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Session 2: the UK case

5th DICJ Roundtable 3/4 March 2010 Introduction • Explanation of factual background to UK authorities’ intervention in banking sector • Overview of principal players involved in working with the (part-)nationalised banks. Banks with Government shareholdings

• Royal

• Bradford & Bingley Banks subject to other intervention

• Heritable

• Kaupthing, Singer & Friedlander (KS&F)

‘Icesave’

• London Scottish Bank

• Dunfermline The tools used (1)

• Recapitalisation • Asset Protection Scheme (APS) • Credit Guarantee Scheme (CGS) • Asset Backed Securities Guarantee Scheme • Special Liquidity Scheme (SLS) • Asset Purchase Facility (APF) The tools used (2)

• Special Resolution Regime (SRR): – Private sector purchaser tool – Bridge bank tool – Bank Insolvency Procedure – Temporary Public Ownership tool The institutional structure

• FSA: – Ongoing supervision – „Triggering‟ SRR

: – Operating the SRR – Special Liquidity Scheme – Asset Purchase Facility The institutional structure (1)

• UK Financial Investments (UKFI) – Wholly owned by the Government – Manages Government shareholdings in banks – “…to protect and create value for the taxpayer as shareholder with due regard to the maintenance of financial stability and to act in a way that promotes competition” The institutional structure (2)

– An of the Treasury – Operates the Asset Protection Scheme on behalf of the Treasury. – Monitoring (and intervening) in the management of assets in the scheme – Reviewing / approving significant decisions in relation to those assets – Verifying the losses on covered assets in order for the APS to make appropriate payments – Forecasting future losses under the APS to enable the Treasury to predict any fiscal impact The institutional structure (3)

• European Commission – State Aid approval of restructurings: – Northern Rock: two separate companies (back book of mortgages managed separately) – Lloyds: divestments – RBS: divestments and APS – B&B: orderly wind down of state-owned business