This article was originally published 15 October, 2008
Summary
A key element of the UK's response to the credit crisis is the introduction of legislation to give its authorities new powers of intervention with regard to UK banks and building societies, and to introduce two additional insolvency procedures specifically for such entities. The package of new measures is known as the special resolution regime (SRR).
The bill - expected to take effect early in 2009 - replaces emergency legislation enacted earlier this year, under which the UK Government has already taken action in respect of a number of institutions.
The new law is very wide-ranging and written in broad terms. As the bill is currently drafted, if the powers were to be exercised with regard to any particular bank or building society, there could be significant adverse consequences for institutions providing commercial banking facilities to that entity, for investors in its debt or equity securities and for counterparties to other types of transaction. In particular, we envisage a considerable degree of uncertainty as to the enforceability or value of contracts made with an institution that becomes subject to the SRR.
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