HM Treasury has published a consultation document on the implementation of the bail-in powers introduced by the Financial Services (Banking Reform) Act 2013 (Banking Reform Act), together with the text of the following draft secondary legislation:
- the Building Societies (Bail-in) Order 2014. This draft Order will make provision under section 17 of the Banking Reform Act, to facilitate the exercise of the bail-in powers by the Bank of England (BoE) for building societies, taking into account their different ownership model and corporate structure;
- the Banking Act 2009 (Restriction of Special Bail-in Provision, etc.) Order 2014. This draft Order will make provisions under section 48P of the Banking Act 2009 (as inserted by the Banking Reform Act). It puts in place appropriate safeguards for certain financial arrangements, including certain types of set-off arrangements and netting arrangements; and
- the Banking Act 2009 (Mandatory Compensation Arrangements Following Bail-in) Regulations 2014. These draft Regulations will make provisions under section 60A of the Banking Act 2009 (as inserted by the Banking Reform Act) and require certain compensation arrangements to be put in place following the exercise of the bail-in stabilisation option.
In its consultation document, HM Treasury also proposes to:
- align the creditor hierarchies in insolvency for banks and building societies, through early transposition of the depositor preference provisions in the proposed Bank Recovery and Resolution Directive (BRRD);
- implement changes to the Financial Collateral Arrangements Directive in what is currently article 107 BRRD through amendments to the Financial Collateral Arrangement (No 2) Regulations 2003; and
- apply the bail-in tool to banking group companies.
The deadline for responses to the consultation document is 7 May 2014.
View HM Treasury consultation document – Bail in powers implementation, 13 March 2014
View Draft – the Building Societies (Bail-in) Order 2014, 13 March 2014