ABI speaks out on Special Resolution Regime

by Gill Montia

Story link: ABI speaks out on Special Resolution Regime

The Association of British Insurers (ABI) has joined leading banks in urging the Government to reconsider plans for its Special Resolution Regime (SRR).

The development of the SRR is a direct response to the collapse of Northern Rock and one aim of the new measures is to simplify the process of nationalising a stricken lender.

The regime will be set up by the Financial Services Authority and implemented if a lender is found to be in serious difficulties.

However, questions have been raised about the cost and legal implications of the SRR and fund managers are warning that the new rules could make it possible for a financial institution to be broken up and sold, without consultation with shareholders or bondholders.

The ABI claims that this could lead to a company’s most valued assets being sold on without stakeholder approval and that the increased risks presented for both creditors and investors could reduce confidence in the UK financial sector.

The consultation period for the new regime has now closed and the Government hopes to draft the legislation by February of next year.