LONDON - The UK Treasury has outlined proposed reforms to provisions for resolving the future failure of an investment bank.
Financial services secretary Paul Myners published the government paper, which is a response to the sudden US bankruptcy filing of Lehman Brothers in September 2008.
The investment-banking firm, although based in New York, caused the UK and other host supervisors enormous problems when its treasury cut off central funds to foreign businesses and subsidiaries.
"The UK's insolvency regime is an important aspect of its attractiveness as an international centre for investment banking," said Myners. "The government is committed to maintaining these advantages and strengthening the existing solvency regime."
The report outlines the Treasury's thinking on relevant changes to market practice, regulation and insolvency law, in addition to treatment of investment banking clients after default, the future of their assets, and the treatment of their open or unreconciled trading positions.
It also examines how to make the insolvency process more effective, and to limit the damage that a failing investment bank can cause.
The government says the reforms are part of a package aimed at renewing the financial services sector, to be expanded on in a forthcoming paper on financial regulation.
The report can be read here.
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