Treasury has published a paper building on its work earlier this year that includes a package of proposed market, regulatory and legislative measures to achieve orderly wind-downs of failing investment banks. Treasury is keen to use market and regulatory solutions wherever it can. The proposals look at:
- requiring firms to manage for failures: there would be a new administrative regime for failed investment firms which would create duties for administrators to prioritise client positions and financial stability and give some special defences to administrators and directors of the firms to enable them to meet these objectives. Firms would have investment firm resolution plans, a "business resolution officer" and business information packs about their operation and structure;
- methods to reconcile and return client money and assets: the paper sets out detailed plans for more clarity on the position of clients pre-insolvency. Contracts and client information would be better, the role of the client asset officer would be clearer and firms could divide money into pools depending on risk assessments;
- giving good support to clients: this would include appointing a client assets trustee whose main task would be to prioritise the return of client assets and money;
- reconciling counterparty positions: the proposals include extending protections similar to those in Part 7 Companies Act 1989 to allow MTFs to deal centrally with a default and new OTC transaction protocols;
- managing complex creditor positions, including possible changes to the ISDA Master Agreement; and
- working towards cross-border resolution.
Treasury welcomes comments by 16 March and will publish detailed proposals, including any necessary draft legislation, in 2010.