The Act has been rushed through to cover the need to nationalise stabilise the UK banks, and has specific provisions that ensure savers and depositors get their funds returned within seven days, up to a total value of £50,000.
More controversially though, is the introduction of rules that allow the Bank of England to support distressed banks with funds without public disclosure. This is to avoid another Northern Rock style run on a UK bank, but critics observe that it may allow a bank to collapse without the knowledge of their customers or, more importantly, their shareholders.
The Act can be summarised as follows:
"(1)The purpose of the special resolution regime for banks is to address the situation where all or part of the business of a bank has encountered, or is likely to encounter, financial difficulties.
"(2)The special resolution regime consists of—
(a)the three stabilisation options,
(b)the bank insolvency procedure (provided by Part 2), and
(c)the bank administration procedure (provided by Part 3).
"(3)The three 'stabilisation options' are—
(a)transfer to a private sector purchaser (section 11),
(b)transfer to a bridge bank (section 12), and
(c)transfer to temporary public ownership (section 13).
"(4)Each of the three stabilisation options is achieved through the exercise of one or more of the 'stabilisation powers', which are—
(a)the share transfer powers (sections 15, 16, 26 to 31 and 85), and
(b)the property transfer powers (sections 33 and 42 to 46).
"(5)Each of the following has a role in the operation of the special resolution regime—
(a)the Bank of England,
(b)the Treasury, and
(c)the Financial Services Authority."
The Act is in 89 Sections as follows:
Sections 1 to 3 Introduction
Sections 4 to 6 Objectives and code
Sections 7 to 10 Exercise of powers: general
Sections 11 to 13 The stabilisation options
Sections 14 to 32 Transfer of securities
Sections 33 to 48 Transfer of property
Sections 49 to 62 Compensation
Sections 63 to 75 Incidental functions
Sections 76 to 81 Treasury
Sections 82 and 83 Holding companies
Sections 84 to 89 Building societies, etc