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By Huw Jones
LONDON, Nov 21 (Reuters) - The Bank of England (BoE) hasproposed raising the guarantee on bank account deposits back to85,000 pounds ($105,000) from Jan. 30, 2017, to reflect thesharp fall in sterling following Britain's vote to leave theEuropean Union.
The level of deposit account protection is set under EUrules at 100,000 euros or its equivalent in member states thatdo not use the single currency.
It was cut to 75,000 pounds in Britain in 2015 following aregular five-year adjustment under the bloc's rules. A weakereuro against the pound was the reason for the cut.
The BoE's Prudential Regulation Authority (PRA), whichregulates banks in Britain and requires them to fund theguarantee, said a change in the pound's value against the euroafter the Brexit vote in June, meant it could be adjusted.
Sterling lost about a fifth of its value against the euro inthe aftermath of the June referendum, and the EU rules allow foradjustments due to unforeseen events.
"Restoring the limit to 85,000 pounds - the level in effectfor almost five years prior to 3 July 2015 - is intended toprovide a measure of memorability and consistency," the PRA saidin a statement, announcing a consultation on the matter.
Lenders would have until the end of June 2017 to implementthe changes to systems.
"The PRA will continue to monitor fluctuations in theexchange rate but, barring unforeseen events, will seek to avoidmaking further adjustments to the deposit protection limit," thewatchdog said.
Andrew Tyrie, chairman of parliament's Treasury SelectCommittee, described the cut in 2015 as absurd.
Tyrie said on Monday the PRA's consultation was a recipe formore uncertainty, but Brexit should allow Britain to write itsown rules for protecting depositors.
"The absurd situation, in which the UK is left vulnerable,at the discretion of the European Commission, to frequentchanges in our deposit scheme, must be brought to an end," Tyriesaid in a statement.
"Brexit should give the UK the opportunity to set its ownlevel of protection. We should take it."
Paul Edmondson, head of financial services at law firm CMS,said: "There is little doubt that putting the level of financialprotection back to its pre-2015 sterling level of 85,000 poundsserves the UK's domestic agenda."
($1 = 0.8108 pounds) (Reporting by Huw Jones; Editing by Louise Heavens and MarkPotter)
