Overview

This bill clarifies how recapitalisation costs are handled when the Bank of England intervenes to rescue failing banks under the Banking Act 2009. It establishes a framework for payments, reporting, and reimbursement related to these interventions, ensuring transparency and accountability.

Description

The bill amends the Financial Services and Markets Act 2000 and the Banking Act 2009. Key changes include:

• Recapitalisation Payments (Section 1): Allows the Bank of England to require the Financial Services Compensation Scheme (FSCS) to make payments to cover the costs of rescuing a failing bank (through sale or transfer to a bridge bank). These costs include recapitalisation and other expenses incurred by the Bank, the Treasury, bridge banks, or asset management vehicles.
• Reporting Requirements (Section 2): Mandates the Bank of England to report to the Chancellor of the Exchequer on these recapitalisation payments, including interim reports if the final report takes longer than three months. The Chancellor must then present these reports (with some exceptions for national security) to Parliament.
• Notification to Parliamentary Committees (Section 3): Requires the Bank of England to notify relevant parliamentary committees (the Treasury Committee and the Financial Services Regulation Committee) as soon as reasonably practicable after requesting a recapitalisation payment.
• Reimbursement (Section 4): Ensures the Bank of England reimburses the FSCS if recapitalisation payments exceed actual costs or if the Bank recovers funds related to the rescued institution.
• Code of Practice (Section 5): Amends the Banking Act 2009 to require the code of practice to include guidance on the content of the recapitalisation payment reports.
• Amendments to existing Acts (Sections 6 & 7): Makes various amendments to the Financial Services and Markets Act 2000 and the Banking Act 2009 to integrate the new recapitalisation payment provisions, including specifying that credit unions are not liable for levies related to these payments and clarifying the definitions of financial assistance and public financial assistance.

Government Spending

The bill doesn't directly specify government spending figures. However, it establishes a mechanism for the government (through the Bank of England and the Treasury) to potentially provide significant financial support to failing banks, impacting overall government expenditure depending on the scale of interventions needed.

Groups Affected

• Failing Banks: The bill directly affects banks facing insolvency, providing a mechanism for their rescue.
• The Bank of England: The Bank takes on a more active role in overseeing and managing recapitalisation payments.
• The Treasury: The Treasury will receive reports and play a role in overseeing the process.
• Financial Services Compensation Scheme (FSCS): The FSCS will be responsible for making and potentially receiving back recapitalisation payments.
• Parliamentary Committees: These committees will receive notifications and have enhanced oversight of the process.
• Taxpayers: Potentially impacted indirectly through government spending to fund recapitalisation payments.

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