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 Bank of Scotland • Lloyds Banking Group • Northern Rock • Bradford & Bingley Banks subject to other intervention • Heritable • Kaupthing, Singer & Friedlander (KS&F) • Landsbanki ‘Icesave’ • London Scottish Bank • Dunfermline Building Society 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 • Bank of England: – 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) • Asset Protection Agency – An Executive Agency 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.