquidity and customer confidence is essential to banks' survival.

The paper said the normal three-month consultation on altering the limit could be shortened due to the current crisis.

Speaking to the BBC, prime minister Gordon Brown did not offer an unlimited guarantee on savings, as has happened in Ireland, but said the government would do "whatever it takes" to protect people's savings.

Yesterday, Ireland moved to guarantee all loans and savings in the country's top six banks in order to prevent a damaging bank run.

Mr Brown told the BBC: "Wherever there has been a problem we have intervened and dealt with it.

"Let's remember, the Irish are dealing with taxpayers' money here.

"We have got to get what's right and also what's reasonable and of course we look at every intervention that is necessary to take but I think people can see from our actions so far that depositors have been protected. No UK depositor has lost money."

The FTSE closed slightly higher last night, on hopes the US plan to bail out the financial system could be saved.

In an unusual move, Senate leaders have agreed to vote on the bill before the House of Representatives has passed it, raising the likelihood the law could be passed soon.