Research Handbooks in Financial Law series
Edited by Matthias Haentjens and Bob Wessels
This chapter provides an overview of bank insolvency law as it applies to the United Kingdom (England and Wales) (‘UK’), with particular focus on recent reforms introduced by the Banking Act 2009 (‘the Act’) and related primary and secondary legislation. The Act is a crucial component in understanding crisis management in the UK banking sector given that it has established for the first time a permanent statutory regime for dealing with distressed financial institutions and is designed to promote financial stability by strengthening depositor protections and providing the necessary tools for dealing with, and rehabilitating, failing financial institutions. This chapter will consider: (a) the relevant legislation in England and Wales and its key objectives; (b) the institutional framework and the authority of financial supervisors; (c) the principal provisions of the Act with focus on the special resolution regime (‘SRR’); (d) the SRR’s stabilization provisions for counterparties and creditors; (e) the Act’s application to financial institutions other than banks; and (f) the procedures for bank insolvency and bank administration envisaged under the Act. Appendix 1 provides a short overview of the UK deposit guarantee scheme which has become important in the context of bank failures and has generated a significant amount of media and political attention. In Appendix 2, there is an analysis of two significant reform measures, relating to the bail-in stabilization tool and State aid. Finally, Appendix 3 addresses the EU Bank Recovery and Resolution Directive which provides a new pan-European regime for bank crisis management.