HM Treasury has published a report entitled Developing effective resolution arrangements for investment banks.
The report lays out the Government’s initial thinking as to the reforms which may need to be considered in developing effective resolution arrangements for investment banks. It responds directly to the issues that were highlighted in the Lehman Brothers case; including the treatment of investment banking clients after default, the future of their assets, and the treatment of their open or unreconciled trading positions. It also examines what can be done to make the process of insolvency itself more effective, and limit the damage that may be done by a failing investment bank.
Insolvency experts have welcomed the report's rejection of a US style bankruptcy regime for investment banks and backed its assertion that the UK's system did not perform markedly worse than others after the collapse of Lehman Brothers. However, the report did highlight one problem highlighted by the Lehman's collapse, the priority of returning client assets.
The deadline for responses to the report is 10 July 2009. The Government will then publish a full consultation paper by the early autumn, outlining possible market and regulatory approaches and any proposed legislative solutions. The consultation period for the autumn paper will last 12 weeks and further consultation may take place at the end of the year if deemed necessary. If appropriate, draft regulations will be published at that time, and if necessary, secondary legislation will then be laid.
View Developing effective resolution arrangements for investment banks, 11 May 2009