Bank regulator says UK could learn from U.S. model

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BEIJING (Reuters) - Britain could learn from the United States by beefing up deposit insurance and making it easier to close failing banks to prevent Northern Rock-like meltdowns, a top U.S. banking regulator said on Thursday.

Speaking in Beijing, John Bovenzi, chief operating officer of the Federal Deposit Insurance Corporation, said the American model offered valuable lessons not just for China but for Britain, too.

“If you set up a deposit insurance system, you should have a high enough coverage level so that most people have most of their money protected so that they feel secure in the banking system,” Bovenzi said on the sidelines of a banking conference.

The long queues of savers pulling their money from mortgage lender Northern Rock NRK.L in September -- Britain's first bank run in more than a century -- highlighted deficiencies in the British banking system, he said.

The current insurance scheme in Britain guarantees individual deposits up to 31,700 pounds, whereas the United States covers savings up to $100,000 (48,445 pounds). American depositors can get near-immediate access to their accounts if their bank fails, while British savers face lengthy delays.

The Financial Services Authority has said it is reviewing the system.

Bovenzi also said regulators should move quickly to wind down the business of failed banks, a process that requires careful planning but can be managed.

“When we have a bank failure, typically if we close a bank at the end of business on a Friday, we’ll have made arrangements for another bank to take it over and re-open the following Monday,” he said.

Bovenzi said China was making good progress in developing its regulatory framework for banks and seemed interested in drawing on U.S. experiences.

Reporting by Simon Rabinovitch; Editing by Alan Wheatley, Valerie Lee