It is possible to direct part or all of a failing bank’s business to a private sector purchaser after a sale process has been undertaken. Second, it is possible for the Bank of England to take control of part or all of a bank’s business through a bridge bank controlled and owned by the Bank. A special bank administration procedure can be used in combination with a partial property transfer or bridge bank. This administration procedure is broadly the same as a conventional administration save for the very important difference that the administrator has a statutory objective to support the transferred business with any infrastructure left in the insolvent rump. Finally, under the SRR provisions, it is possible to take a bank into temporary public ownership. For this approach, the Treasury would be in the lead, and there is a higher test of systemic importance to be passed (there must be a serious threat to financial stability) for this approach to be used. As I have indicated, the SRR contains important roles for all of the authorities. The FSA is responsible for triggering the SRR by determining, broadly, that a bank no longer meets its threshold conditions for authorisation, and there is no reasonable prospect of it taking actions to correct the situation within an acceptable timeframe. The FSA is also responsible for approving the transfer of business to another institution that it authorises.
The second credit-related measure adopted was to step up the work currently under way to design a programme for the purchase of asset-backed securities. This market was heavily affected by the crisis, and its underdevelopment in Europe is constraining the greater diversification of sources of corporate finance, particularly for SMEs. Initiatives such as this may stimulate the deepening of this market, although they are unlikely to be decisive if not accompanied by further action in equally important areas, such as that of regulation. To sum up, the situation of the euro area justifies the differing conduct of its monetary policy which, as I have attempted to explain, is still at the stage of scaling up its expansionary action, in contrast to the likely winding-down of stimuli prevalent in other advanced economies. This adds complexity and uncertainty to the exceptional situation of abundant liquidity and low interest rates prevailing in the markets. Thank you. 4  BIS central bankers’ speeches