The deposit guarantee has been reduced following the devaluation of the euro.

£75,000 will be the guarantee limit for cash in bank accounts from 01 Jan 2016, said the Bank of England. The current limit of £85,000 will be reduced due to the euro’s weakness against the pound.

The fixed protection limit of €100,000 followed by banks all over the European Union (EU), as agreed in 2010, equaled to £85,000. Now, as the euro falls against the pound, the limit corresponds to £75,000.

“HM Treasury has today put in place legislation to maintain the existing limit of £85,000 until 31 December 2015 for depositors who were previously protected by the FSCS and continue to be protected (including individuals and small companies),” the Bank of England’s Prudential Regulation Authority said.

“This transitional measure helps to ensure that depositors have suitable time to plan for and adjust to the change and will protect most depositors from experiencing a sudden change in the amount of compensation available in the event of the failure of a bank, building society or credit union.”

For joint accounts, each of the couple will receive protection of £75,000 totaling to £150,000 if their bank was to collapse.

Savers can also split deposits to more than one bank to avail a protection guarantee of £75,000 from each bank, if they are to save above £75,000 in bank accounts. As the protection applies to each bank, splitting the savings can be used wisely to avail larger savings protection. Customers who come into a bank or building society with a larger sum are given a temporary higher limit of protection.

“Depositors with temporary high balances will be covered up to £1 million for six months from the date on which the money is transferred into their account, or the date on which the depositor becomes entitled to the amount, whichever is later,” the Bank of England said. “This is to ensure that depositors are protected when they deposit funds over the limit as a result of specified events, including following a house sale or funds received from a ‘life event’ such as a divorce settlement or inheritance, for a period of time until they have had sufficient time to spread the risk between institutions to appropriately protect these funds.”

“It is absurd that the 16 percent 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 UK depositors,” said Mr Tyrie, the chairman of the Treasury Select Committee.

“In this respect, the EU Deposit Guarantee Schemes Directive is defective. It has been designed without adequate consideration for the requirements of those, like the UK, in the EU but outside the eurozone.”

Mr Tyrie said he would write to the Chancellor asking to raise this issue in Europe, and seek flexibility on the level of the deposit guarantee urging the Chancellor George Osborne to push for the EU’s rules to be changed to allow the guarantee to be raised back up to £85,000.

The guarantee protects savers in the rare event of a bank collapsing. The limit covered by the scheme was increased in many stages through the financial crisis to reassure savers of the safety of their deposits, and to avoid bank runs. This is the first time the level of protection has been cut since the financial crisis.

Till 2007, only the first £2,000 was completely protected with the following £30,000 subject to 90 percent protection. At the start of the financial crisis, the government introduced a complete guarantee on deposits of up to £35,000 to stem the run on the bank and to woo customers of Northern Rock.

In 2008, the guarantee for savers was raised to £50,000 and further to £85,000 in 2010 corresponding to €100,000 guarantee across the European Union.