Reducing the likelihood of a bank failing

21.   Chapter 3 looks at the existing UK regulatory framework and makes proposals that are more substantial.  The BSA supports these proposals in principle, subject to certain qualifications -

• extra requirements regarding information to the FSA, provided –
  • the Authorities fully recognise that firms already have onerous obligations in this area and no excessive new obligations are introduced in respect of quantity of information, turnaround times etc
  • there is a full cost-benefit assessment in relation to any extra requirements, and
  • there is much more transparency from the FSA about why existing, as well as any new, information is required, and greater feedback on how the information is processed and used.  (As things stand, we understand from our members that firms provide a great deal of data to the FSA, but are unclear as to why the FSA finds it necessary to collect so much information.)

We note that the FSA plans to consult and the BSA will consider, and respond to, the proposals.

• better payments systems oversight - but only if limited to what is strictly necessary
• limited delay in disclosure of emergency liquidity assistance
• new arrangements regarding Bank of England immunity and security - provided drawn only as widely as is absolutely necessary
• modest changes, in respect of building societies, concerning access to liquidity - Bank of England funds, and the power to grant floating charges in favour of the Bank of England - this would put societies on a par with banks in the highly unlikely event of needing help.  (We note that the Building Societies (Financial Assistance) Order 2008 has been laid before Parliament and, if approved, would allow building societies to obtain relevant financial assistance and create floating charges in favour of the Bank.)

However, unforeseen consequences must be guarded against.  For example, we understand that some societies' contractual documents in respect of wholesale borrowing prevent a society from issuing a floating charge.  Such matters need to be addressed.