New Banking Act comes into effect
The UK's new Banking Act, which gives greater powers of intervention to
the Bank of England, is coming into force.
The act enables the Bank to intervene more quickly to help troubled
banks and protect investors.
The Bank will be able to give hidden support to stricken banks, with the
aim of maintaining financial stability.
However, critics of the act say it throws a cloak of secrecy around the
banking world, which could be detrimental for consumers.
The act allows certain decisions to be exempt from disclosure under
Freedom of Information laws.
If a bank collapses, the act allows for savers to receive compensation
within a week.
At present, payouts for savers with failed banks can take weeks, leaving
many customers concerned about access to money in the interim.
Transferring customers from a failed bank to another should also now be
easier.
One of the Bank of England's formal objectives under the act is to
maintain stability.
Peter Thal-Larsen, banking editor of the Financial Times, told the BBC's
Working Lunch programme the act will basically allow financial
authorities to take early action to move savers' deposits from a failing
bank before tackling other problems.
"The idea is that, if there is a bank that gets into trouble, to
insulate it and make the wider impact of that less, but I don't think
they can actually stop banks from getting into trouble in the future,"
he said.
Stigma
Colin Melvin, chief executive of Hermes Equity Ownership Services, said:
"We welcome the new Banking Act and the enhancement it will bring to the
regulatory framework, including the strengthening of the Bank of
England.
"However, we need to do more to stimulate growth and restore confidence
and trust in the financial sector."
The new laws make permanent temporary laws introduced in the wake of the
collapse of Northern Rock, which was nationalised after confidence in it
disappeared.
BBC business correspondent Joe Lynam said that until recently it was
unusual for Britain's banks to apply for emergency funding from the Bank
of England due to the stigma attached and the ensuing drop in
confidence.
Northern Rock's very public appeal for funds accelerated its demise 18
months ago.
The new legislation is unlikely to prevent banks collapsing but it arms
the financial authorities with the ability to act behind the scenes in
the overall interest of the economy, our correspondent adds.
Story from BBC NEWS:
http://news.
Published: 2009/02/21 02:53:11 GMT
Saturday, 21 February 2009
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