Banking
The breathtaking provisions of the Banking Reform Bill may barely be relevant in the wider context of the banking crisis and risk undermining legal certainty for those dealing with banks in the future.
Richard Stones, financial services and market law and regulation consultant at Lovells, says that the intention of the Banking Bill was to create a virtuous circle, helping depositors gain confidence from the existence of powers. “Since then bigger problems have emerged,” he says. “The emphasis is now on intervention at a systemic level by recapitalising banks and guaranteeing their borrowings. In this context the Bill is barely relevant.” Stones believes that in the current crisis it is easy to overlook the extraordinary powers of the Bill: “At the stroke of a pen the authorities can change ownership of assets, rewrite contracts, override restrictions on transfers and amend legislation. There are no entrenched safeguards to prevent the authorities from ‘cherrypicking’ the good assets, leaving unfavoured creditors with the bad.”
