BRITISH savers will have less of their money protected if a bank fails next year, the government said Friday, blaming European Union (EU) rules which one senior lawmaker called “absurd.”

    Relations between Britain and the EU are already tense. Prime Minister David Cameron, who is trying to reshape relations with the 27-member bloc before calling a referendum by the end of 2017 on whether to stay in, wants to ensure that Britain is not disadvantaged by not using the euro.

    The EU bars governments from offering more than 100,000 euros (US$130,000) of protection to savers if a lender collapses. It requires countries that are not in the euro, such as Britain, to adjust local currency limits once every five years.

    Sterling has strengthened by around 20 percent since the last change, so the limit for depositor protection will fall by 10,000 pounds (US$15,600) to 75,000 pounds from the start of 2016.

    Andrew Tyrie, the Conservative legislator who heads the British parliament’s finance committee, said the EU directive which requires this was “defective” and that he would ask Britain’s finance ministry to lobby the EU for changes.

    “It is absurd that the depreciation of the euro, largely brought about by the crisis in the eurozone in general and the Greek crisis in particular, should be forcing a reduction in the level of protection available to U.K. depositors,” he said.

    The British Bankers’ Association called the change “disappointing,” as customers were used to the 85,000 pound guarantee.

    Britain’s deposit protection scheme has paid out more than 26 billion pounds to 4.5 million people since it was established in 2001. Major claims include Northern Rock, which suffered a bank run at the start of the financial crisis in 2007.

    (SD-Agencies)