London Banks Set To Write Living Wills
By: Ainsley Brown
Banks in London, England are set to roll out their living wills by the end of the year.
The living wills are a direct consequence of the financial – bank – meltdown experienced in the UK. The pilot scheme is set for a trial run in London before being expanded to the rest of the country will see banks set out plans to have themselves wound-down if they fail. The Financial Services Authority (FSA), which strongly backs the idea of living wills, believes this is system would provide a necessary backstop in the UK financial system in case a bank fails.
These living wills are especially important for banks that have been deemed too big to fail. The FSA believes that, “[s]ystemically important banks should be required to produce recovery and resolution plans which set out how operations would be resolved in an orderly fashion.”
In creating a living wills banks will be forced to meet an adequacy test. Those banks that are unwilling or unable to create to create acceptable plans, the FSA has indicated that it will intervene and restructure certain parts of a bank.
This idea of a living will is to be contrasted with the thoughts of the Bank of England, which wanted banks that failed to be split up to ensure that they are not too big to fail. The contrasting approaches of the FSA and the Bank of England have only increased the tensions between the two regulators, according to the Times.
