On October 17, HM Treasury published a summary of responses in relation to its August consultation on broadening the financial sector resolution regime to systemically important non-banks. Indicative draft legislation was also published alongside the consultation, to provide a resolution regime for entities such as investment firms, central counterparties and parent undertakings.
The UK government is considering developing the UK’s domestic regime in this area ahead of European legislation being introduced. Following the consultation, it has amended the draft legislation and is making amendments to the Financial Services Bill 2012 – 2013. The core changes include:
o narrowing the definition of investment firms through secondary legislation;
o extending stabilization powers to group companies to aid the resolution of a failing entity (subject to certain conditions);
o adding an objective for intervention in a failing central counterparty in order to maintain critical services; and
o excluding the initial proposal to make the members of a central counterparty liable for losses above and beyond provisions already in place (although such loss allocation rules may become part of the operational requirements that a central counterparty must have in order to operate as a clearing house in the UK).