Individual savings of up to €100,000 (£77,000) will be fully guaranteed under draft legislation presented by the European Commission today.

The proposal is part of the package of measures that governments are putting in place to restore confidence in the ailing banking sector. It represents a fivefold increase on the current legal minimum of €20,000 introduced by the first pan-European deposit guarantee scheme 14 years ago.

If approved by EU Governments and the European Parliament, the measure, which would be introduced in two stages, would raise the protection enjoyed by savers in Britain from the £50,000 recently announced by the Government to almost £80,000.

Presenting the proposal, Charlie McCreevy, the Internal Market Commissioner, said: "Increasing the minimum protection will strengthen Europeans' confidence in the safety of their deposits."

The possibility of raising the ceiling was first discussed by European finance ministers last week. But while it is likely to be supported by countries such as Germany and Italy, which already guarantee savings up to €100,000, it will face opposition from many central and eastern European Governments anxious about the potential costs for the State.

Under the scheme, the guarantee will be backdated — once it has been formally approved — and will apply from today to the first €50,000 in any savings account. Within a year, the ceiling will be raised to €100,000.

According to the European Commission, about 65% of eligible deposits are covered by the existing scheme. The latest proposal will increase this to 80 per cent from today and to 90 per cent within one year.

In a further attempt to boost savers' trust, the Commission is proposing that, if a bank collapses, depositors should receive the money covered by the guarantee scheme within three days. Currently, a pay out can take between three to nine months.

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