The UK Banking Act 2009, Pre-Insolvency and Early Intervention: Policy and Practice
Journal of Business Law, No. 1, 2011
32 Pages Posted: 13 Nov 2010
Date Written: November 11, 2010
The Banking Act 2009 has introduced a special regime to deal with failing banks in the UK. A feature of the legislation is the regulator’s power to trigger the regime by determining whether or not a bank is likely to fail. The use of the Act with Dunfermline Building Society has highlighted the importance of some guidance being developed to assist a bank or building society that is faced with such a situation on how best to work out its position with the regulator, and ultimately with the Bank of England and the Treasury. This paper looks at the key features of the Canadian and US models of early intervention, which could be described as discretionary and rules-based approaches, respectively. It evaluates these two models in comparison with the UK model to assess whether any lessons could be learned from them. It asks whether early intervention alone is the panacea that regulatory authorities are looking for to reduce the likelihood of bank failure.
Keywords: UK Banking Act 2009, failing banks, US banking model
JEL Classification: G20, G21, G28, K10, K20
Suggested Citation: Suggested Citation