TheCentral Bank and Credit Institutions (Resolution) Bill 2011 seeks to establish a more permanent and a wider framework for dealing with insolvent banks and banks in financial difficulty. It is intended that the legislation would replace and extend the provisions contained in the Credit Institutions (Stabilisation) Act 2010.
The new Bill was published to meet the end of February deadline set under the terms of the EU-IMF Financial Support Agreement.
The legislation would give the Central Bank power to take control of banks, appoint managers to run them and remove directors, staff and consultants and to move their deposits and loans to other banks. It provides for the establishment of a Credit Institution Resolution Fund which would provide a source of funding for the resolution of financial instability in, or an imminent serious threat to, the financial stability of an authorised credit institution. Authorised Credit Institutions will be obliged to contribute to the Resolution Funds. An authorised credit institution for the purposes of the legislation is a licensed bank, building society or a credit union.
The Central Bank will be given the powers to establish “bridge-banks” which may hold assets and liabilities on a temporary basis following the making of a transfer order in respect of assets or liabilities. The Central Bank will also be empowered to make special management orders in relation to an authorised credit institution or its subsidiary or holding company of the authorised credit institution in certain circumstances.
The Bill also sets out the powers of the Central Bank with regard to the liquidation of authorised credit institutions. Authorised Credit Institutions may also be directed to prepare a recovery plan setting out actions that could be taken to facilitate the continuation or secure the business or part of the business of that institution.
While the Credit Institutions (Stabilisation) Act 2010 is in operation, certain credit institutions that are relevant institutions under the 2010 Act will be deemed not to be authorised credit institutions for the purposes of this legislation..