Investment Bank Special Administration Regulations 2011

(Limited Text - Ministerial Extracts only)

Tuesday 14th January 2014 Written Statements

[The Financial Secretary to the Treasury (Sajid Javid)]

Today, HM Treasury is laying before Parliament the final part of Mr Peter Bloxham’s independent review of the Investment Bank Special Administration Regulations 2011. This report follows on from the interim report laid before Parliament on 23 April 2013.

The special administration regime came into effect in February 2011, following provisions made under the Banking Act 2009 to offer a modified insolvency procedure to investment firms. In accordance with section 236 of the Act, the Treasury were required to review the effect of the regulations within two years of the date that these powers came into force. Mr Peter Bloxham was appointed on 28 November 2012, and reported to the Treasury on 7 February to begin the review.

The Act required a review of the Investment Bank special administration regulations to consider if the regulations are achieving their specified objectives. These specified objectives are:

identifying, protecting, and facilitating the return of client assets;

protecting creditors’ rights;

ensuring certainty for investment banks, creditors, clients, liquidators and administrators;

minimising the disruption of business and markets; and

maximising the efficiency and effectiveness of the financial services industry in the United Kingdom.

Mr Bloxham’s terms of reference set out a two-stage process. The first stage, denoted by his interim report, asked him to address each of the objectives above in turn to determine whether they had been achieved. The second stage asked Peter Bloxham to consider further possible changes to the special administration regime that may improve the operation of the regime, and consider wider changes that may make the regime more robust. The final report being laid before Parliament today represents the completion of the second stage.

After completion of both stages of the terms of reference, Mr Bloxham concludes that the special administration regime stands as a useful provision under the Act and should therefore be kept, subject to change. Mr Bloxham makes extensive and considered recommendations for possible improvements to the regime, which are summarised within the final report.

I am personally very grateful to Mr Bloxham for all his work on this review over the last year, and to those who consulted with him.

The Treasury agrees with Mr Bloxham’s recommendation to retain the investment firm special administration regime. The Treasury also recognises that amendments can be made to the regime to allow it better to fulfil its specific objectives. The Treasury will now consider the rest of Mr Bloxham’s recommendations in full and take suitable steps to enhance the regime in due course.