UK gets a new Banking Act
Posted by Archana Venkatraman on February 21, 2009
The financial regulators will have greater powers to rescue the troubled banks and protect investors in the UK as a result of the new Banking Act. Starting today, the Bank of England, the FSA (Financial Services Authority) and the Treasury will have more powers to intervene and a
ct upon ailing institutions.
The new Bill ensures that customers can withdraw their savings out of a collapsed bank or a building society. It also allows the regulators to take a final call on selling or nationalising the banking firms in question. Before the law came into effect, savers were concerned about their cash in failed banks and took several weeks to access their money.
However, the legislation also has a controversial clause that allows the Bank of England to keep confidential, the details of support given to stricken banks. This secrecy is intended “to help maintain financial stability”.
The act was finally enforced on Saturday (21 February) following the nationalisation and subsequent failure of Northern Rock 18 months ago. It makes permanent the temporary solution introduced by regulators in the wake of the banking crisis that hit the UK since the demise of Northern Rock.
The new act is thought to be the “biggest shake-up” of the banking industry in the last 10 years and is expected to restore the lost confidence in the financial sector.
