Banking (Special Resolution Regime) Act 2016

About Andrew A. MartinAndrew A. Martin

Andrew Martin’s practice bridges the international corporate and dispute resolution fields and focuses on commercial litigation and arbitration, insolvency and corporate reconstruction.

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This Act was passed in the first quarter of 2016 but has not yet become effective. It is a lengthy Act with a number of separate and detailed statutory mechanisms which work in conjunction with one another. The purpose of the Act is to address a situation where all or part of a bank’s business encounters financial difficulty or is likely to encounter such difficulty. The Act seeks to provide a mechanism for enabling the orderly transfer of the assets of a distressed bank, and the protection of deposit holders’ interests in keeping with international standards.

The Act entails an initial rescue or stabilisation phase, an insolvency phase and an administration phase. The Regulator is granted wide powers to deal with claims, dispose of assets and override strict legal priorities in order to maximize the preservation of value and recovery of assets. The purpose of the regime is to be able to stabilize a distressed bank by taking it into public ownership, transfer ownership of assets to a bridge bank, and/or ultimately transfer the bank or part of it to a new bank and discharge the security over the assets of the distressed banks in order to achieve the successful bail out.

In addition, directors of Banking institutions may be liable for wrongful (i.e. negligent) trading in the zone of insolvency without being guilty of fraudulent trading, and there are provisions dealing with the reversal of extortionate credit transactions.

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