Further to our e-update of 08/01/09, the Banking Bill has now completed its passage through Parliament. The provisions became law on Thursday 12th February, as the Queen gave Royal Assent to the legislation, creating the Banking Act 2009.
Ministers worked to a tight deadline to finalise provisions of the Bill prior to the upcoming expiry of the Banking (Special Provisions) Act 2008, which was used to nationalise Northern Rock and Bradford and Bingley, on 20th February.
The interim powers in the 2008 Act will be replaced with the first permanent statutory regime aimed at dealing with failing banks. A new procedure named the Special Resolution Regime (SAR) allows the FSA to seize assets of a struggling bank and secure depositors savings. Other provisions include measures to facilitate faster pay out under the Financial Services Compensation Scheme, a new statutory role for the Bank of England in maintaining financial stability, and enhancement of the information gathering rights of the FSA.
The legislation will be fleshed out by way of Codes of Practice to be issued by the Treasury, giving guidance on the key areas of stabilisation powers, as well as bank insolvency and administration procedures. It is a requirement of the legislation that these be devised via consultation with the FSA, the Bank of England and the scheme manager of the Financial Services Compensation Scheme