Financial sector resolution: broadening the regime

The government asked the Independent Commission on Banking to recommend ways to strengthen the resilience of the banking system and promote competition. In June this year the government published a white paper setting out how it would implement those recommendations.  

But banks are only part of the financial system. Other types of financial institution can also pose a risk to financial stability, if there is no way for them to fail safely. And the disorderly failure of ‘financial market infrastructures’ – networks that connect market participants to each other – could also severely disrupt both financial markets and the normal functioning of the wider economy. 

The government has therefore consulted industry on proposals to ensure that if parts of the financial system other than banks run into trouble, they can fail in a way that does not threaten financial stability, without requiring taxpayer support. The consultation focused on investment firms and financial holding companies, ‘central counterparties’ that place themselves in between two parties to certain financial transactions, other financial market infrastructures (such as payments systems), and insurers. 

Next steps

The government has since set out a proposal for payment and settlement systems to address some of the issues raised in this consultation.

Special resolution regime powers over investment firms, clearing houses and group companies

The government has published an update on

Read the related impact assessment on loss allocation rules for central counterparties.