Slide 1

Report
Alex Kuczynski, Director of Corporate Affairs
Financial Services Compensation Scheme, UK
Role of Deposit Insurance in Bank Resolution
Framework – Lessons from the Financial Crisis
November 13-16, 2011
JODHPUR, INDIA
LESSONS FROM FINANCIAL CRISIS FOR BANK
RESOLUTION – US AND EUROPEAN EXPERIENCE
• UK – The ‘mid Atlantic’ view
• First to act/react
• Northern Rock, September 2007
THE RUN ON NORTHERN ROCK
• A mid sized, UK bank
• NOT global, interconnected or a clearing bank
• August 2007 – “credit crunch”
• September 2007 – emergency liquidity
– bank run
– Government guarantee
all deposits
THE RESPONSE TO NORTHERN ROCK
• Corporate insolvency inadequate
• Limited regulatory tools
• Potentially systemic consequences
• Limited and complex deposit insurance
•
- coinsurance (100% x £2,000, 90% x £33,000)
- eligibility
- set off
Banking (Special Provisions) Act 2008
- nationalisation
BANKING ACT 2009 (1)
• Special Resolution Regime
• Bank of England as resolution authority
• Stabilisation powers
•
- property transfer
- bridge bank
- temporary public ownership
Administrative function
BANKING ACT 2009 (2)
•
SRR objectives
- protect and enhance the stability of the financial
systems of the UK
- protect and enhance public confidence in the stability of
the banking systems of the UK
- protect depositors
- protect public funds
- avoid interfering with property rights in contravention
of a Convention right (within the meaning of the Human
Rights Act 1998)
BANKING ACT 2009 (3)
•
Dunfermline Building Society (March 2009)
- Bridge Bank
- Property transfer
- Administration
•
FSCS contribution to costs of resolution
- the “net” cost to FSCS of an insolvency counterfactual
•
Southsea Mortgage and Investment Company Limited (July
2011)
- Bank insolvency/liquidation
- Depositor payout
FSCS – DEPOSITOR PAYOUT
• Deposit Guarantee Scheme Directive – 20
working days?
• FSCS target for most depositors – 7 days
• No application form
• Simplified eligibility
• No set off
• Single customer view file
- aggregate deposits per customer per
bank
LESSONS FOR FSCS
• Contingency planning and collaboration of
authorities
• Funding
- ex post scheme
- National Loans Fund
• Consumer awareness
- TV campaign
- Industry disclosure
- PR/media
NEXT STEPS
•
•
•
Recovery and Resolution Plans
- FSA consultation (July 2011)
- Pilot RRPs
- EC Technical Framework (January 2011)
- FSB consultation (July 2011)
DGS funding
- ex post/ex ante
- risk based levies
Faster payout
- electronic
- larger banks
REGULATORY DEVELOPMENTS
• Regulatory Reform
•
•
- Prudential Regulatory Authority
- Financial Conduct Authority
- 2013
EC/DGS
- and Investor Compensation Scheme Directive
- and Insurance Guarantee Scheme Directive
ICB/Vickers Report
- ring fence retail banks
- depositor preference
- 2019!

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