UK Authorities To Take New Powers Over Banks And Building Societies - The Special Resolution Regime

This article was originally published 15 October,

2008

Summary

A key element of the UK's response to the credit crisis is

the introduction of legislation to give its authorities new powers

of intervention with regard to UK banks and building societies, and

to introduce two additional insolvency procedures specifically for

such entities. The package of new measures is known as the special

resolution regime (SRR).

The bill - expected to take effect early in 2009 - replaces

emergency legislation enacted earlier this year, under which the UK

Government has already taken action in respect of a number of

institutions.

The new law is very wide-ranging and written in broad terms. As

the bill is currently drafted, if the powers were to be exercised

with regard to any particular bank or building society, there could

be significant adverse consequences for institutions providing

commercial banking facilities to that entity, for investors in its

debt or equity securities and for counterparties to other types of

transaction. In particular, we envisage a considerable degree of

uncertainty as to the enforceability or value of contracts made

with an institution that becomes subject to the SRR.

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