Darling to shake up asset recovery rules after Lehmans

Alistair Darling is to propose an overhaul of the UK’s asset recovery rules
in the wake of the delays that beset administrators sifting through the remains
of Lehman Brothers.

The plans focus on making it easier to return assets to clients and also give
counterparties a better idea of their positions if a bank cannot honour its
obligations in the event of a collapse.

Under the present system, administrators from PricewaterhouseCoopers had to
deal with a huge backlog of ‘hung’, or frozen, trades when Lehmans went bust,
severely affecting the process of returning assets to creditors.

Darling will stop short of calling for a full US-style Chapter 11 framework
which completely ring-fences a failed company from creditors.

In the case of Lehman Brothers’ US arm, the Chapter 11 system provided
breathing space for limited trading to take place and the Chancellor is
understood to be floating the idea of a ‘continuity of service’ obligation for
administrators, the

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