Treasury is consulting on safeguards for use of the Special Resolution Regime proposed under the Banking Bill. It plans a range of safeguards to be put in place through secondary legislation. These are:
- safeguards to protect set-off and netting, structured finance, and security arrangements, as initially proposed in the SRR consultation, and now strengthened in the light of consultation responses;
- a new third-party compensation mechanism to provide for minimum compensation to creditors left in a residual company, so that they will be no worse off than they would have been in a whole-bank liquidation;
- narrowly defined restrictions on the scope of certain types of partial transfers; and
- guidance on using partial transfers to be included in the Code of Practice.
The consultation closes on 9 January. It includes draft legislation that would take effect with the new Act, which the Government still aims to bring into force by February 2009.