Banking Act
In the light of the recent financial turmoil, the new Banking Act provides a permanent set of tools that allows the tripartite authorities to resolve a distressed bank or building society in an orderly way. These powers will help reduce the impact of bank failure on financial stability and bank customers.
The Act will increase the responsibilities, powers and role of the Bank:
- creating a new Special Resolution Regime (SRR) for dealing with distressed banks
- giving the Bank a statutory financial stability objective and with it creating a Financial Stability Committee to advise on financial system matters
- formalising the Bank's payment system oversight role
- creating a new framework for issuance of Scottish and Northern Ireland banknotes to be overseen by the Bank
These changes, beginning with the introduction of the SRR which took place on 21 Febuary, will be implemented in stages during 2009.
The Act draws on an extensive consultation launched by The Chancellor during 2008.
A stable financial system is a key ingredient for a healthy and successful economy. People need to have confidence that the system is safe and stable, and that it functions properly. It is also important that problems in particular areas do not lead to wider disruption across the financial system.
The Bank's role is to contribute to maintaining the stability of the UK financial system. It aims to identify and draw attention to potential vulnerabilities and risks and to assist in efforts to ensure the system remains resilient and risks are reduced.
In the light of the recent financial market turmoil, the new Banking Act increases the responsibilities, powers and role of the Bank. A key part of the Act is the creation of the Special Resolution Regime to provide the tripartite authorities - HM Treasury, Bank and Financial Services Authority - with a framework to deal with distressed banks.
