Guardian.co.uk

The government is preparing a raft of emergency measures to shore up confidence in the financial sector as it raced through an increase in guarantees for bank deposits to £50,000.

Amid anxiety that the UK banking system is losing out to blanket guarantees of savings in Ireland, the Financial Services Authority made it clear the government was preparing legalisation to 'further enhance consumer confidence in the banking sector'.

Hector Sants, chief executive of the City regulator, said the increase in savings guarantees would take place from Tuesday, October 7.

Customers with joint accounts will be eligible to claim up to £100,000.

The FSA is also to preparing to consult on further raft of reforms intended to give customers total confidence that their savings are secure. Among the changes being proposed are further increasing the compensation limit, the speed with which compensation is paid to customers and the rules surrounding whether deposits are covered on a legal entity, a 'brand' or an 'account' basis.

The existing compensation scheme is complex and limited and does not cover multiple accounts held in one bank, or deposits in several banks with the same ownership.

Hector Sants, FSA's chief executive officer, said: 'There has been extensive debate about the compensation levels. In the interests of providing clarity over the minimum level for the long term we have now decided to implement the move to a £50,000 limit from Tuesday.

'This change ties in with the introduction of the Government's Banking Bill in Parliament which is due next week, and is also appropriate given the consolidation that has taken place in the banking sector'.

'In addition, the chancellor has made clear that the Authorities will do whatever is necessary to maintain financial stability and protect depositors.'