The first test that must be applied is to assess whether the public interest objectives could be met by implementing a rapid payout of insured deposits, or any other definition of deposits which the authorities wish to protect via a top-up extension of the deposit insurance scheme. The remainder of the bank would then be put through something known as the bank insolvency procedure. The test of whether this procedure could be used depends in large part on how long depositors would face without access to their funds. At the moment I think few banks could meet an acceptable timetable for payout. Moreover, for bigger banks this would always be too disruptive as an approach. Work is underway to facilitate rapid payout of depositors under the Financial Services Compensation Scheme and I hope that in the next year, banks will be able to meet the objective that they have been given by the FSA to be able to make payouts to depositors within seven days. This is not a trivial task as I readily recognise, and achieving it would not mean that this approach would always be chosen in a resolution. That depends on the situation at the time. If the failure of a bank is determined to have wider systemic consequences that could undermine financial stability, confidence in the banking system or depositor protection, then the SRR provides a range of other tools to be used.
Andrew Bailey: The UK bank resolution regime Speech by Mr Andrew Bailey, Executive Director for Banking Services and Chief Cashier of the Bank of England, at The Institute of Chartered Accountants in England and Wales (ICAEW) Financial Services Faculty breakfast, London, 26 November 2009. I am grateful to Peter Brierley, Victoria Cleland, Iain De Weymarn, Geoff Davies, Tony Foster, Andrew Hauser, Orla May and Paul Tucker for their comments and assistance. *  *  *  The UK bank resolution regime Thank you for inviting me to speak this morning. One of the characteristics of bank resolutions, to which I will return later, is that they have to be done quickly to a fixed deadline and involve working through the night. They also require extensive involvement by accountants and lawyers, so, I have had some experience with spending nights and early mornings with accountants. The only, but important difference, is that I don’t get to choose when to spend my early mornings on resolutions, whereas you did choose to listen to me early this morning, for which I am very grateful. Some history The 2009 Banking Act, passed in February, created the new bank resolution regime in the UK. In its first nine months it has been used once, at the end of March for the Dunfermline Building Society.