Written evidence to be reported to the House
Banking Bill
4:40 pm
Angela Knight: If a clause of this type must remain, it must be absolutely clear that the compensation scheme kicks in on the SRR only when all other avenues for paying for the resolution have been exhausted. Then, if it must kick in, we must define those costs quite narrowly, because otherwise, in effect, we would be leaving an open door for industry to pay for almost everything regarding a failure, whereas the first responsibility for preventing the failure of an institution is with its management. One must work one’s way down a series of questions: “Who does what?”, “Whose are the responsibilities?”, “Who pays what?” and so on. If there must be a last resort, there must be a last resort, although we would argue that that is not right. But if it is necessary, it must happen only if the assets of that institution cannot pay for the costs of the SRR. If an ordinary company is wound up, the liquidator gets paid. It seems to us, therefore, that we have rather moved away from some of the accepted common principles in this area.