Creating a Template for Banking Insolvency Law Reform after the Collapse of Northern Rock

Insolvency Intelligence, Vol. 22, No. 5 & 6, pp. 65-70 & 81-88, 2009

23 Pages Posted: 12 Jun 2009 Last revised: 12 Aug 2009

Roman Tomasic

University of South Australia - School of Law; Durham University - Law School

Date Written: June 9, 2009

Abstract

The passage of the Banking Act 2009 (UK) was a major landmark in the development of legal tools for the handling of banks in financial difficulties in the United Kingdom. The Act has emerged from over a year of economic crisis and from politically charged debates and consultations that followed the collapse and nationalisation of Northern Rock plc. It is built upon ideas that were found in the temporary emergency legislation that was first enacted in the form of the Banking (Special Provisions) Act 2008 a year earlier. What is surprising about this most recent enactment is the fact that the pre-existing laws in regard to bank failure and rescue were found to be so inadequate. It is clear that self regulation had failed to protect British banks from the consequences of the liquidity crisis that struck them in September 2007. It was to take more than fifteen months to fashion some suitable legal and regulatory tools to deal with banks in financial crisis. This paper reviews some of the debates that led to the passage of the 2009 enactment and provides an overview and assessment of this new legislation. It is clear that this hurriedly passed legislation constitutes an unfinished work in progress in the midst of a world economic crisis of massive proportions and that it will inevitably be subject to further refinement and development as it is applied to the circumstances of different banking institutions in the UK. However, the legislation has at least provided a basic set of tools with which to deal with banks in crisis whilst seeking to maintain stability and confidence in the UK banking system.

Keywords: banking crisis, banking insolvency, rescue, nationalisation, law reform

JEL Classification: G33, G34, K22, E44, E58

Suggested Citation

Tomasic, Roman, Creating a Template for Banking Insolvency Law Reform after the Collapse of Northern Rock (June 9, 2009). Insolvency Intelligence, Vol. 22, No. 5 & 6, pp. 65-70 & 81-88, 2009. Available at SSRN: https://ssrn.com/abstract=1416823

Roman A. Tomasic (Contact Author)

University of South Australia - School of Law ( email )

GPO Box 2471
Adelaide SA 5001
Australia

Durham University - Law School ( email )

Palatine Centre
Stockton Road
Durham, Durham
United Kingdom

HOME PAGE: http://www.durham.ac.uk

Paper statistics

Downloads
457
Rank
49,474
Abstract Views
1,871