Financial regulations: Banks fight new rules to prevent repeat of Rock run

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Government told sweeping proposals raise 'quite significant concerns' about handling failing banks

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Re: Financial regulations: Banks fight new rules to prevent repeat of Rock run

Financial regulations: Banks fight new rules to prevent repeat of Rock run

• Jill Treanor
• The Guardian,
• Monday September 15 2008
• Article history

Government plans to introduce ground-breaking new rules to prevent a repeat of the run on Northern Rock are coming under fire from both banks and shareholders, who are demanding changes to the sweeping proposals.
With the consultation on the changes ending today, the government is being told that its case to introduce the new regime for failing banks is "not proven" and raising "quite significant concerns".
Just days after the first anniversary of the queues forming outside Northern Rock, the government is being urged to give more thought to the rights of shareholders and creditors. Some former shareholders in Northern Rock are still wrangling over compensation they should receive following the bank's nationalisation.
Peter Montagnon, head of investment affairs at the Association of British Insurers (ABI), said the shareholders he represented would be more cautious about investing in bank shares and be more reluctant to place wholesale deposits with banks if the new rules were introduced.
Angela Knight, chief executive of the British Bankers' Association, also admitted to having "some quite significant concerns", particularly on technical points about the treatment of creditors. The government - through the Treasury, Bank of England and Financial Services Authority - wants to introduce a special resolution regime (SRR) that would allow the so-called Tripartite Authorities to impose a sale of all or part of a troubled bank. The authorities could also transfer some of the bank's assets to a bridge bank or take the bank into temporary public ownership, as well as modify insolvency rules - which prevent banks in administration from paying depositors - to allow the deposit protection scheme to pay out.
The ABI argued that "the case for such a SRR is not proven and that the current design requires substantial change. We do need an orderly means of dealing with failing banks but current proposals are being rushed through with too much haste."
Knight said that a year on from the run on Northern Rock it was clear that: "If a financial entity gets into difficultly, act quick. If anybody was wondering what globalisation has been about we can now see it. It does show how important a strong banking sector is."

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Re: Financial regulations: Banks fight new rules to prevent repeat of Rock run

Knight said that a year on from the run on Northern Rock it was clear that: "If a financial entity gets into difficultly, act quick. If anybody was wondering what globalisation has been about we can now see it. It does show how important a strong banking sector is."

Yet if Joe/Joesephine Public get into difficulty screw them for all they have and make life a misery for them. I do understand the implications on the global economy but to see and hear them pleading poverty when there is £billions being wasted in top brass bonuses I find it hard to justify the taxpayer stumping out for yet another bad decision or chain events made from the boardroom.