Darling to overhaul bank insolvency rules

The chancellor is to overhaul the insolvency regime for banks, in moves designed to head off another Northern Rock-style banking crisis.

Alistair Darling revealed the moves in an interview with the Financial Times today.

The changes will see a series of 'triggers' put in place, including a request to the Bank of England for an emergency loan, allowing the FSA to step in.

Deposits would then be secured and repaid quickly or be parcelled off to another bank.

Northern Rock's problems were not related to its solvency but to a lack of liquidity, and the chancellor also wants to beef up the FSA's powers to find out more information about banks' liquidity positions.

Darling will introduce legislation in May and a consultation within the next few weeks.

Further Reading:

FT interview: Darling in UK banks shake-up