1. Alex Kuczynski, Director of Corporate Affairs Financial Services Compensation Scheme, UK Role of Deposit Insurance in Bank Resolution Framework – Lessons from the Financial Crisis November 13-16, 2011 JODHPUR, INDIA

2. LESSONS FROM FINANCIAL CRISIS FOR BANK RESOLUTION – US AND EUROPEAN EXPERIENCE UK – The ‘mid Atlantic’ view First to act/react Northern Rock, September 2007

3. THE RUN ON NORTHERN ROCK A mid sized, UK bank NOT global, interconnected or a clearing bank August 2007 – “credit crunch” September 2007– emergency liquidity – bank run – Government guarantee all deposits

4. THE RESPONSE TO NORTHERN ROCK Corporate insolvency inadequate Limited regulatory tools Potentially systemic consequences Limited and complex deposit insurance - coinsurance (100% x £2,000, 90% x £33,000) - eligibility - set off Banking (Special Provisions) Act 2008 - nationalisation

5. BANKING ACT 2009 (1) Special Resolution Regime Bank of England as resolution authority Stabilisation powers - property transfer - bridge bank - temporary public ownership Administrative function

6. BANKING ACT 2009 (2) SRR objectives - protect and enhance the stability of the financial systems of the UK - protect and enhance public confidence in the stability of the banking systems of the UK - protect depositors - protect public funds - avoid interfering with property rights in contravention of a Convention right (within the meaning of the Human Rights Act 1998)

7. BANKING ACT 2009 (3) Dunfermline Building Society (March 2009) - Bridge Bank - Property transfer - Administration FSCS contribution to costs of resolution - the “net” cost to FSCS of an insolvency counterfactual Southsea Mortgage and Investment Company Limited (July 2011) - Bank insolvency/liquidation - Depositor payout

8. FSCS – DEPOSITOR PAYOUT Deposit Guarantee Scheme Directive – 20 working days? FSCS target for most depositors – 7 days No application form Simplified eligibility No set off Single customer view file -aggregate deposits per customer per bank

9. LESSONS FOR FSCS Contingency planning and collaboration of authorities Funding - ex post scheme - National Loans Fund Consumer awareness - TV campaign - Industry disclosure - PR/media

10. NEXT STEPS Recovery and Resolution Plans - FSA consultation (July 2011) - Pilot RRPs - EC Technical Framework (January 2011) - FSB consultation (July 2011) DGS funding - ex post/ex ante - risk based levies Faster payout - electronic - larger banks

11. REGULATORY DEVELOPMENTS Regulatory Reform - Prudential Regulatory Authority - Financial Conduct Authority - 2013 EC/DGS - and Investor Compensation Scheme Directive - and Insurance Guarantee Scheme Directive ICB/Vickers Report - ring fence retail banks - depositor preference - 2019!