In January 2008, HM Treasury, the FSA and the Bank of England (the Authorities) published a Consultation Paper entitled "Financial stability and depositor protection: strengthening the framework". The Consultation Paper summarised the Authorities’ response to the credit crunch and in particular included proposals dealing with the situation where a bank gets into financial difficulty.

In early July 2008, the FSA published a further Consultation Paper entitled "Financial stability and depositor protection: further consultation". This follows up, in detail, on the proposals put forward in January 2008. It explains the Authorities’ plans, indicates where proposals have developed in the light of consultation, provides a response to issues that were raised during the consultation, and seeks further views on a number of key outstanding questions.

The Authorities have now published a further Consultation Paper entitled "Financial stability and depositor protection: special resolution regime". This Consultation Paper provides further information on the Authorities' proposals for the special resolution regime (the regime designed to reduce the impact of a bank failure), including draft clauses where appropriate. The proposals in this Consultation Paper cover:

  • The objectives for the special resolution regime (SRR) (including draft clauses).
  • The roles of the Authorities in relation to the SRR (including draft clauses).
  • The governance arrangements for the SRR (including draft clauses).
  • Powers for the Bank of England to transfer of all or part of the failing bank to a private sector purchaser or to a publicly-controlled bridge bank (including draft clauses on the powers to effect this).
  • A special bank administration procedure to facilitate partial transfers to a bridge bank.
  • Powers for the Treasury to take a failing bank into temporary public sector ownership.
  • Powers to set up compensation arrangements for failing banks, their creditors and shareholders (including draft clauses).
  • Powers for a bank to be put into a bank insolvency procedure (including draft clauses).

The Consultation Paper also sets out the proposed scope of firms that will be included in the SRR, in particular the application of the regime to building societies.

Comments on both the Consultation Papers published in July 2008 are due by 15 September 2008.

View Financial stability and depositor protection: special resolution regime, (PDF 533KB), 22 July 2008