Government to act over failing money firms

The Government will give its regulators new powers to wind down failing investment firms and clearing houses to avoid wreaking havoc in the wider market, saying the timing of similar European Union rules was too uncertain for it to wait.

The Government already has powers to force a deposit-taking bank to be wound down in an orderly way and without needing taxpayer help. The Financial Services Minister Mark Hoban said yesterday the Government wants similar powers over parts of the non-banking financial system.

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Sectors being looked at include insurers, investment firms, clearing houses and payments systems such as those provided by banks for credit and debit transfers. The Government published a consultation paper ahead of legislative proposals. “This consultation underlines the Government’s commitment to maintaining the UK’s position as a pre-eminent global financial centre, while also ensuring that the financial services sector is able to provide essential services to the wider economy without posing a risk to financial stability,” Mr Hoban said.

The EU is scrutinising a law for a resolution regime covering investment firms and banks but the UK government “intends to prepare to legislate domestically on a more accelerated timetable”.

There will also be a full resolution regime for UK incorporated parent firms of systemic investment firms and deposit-taking institutions. Britain only has a special administration regime for investment firms and the UK arm of United States broker MF Global was the first firm to be subject to this regime.