Resources for Sarbanes-Oxley (SOX)

UK banks in danger of getting Sarbanes-Oxley treatment

business.timesonline.co.uk

The continuing UK consultation on the post-Northern Rock proposals on dealing with failing banks is set to be hard-fought. Northern Rock remains firmly on the minds of politicians. There is a sense that something must be done, but the proposals, as they stand, risk being a UK Sarbanes-Oxley – hurried, kneejerk legislation that does far more harm than good. The threat to the UK banking industry is clear and present.

At the core of the proposals is a set of powers for the tripartite authorities – the Financial Services Authority, the Bank of England and the Treasury – to take wide-ranging powers to resolve a failing bank. This is the special resolution regime (SRR). As well as nationalisation (à la Northern Rock), the authorities want powers to force a sale of all or part of a failing bank to the private sector or to a bridge bank (a state-backed bank).

To keep investors and creditors out of the way of their solution, the authorities also seek wide-ranging powers to disenfranchise stakeholders in the failing bank. These include nullifying or varying the terms of securities and overriding contractual rights, subject to certain vague, undrafted nonstatutory “safeguards”.

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