New powers will allow the Bank of England to intervene in failing financial institutions
LONDON - The UK's Banking Act, which includes new powers for the Bank of England to intervene to support failing financial institutions and investors, comes into force today.
The Act was drafted following the collapse of Northern Rock to formalise the temporary laws that allowed the central bank to move in and take interim control of the troubled financial institution. The Financial Services Authority can trigger the Special Resolution Regime even before a bank becomes insolvent, and state support can be kept hidden from the markets to maintain financial stability and confidence. The Act also enshrines a depositor's right to receive compensation within a week.
Critics are worried the Act will shroud the banking industry in secrecy at a time when the financial crisis has shown the need for transparency.
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