'The UK Banking Act 2009 is Now Seen as the Benchmark, Post the Financial Crisis, for Dealing with Failing Banks' - A Critical Evaluation

Abstract

The recent financial crisis saw the rise of a multitude of concerns relating to the inadequacies of the United Kingdoms' insolvency and regulatory framework in dealing with the failing of major financial deposit-taking institutions such as Northern Rock and HBOS. This included the system of self-regulation by banks which sought to limit the involvement of the government in the market, as well as the self-correcting powers of markets. The realization that 'normal' insolvency laws were not adequate in dealing appropriately with distressed deposit-taking banks, meant that a new statutory framework was urgently required. The sudden collapse of Northern Rock saw the swift passage of the Banking (Special Provisions) Act 2008, whose immediate purpose was to take Northern Rock into temporary public ownership. That temporary legislation has now been supplemented by the new, more focused Banking Act 2009, which has created a new layer of insolvency laws, adopting into it, many provisions of the Insolvency Act 1986. Arguably therefore, the introduction of this Act is a move away from generic insolvency laws, towards "purpose built laws that are tailored to the circumstances of particular strategically important industries."