Savings of up to £1m are now to be protected under new proposals from the Bank of England, to come into force July 2015.

Money temporarily deposited in the bank will be protected for six months. Such money may come from temporary windfall, such as an inheritance. 

The amount of money protected will be as high as £85,000.

This is in order to comply with new European directives.

The PRA, Bank of England’s Prudential Regulation Authority, chief executive Andrew Baily said this would create a “stable financial system.

“These proposals will allow customers to have continuous access to the money in their bank account.”

The changes move toward ending the ‘bank run’, in which banks are forced to dispense more credit than they have in physical resources.

The plan comes as part of a wider initiative to help protect the financial sector in the future, and protecting customers’ deposits from failed bank investment opportunities.

Ring-fenced banks – which separate assets, for instance an investment arm – will now need to appoint a separate chief executive and chairman. They will have to submit their plans, legal and operational, by the end of the year. 

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