Britain's new limit will still leave about two-fifths of cash on deposit uninsured.
None of the "usual" guarantees, such as real estate or cash on deposit with banks, have been put up, the banker said.
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That means banks have to keep a larger portion of their cash on deposit instead of loaning it to clients, thus restricting the flow of money into the economy.
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According to a banker involved in the deal, none of the "usual" guarantees, such as real estate or cash on deposit with banks, have been put up, the banker said.
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And for Italian and Spanish banks, in today's febrile climate there is a strong temptation to put any spare cash on deposit with central banks, even for a guaranteed loss on that money, because they don't want to double up on lending to households and businesses struggling to repay what they owe, and they don't want to be short of cash if capital flight intensifies.
So, for example, cash placed on deposit by small businesses has been growing.
The real Fed Funds rate averaged 3%-plus, leaving gold to drop three-quarters of its real dollar value inside 20 years, as the real value of cash-on-deposit doubled.
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Holding cash-on-deposit now guarantees a loss of real value.
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Grameen sees its cash deposit multiply twelvefold on its way to the poverty-stricken borrower.
That said, there is an expectation that the European Central Bank will start to penalise banks for holding money on deposit with it, rather than using that cash to make loans, by charging negative interest rates for deposits.
Most banks that now have cash prefer to deposit funds at the European Central Bank (ECB), which in turn lends it on to those that are short of it.
He said the ECB was "technically ready" to take the interest rate on its deposit facility into negative territory - in other words, to charge banks to park their cash with the central bank.
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