Conduct of Persons in Financial Services: Causing a Financial Institution to Fail

The Financial Services (Banking Reform) Act 2013 (the Act) is yet another Leviathan statute. The Act is spread out over eight parts encompassing one hundred and forty-eight sections and contains ten schedules. First of all, this wide-ranging legislation implements the recommendations of the Independent Commission on Banking (or ICB, chaired by Sir John Vickers). Equally, it also implements the recommendations of the Parliamentary Commission on Banking Standards (or PCBS, in relation to the LIBOR scandal) which aim to improve culture and standards in the banking sector. Moreover, under section 17, the Act also provides the Bank of England with the new stabilisation “bail-in option” under the Banking Act 2009. See updates here and here.

Independent Commission on Banking

In its final report, the ICB remarked that:

Banks are at the heart of the financial system and hence of the market economy. The opportunity must be seized to establish a much more secure foundation for the UK banking system of the future.

Recommending structural reform of the banking industry, coupled with measures designed to increase the capacity of banks to absorb losses, the ICB’s work focused on cost effective solutions as regards rescuing failing banks.