Overview

The Banking (Special Provisions) Act 2008 granted the UK Treasury temporary powers to intervene in the financial system to protect its stability. This involved the ability to transfer assets and liabilities of failing banks to other entities, with provisions for compensation and other adjustments.

Description

Treasury Powers

The Act empowered the Treasury to issue orders for transferring securities or property, rights, and liabilities of authorized UK deposit-takers (banks) to either the Bank of England, a Treasury nominee, a company wholly owned by the Bank of England or the Treasury, or other entities, if deemed necessary to maintain the stability of the UK financial system or protect the public interest, especially where the Treasury had already provided financial assistance.

Asset Transfers

The Act details the process of transferring securities and other assets, including provisions for compensation to those whose assets were transferred (paid by the Treasury or the private sector body taking the assets).

Compensation

Compensation schemes were to be established to determine the amount payable to those affected by the asset transfers or extinguishment of rights.

Tax Consequences

The Treasury was given power to adjust tax laws in relation to any actions taken under the Act.

Building Societies

The Act also allowed the Treasury to modify existing legislation concerning building societies to facilitate financial assistance from the Bank of England.

General Provisions

The Act includes general provisions covering consequential actions, retrospective effects, and the process for making orders and regulations.

Government Spending

The Act authorized the Treasury to spend money to cover the costs of financial assistance given to failing banks, compensation payments, and other administrative expenditures. No specific figures are mentioned in the provided act text.

Groups Affected

• Authorized UK Deposit-takers (banks): Could experience asset transfers, potentially impacting their solvency and operations.
• Security holders: May receive compensation for transferred securities.
• Depositors and creditors: Their interests were intended to be protected.
• The Bank of England: Played a role in providing and managing financial assistance and asset transfers.
• The Treasury: Held the primary responsibility for intervention and compensation schemes.
• Building societies: The act allowed the Treasury to modify legislation impacting them.
• Taxpayers: Ultimately bear the cost of any government spending under the Act.

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