We use cookies to provide you with a better experience. If you continue to use this site, we'll assume you're happy with this. Alternatively, click here to find out how to manage these cookies

hide cookie message
RSS FeedGovernance

UK and USA outline bank insolvency plans

One national regulator to be given responsibility for overseeing insolvency

Article comments

The Bank of England (BoE) and US Federal Deposit Insurance Corporation (FDIC) have jointly outlined their respective plans for the UK and USA aimed at dealing with damage limitation and an insolvency should their banks get into difficulty.

Under the plans, published late on Monday, one national regulator would be given the responsibility for overseeing the insolvency of a big international bank instead of bodies from different countries dealing with subsidiaries.

Subsequently, shareholders would lose their holdings and creditors who had lent the bank money would end up owning it. Since, the management would be held responsible for bank collapses and replaced, the idea is also to force enough funding at the top of banking organisations to absorb losses, instead of spreading it around often complex organisational structures.

The BoE/FDIC plans would only cover the biggest international banks, referred to as globally active, systemically important, financial institutions. Both institutions are hoping to prevent a repeat of the situation following the collapse of Lehman Brothers in 2008, when regulators outside the US were left having to deal with their own collapsed subsidiary.

The British Bankers' Association (BBA) welcomed the BoE/FDIC move as "a constructive contribution".

"It is important to note that work is already well underway in the UK - our banks have already developed recovery and resolution plans and reforms are progressing," it said in a statement.

However, the ICAEW said such further stringent bank requirements may hamper banks' ability to lend.

Iain Coke, head of ICAEW's Financial Services Faculty, said, "The likelihood of taxpayers paying for failing banks should be minimised so further initiatives on how to deal with the potential future failures of large banks are much needed. However, banks’ ability to lend could be further hampered if the result of the proposals in the paper is further stringent capital or structural requirements."

"It is important regulation doesn’t prevent banks from fulfilling their key role in society," he added.



UK and USA outline bank insolvency plans

What makes a good board report?

What makes a good board report?

Examining how CFOs can improve the way they report back to the boardmore ..

Vodafone buys out partner's stake in Indian unit

Mobile giant acquires the remaining 11% it did not already ownmore ..

Financial advisers not being clear enough on charges, says watchdog

FCA’s review found 73% of firms failed to provide adequate informationmore ..

EU data retention rules violate privacy rights, EU court rules

Rules requiring telcos to retain communications metadata are disproportionate, the court saidmore ..

Examining the issue of corporate litigation funding

Litigation funding is a very useful tool for CFOs but not a panacea for all legal mattersmore ..

Corporate governance: A catalyst for innovation

Corporate governance is a powerful tool in a C-suite executive’s arsenalmore ..

Send to a friend

Email this article to a friend or colleague:

PLEASE NOTE: Your name is used only to let the recipient know who sent the story, and in case of transmission error. Both your name and the recipient's name and address will not be used for any other purpose.

In Depth
How M&A teams can create value by challenging the CEO

How M&A teams can create value by challenging the CEO

A typical “hold” period of nine to 18 months can generate increased sale value more ..

In Depth
What every company needs to do about big data?

What every company needs to do about big data?

In the first of a three part series, Pat Brans explores just how big 'big data' will get? more ..


* *