Bank crisis resolution

George Walker reviews the content and importance of the Banking Act 2009 adopted in response to the difficulties that arose after the forced public acquisition of Northern Rock and associated consultation documents.[1]

George Walker, Centre for Commercial Law Studies, Queen Mary, London

The Government introduced to the House of Commons the Banking Bill 2008 on 6 October 2008 (Bill 147). This followed the three consultation papers issued by the Treasury with the Bank of England and Financial Services Authority (FSA) on banking reform in October 2007 and January and July 2008.[2] These were produced in response to the apparent weaknesses revealed in UK banking law concerning the management and resolution of banks facing financial difficulties. This was considered necessary after the problems at Northern Rock which was forced to seek emergency assistance from the Bank of England in September 2007 and was subsequently nationalised in February 2008 after private-sector bids for the bank had been rejected by the Treasury. The Banking Act 2009 does not alter the structure of the system of integrated financial regulation set up under the Financial Services and Markets Act 2000 (FSMA) although it supplements this with the establishment of a new resolution regime for banks with other consequential amendments to the structure and operation of the Bank of England and the Financial Services Compensation Scheme (FSCS) set up Part 15 FSMA.