In reality it has little choice. The limit is set by an EU Directive at €100,000. That came into force in 2010. Before that the UK had a limit of £50,000. When the EU harmonised protection in all member states the countries which did not use the Euro had to fix the limit by converting €100,000 to their own currency.
At the time that level was £85,000 and that was the new limit from July 2010. The conversion rate is normally reviewed every five years and by the middle of 2015 the pound had strengthened against the euro, When the new level was set on3 July 2015 €100,000 was worth a little over £71,000 which the Government rounded up to £75,000 - the maximum the Directive allowed. It also delayed the introduction of the new limit until 1 January 2016.
Since the Referendum on leaving the EU the pound has fallen by about 15% against the euro and today €100,000 is worth about £85,000.
The Bank of England, through the Prudential Regulation Authority, has accepted that this fall in Sterling and the vote to leave the EU were unforeseen when the level was fixed in 2015. So it has taken action to change the UK protection to its current level against the euro. It has chosen the level of £85,000 at which it was fixed for five years from 2010.
Although the change will start from 30 January the regulator proposes giving banks, building societies, credit unions, and others which offer savings accounts up to five months after that date to adjust all the information they give to customers. It will not require them to tell customers individually of the change but expects their staff to be able to answer questions correctly at least from 30 January 2017.