Transcript Slide 1
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!