Reform welcomed but government advised against dash for change
16/09/2008
The principle behind the government's banking reform proposals may look simple, but getting the detail right is vital the British Bankers' Association said today.
Chief Executive Angela Knight said the BBA supports the government's high level proposals for intervening when a bank gets into difficulties through a "Special Resolution Regime" [SRR]. However, she said, the industry was concerned that the current timetable for the new legislation was extremely tight despite the importance - as the current environment shows - of getting banking reform right.
The plans, as the Treasury has set them out at the moment, would also cut across creditors' rights and interfere with contractual arrangements. The particular problems surround what is known as "partial transfer" - where only part of a failing bank is to be transferred to another institution.
Angela Knight said:
"The best way to ensure depositors are protected in the event of a problem arising is for the special resolution regime to be used to keep the payments system working and for people to continue to have access to cash machines. This would prevent the Financial Services Compensation Scheme being needed to make compensation payments making it faster and easier for customers to get their money."
Mrs Knight also said clarity was needed about who takes the lead in a crisis. Banks believe it is for the FSA to regulate but, should they be unable to resolve an issue, than responsibility should pass to the Bank of England, which issues the SRR.
She also said there was no need for new legislation to increase protection for depositors which could be done by changes to existing regulations.
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Notes to Editors:
16/09/2008
The principle behind the government's banking reform proposals may look simple, but getting the detail right is vital the British Bankers' Association said today.
Chief Executive Angela Knight said the BBA supports the government's high level proposals for intervening when a bank gets into difficulties through a "Special Resolution Regime" [SRR]. However, she said, the industry was concerned that the current timetable for the new legislation was extremely tight despite the importance - as the current environment shows - of getting banking reform right.
The plans, as the Treasury has set them out at the moment, would also cut across creditors' rights and interfere with contractual arrangements. The particular problems surround what is known as "partial transfer" - where only part of a failing bank is to be transferred to another institution.
Angela Knight said:
"The best way to ensure depositors are protected in the event of a problem arising is for the special resolution regime to be used to keep the payments system working and for people to continue to have access to cash machines. This would prevent the Financial Services Compensation Scheme being needed to make compensation payments making it faster and easier for customers to get their money."
Mrs Knight also said clarity was needed about who takes the lead in a crisis. Banks believe it is for the FSA to regulate but, should they be unable to resolve an issue, than responsibility should pass to the Bank of England, which issues the SRR.
She also said there was no need for new legislation to increase protection for depositors which could be done by changes to existing regulations.
For further information, please contact:
Press Office (020 7216 8989 )
Out of Hours (020 7216 8888 )
Notes to Editors:
- The BBA's full response to: 'Financial stability and depositor protection: further consultation' and 'Financial stability and depositor protection special resolution regime' can be found at http://www.bba.org.uk/bba/jsp/polopoly.jsp?d=155&a=14520 and
http://www.bba.org.uk/bba/jsp/polopoly.jsp?d=155&a=14519 - The response is accompanied by a covering letter from Angela Knight to the Chancellor which you can see at: http://www.bba.org.uk/bba/jsp/polopoly.jsp?d=155&a=14521