On 13 March 2014, HM Treasury published a consultation document on the implementation of bail-in pursuant to the Financial Services (Banking Reform) Act 2013.
The consultation is open for comment until 7 May 2013 and seeks comments on three draft statutory instruments:
- The Building Societies (Bail-in) Order: which facilitates the exercise of bail-in in relation to building societies, primarily through a process of demutualisation and alteration of the credit hierarchy;
- The Banking Act 2009 (Restriction of Special Bail-in Provision, etc.) Order: which establishes certain safeguards with respect to set-off and netting arrangements; and
- The Banking Act 2009 (Mandatory Compensation Arrangements Following Bail-in) Regulations: designed to protect the principle of “no shareholder or creditor worse off than in insolvency”.
The UK government is committed to fully transposing the EU Bank Recovery and Resolution Directive Directive by 1 January 2015 and does not intend to take advantage of the option of delaying the application of bail-in until 2016.