Overview

The Banking (Special Provisions) Act 2008 granted the UK Treasury the power to intervene in failing banks to protect the financial system and public interest. This involved the ability to transfer assets and liabilities, and to compensate affected parties.

Description

The Act empowered the Treasury to issue orders for the transfer of securities and/or property, rights, and liabilities of authorized UK deposit-takers (banks accepting deposits) under specific conditions. These conditions included a serious threat to the stability of the UK financial system or the need to protect the public interest where financial assistance had been given to a bank by the Treasury or Bank of England.

Securities Transfer:

The Treasury could transfer securities to the Bank of England, a Treasury nominee, a wholly-owned subsidiary of the Bank or Treasury, or another company. Compensation schemes for those holding the securities were mandated.

Property, Rights and Liabilities Transfer:

Similarly, the Treasury could transfer a failing bank's property, rights, and liabilities to a wholly-owned subsidiary of the Bank of England or Treasury, or another entity. Again, compensation schemes were required.

Further Transfers:

The Act allowed further transfers of assets after an initial transfer to a public sector entity (e.g. the Bank of England).

Compensation and Consideration:

The Act stipulated that the Treasury must establish compensation schemes for those whose assets were transferred to the public sector, while private sector purchasers were required to provide consideration (payment) to former holders.

Tax Consequences:

The Treasury could issue regulations to adjust tax liabilities related to transactions under the Act.

Building Societies:

The Act provided the Treasury with powers to modify legislation applying to building societies to enable them to receive financial assistance from the Bank of England.

General Provisions:

The Act included clauses for supplementary provisions, retrospective effects, interpretation, and commencement.

Government Spending

The Act mandated government spending for compensation to individuals affected by bank asset transfers and for financial assistance provided to banks. Exact figures are not available in the provided text.

Groups Affected

• Authorized UK Deposit-takers (Banks): Faced potential asset transfers and government intervention.
• Security Holders: Could experience transfers of their securities and receive compensation.
• Depositors and Creditors of Banks: Potentially affected by bank failure and any subsequent transfers or restructuring.
• Taxpayers: Potentially affected by government spending on compensation schemes and bank bailouts.
• Building Societies: Could receive financial assistance and face changes in legislation.
• Bank of England and Treasury: Responsible for implementing the Act's provisions.

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