Banking Act 2009

FMLC Publishes Response on Bail-in Powers

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In response to a consultation by HM Treasury, the UK’s Financial Markets Law Committee (FMLC) published a letter on June 4 relating to the bail-in powers introduced by the Financial Services (Banking Reform) Act 2013. This act expands the powers available to the Bank of England and HM Treasury to make “bail-in” resolutions in relation to certain classes of investor in failing banks and investment firms by writing down their claims or converting them to equity.

Commenting specifically on the Banking Act 2009 (Restriction of Special Bail-in Provision, etc.) Order 2014 and the Banking Act 2009 (Mandatory Compensation Arrangements Following Bail-in) Regulations, the FMLC remarks and advises on technicalities which should be reflected in draft implementing secondary legislation. FMLC Letter.

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.