The UK’s bank regulatory and insolvency law structures were unprepared for the global financial crisis. As a result, the UK government’s response to intense bank stress in the immediate aftermath of the crunch led to a number of somewhat unsatisfactory ad hoc solutions ranging from nationalisations to encouraging otherwise healthy institutions to take over weaker banks. Generally speaking, there was a criticism, fairly made perhaps, that profits were privatised and losses had been socialised. In common with other European nations, the UK has striven hard to improve its insolvency laws so that a bank requiring a restructuring is able to contemplate a ‘bail in’ (a debt haircut in old parlance) of its subordinated bondholders to contribute to the restructuring. In recent days the Co-operative Bank (the “Bank”) has announced that it requires additional capital to satisfy regulatory requirements. The Bank needs additional aggregate Common Equity Tier 1 capital of £1.5 billion by 2015, comprising:
- £1 billion to be contributed in 2013; and
- £500 million to be contributed in 2014.
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