BusinessBusiness RecoveryDarling to overhaul bank insolvency rules

Darling to overhaul bank insolvency rules

Plans will see 'triggers' introduced that automatically mean the FSA is called in and deposits protected

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

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