Commercial Secretary to the Treasury, Lord Sassoon, today set out proposals in a consultation paper for a new special administration regime to strengthen the UK’s ability to deal with any future failures of investment firms.
The government’s proposals will enhance the UK’s reputation as one of the world’s leading centres for conducting investment business and will ensure that the administration of an investment firm is conducted with due regard to clients, creditors and financial stability.
Lord Sassoon said:
Investment firms are a core part of the national and international financial system and play a critical role in providing market liquidity.
It is crucial to reduce the impact of an investment firm failure on the stability of the UK financial systems. The proposed new special administration regime will provide administrators with clarity and direction to manage a firm’s winding up in a way that is both less expensive and less disruptive.
The new regime will include new special administration objectives that will ensure that administrators focus on:
- the return of client assets
- engagement with market infrastructure bodies and the authorities
- maximising returns to creditors
The proposed new special administration regime is not expected to impose any additional regulatory costs on the private sector.
The Treasury has worked extensively with industry experts, the Bank of England and the Financial Services Authority (FSA) to develop the special administration regime and ensure that it is a balanced and proportionate policy response to any future failure of a major investment firm. Extensive consultation has been undertaken with industry on these new insolvency arrangements for investment firms.
Notes for editors
The paper, Special administration regime for investment firms, is the Treasury’s third consultation paper on enhancing resolution arrangements for investment firms.
The Treasury published an initial paper, titled Developing effective resolution arrangements for investment banks, in May 2009. This was followed by a further consultation paper, titled Establishing resolution arrangements for investment banks, in December 2009.
As part of the commitment to an open review, this paper, like the previous ones, has been developed in collaboration with an Advisory Panel of over 30 industry experts (as well as the Bank of England and FSA).
The government welcomes responses to the issues and questions raised in the paper by 16 November 2010.
The consultation document is available on the website.
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