Financial Services Bill

Resolving Financial Institutions – A Joint Paper by the FDIC and the Bank of England

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On December 10, the Bank of England (the Bank) and the Federal Deposit Insurance Corporation (the FDIC) published a joint paper entitled ‘Resolving Globally Active, Systemically Important, Financial Institutions’ (G-SIFIs).  The joint paper sets out the strategies that the Bank and the FDIC have designed to enable large and complex cross-border firms to be resolved without threatening financial stability or putting public funds at risk.  The paper builds on the work of the Financial Stability Board, and focuses on the application of “top-down” resolution strategies whereby a single resolution authority applies its powers at parent company level.

In the UK, this will involve the use of the powers under the Banking Act 2009 and those that are anticipated to be provided by the European Union Recovery and Resolution Directive and the Financial Services Bill, and will involve the bail-in (write-down or conversion) of creditors at the top of the group in order to restore the whole group to solvency.

Treasury Committee Publishes Report on the Financial Services Bill

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On 8 June, the Treasury Select Committee published a report setting out its main concerns on the Financial Services Bill. Report.

In particular, it called for amendments to the Bill which would:

  • Oblige the Court of the Bank of England to undertake retrospective reviews of the Bank of England’s performance;
  • Give a general power to the Chancellor of the Exchequer to direct the bank of England when public funds are at risk;
  • Make competition an objective of the Prudential Regulation Authority;
  • Ensure Parliament, through the Treasury Committee, may request retrospective reviews of the work of the Financial Conduct Authority’s (“FCA”).

It also considered whether the Treasury Committee should have a role in the appointment and dismissal of the Governor of the Bank of England and whether there is a way of requiring the FCA to publish board minutes. It welcomed the House of Lords to re-examine these issues. The second reading of the Bill in the House of Lords will take place on 11 June 2012.