Overview

This bill clarifies how the Bank of England can recover costs associated with rescuing failing banks. It establishes a process for the Bank to recoup expenses from a compensation scheme, while ensuring parliamentary oversight and transparency.

Description

The Bank Resolution (Recapitalisation) Bill amends the Financial Services and Markets Act 2000 and the Banking Act 2009. It allows the Bank of England to demand "recapitalisation payments" from the Financial Services Compensation Scheme (FSCS) when intervening to save a failing bank through sale or transfer to a "bridge bank".

Recapitalisation Payments:

These payments cover the Bank's estimated costs of recapitalising a failing bank, including expenses incurred by the Bank, the Treasury, a bridge bank, or an asset management vehicle. The Bank must consult the FSCS before making such a payment and is prohibited from doing so if the failing bank exceeded minimum capital requirements. These payments are treated as expenses under the compensation scheme.

Reporting and Notification:

The Bank is required to report to the Chancellor of the Exchequer, who then presents these reports to Parliament. Parliamentary committees (the Treasury Committee and the Financial Services Regulation Committee) are also to be notified promptly.

Reimbursement:

The Bill ensures that if the recapitalisation costs are lower than initially estimated, or if the Bank recovers funds from the failing institution, the FSCS will be reimbursed.

Amendments to Existing Acts:

The bill amends several sections of the Financial Services and Markets Act 2000 and the Banking Act 2009 to incorporate the new recapitalisation payment provisions. Specifically, it addresses how these payments are accounted for in existing schemes, levy regulations for credit unions, and definitions related to financial assistance and the resolution fund.

Government Spending

The bill doesn't directly increase government spending. Instead, it aims to shift the burden of costs associated with bank rescues from the taxpayer (via the Treasury) to the FSCS, potentially funded through levies on financial institutions. Exact financial implications are not specified.

Groups Affected

• The Bank of England: Gains a clearer mechanism for recovering costs associated with bank rescues.
• The Financial Services Compensation Scheme (FSCS): May face increased financial liabilities in funding bank rescues, although reimbursement mechanisms are included.
• Financial Institutions: Potentially affected by increased levies to fund the FSCS if the scheme's costs increase.
• Taxpayers: The bill aims to reduce the potential financial burden of bank rescues on taxpayers, although this depends on the FSCS' ability to cover the costs.
• Parliamentary Committees: Enhanced oversight via mandatory reporting requirements.

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