Andrew Campbell and Elise Campbell
Andrew Campbell and Judith M. Dahlgreen
This chapter charts the development of the mutually owned building society in the UK as a means of providing a small and simple range of financial services to consumers in the nineteenth, twentieth and twenty-first centuries. The decline of the size of the sector in the late twentieth century is described, and this is identified as an unforeseen consequence of a small legal change in the Building Societies Act 1986 which permitted conversion of a mutual building society into a registered limited company with a share capital. The large number of consequent conversions and takeovers is noted. A legal change which was motivated by a desire to increase competition for consumers, in fact resulted in a reduction in competition and in the removal from the marketplace of financial services providers who had a simple and distinct product offering and ethos. Some restrictive features of building society legislation are identified and comments are made about the consequent financial stability of these necessarily conservative entities.
Andrew Campbell and Paula Moffatt
The importance of early intervention with regard to a financially troubled institution has long been recognised. The supervisory authorities in the US recognised this early on and have used the concept of ‘prompt corrective action’ for many years. It has repeatedly been demonstrated in banking crises that the failure to act as soon as a problem is discovered generally means that the value of financially distressed banks reduces very quickly and that crises develop when they could have been avoided, or their effects limited. This chapter examines the European response to early intervention following the banking crisis that began just over ten years ago and which affected many European banks. The chapter focuses on the early intervention measures in the Bank Recovery and Resolution Directive which has now come into effect throughout EU.
Catherine Campbell and Andrew Gibbs
Andrew Campbell and Paula Moffatt
This chapter examines how banks are different, in terms of rescue from insolvency, from other types of companies. It is concerned with commercial banks i.e. banks which take deposits from the public and lend to businesses and individuals. The concept of regulatory insolvency is discussed and the ways in which the regulator can make an early intervention in an attempt to avoid liquidation is examined in detail. The importance of early intervention is examined in depth. The reasons why banks should get special treatment on insolvency are examined and the concepts of moral hazard, systemic risk, contagion and lender of the last resort are discussed. The aims and objectives of a bank insolvency regime are discussed. The legislative position in the United Kingdom is examined from the Insolvency Act 1986 to the Banking Act 2009. The 2009 Act introduced the special resolution regime to deal with insolvent banks which gives significant power to the authorities to take quick and, hopefully, effective action. The EU Bank Recovery and Resolution Directive is considered as is Ring-fencing in the UK and the Volcker rule in the US. Consideration of whether the differences between banks and non-financial institutions are becoming less distinct and issues such as protecting bank depositors and the collapse of Carillion are examined. The chapter concludes with reflection on the main issues raised throughout.