BBA has published its responses to the July consultations on financial stability and depositor protection. It supports the banking reform initiative and believes:

  • the tripartite system is not fundamentally broken, but regulators must use their powers to the full and FSA must improve its supervision following the post-Northern Rock recommendations;
  • while there is a role for the proposed Special Resolution Regime, it should be a regulatory objective to avoid using it wherever possible and it should be seen as a way of dealing with financial failure rather than avoiding it;
  • the FSCS should be enhanced;
  • however, it is dangerous to fast-track the proposed new SRR legislation as there are still outstanding issues, in particular over the powers of the regulators.

BBA is also concerned about how the SRR would work where only part of a failing business is transferred. It sees the role of the SRR as keeping the payment system working which would help FSCS. (