The government have published the Credit Institutions (Stabilisation) Bill which is scheduled to be debated on Wednesday and enacted by the end of the week. It appears to be a sort of mini-special resolution regime bill. The Minister for Finance’s statement on the bill notes that “it is the first important step in putting in place an extensive Special Resolution Regime (SRR) that will provide for a comprehensive framework to facilitate the orderly management and resolution of distressed credit institutions.”
For our legion of subbie-watchers, the relevant sections are sections 28 to 32. They appear to empower the Minister for Finance to make debt-for-equity swaps to subdebt holders and to have various rights of these debtholders to be set aside if the state has provided financial support required to allow continued viability of a bank. As speculated here recently, the bill appears to allow the Minister for factor in past equity investments when considering whether to introduce a “proposed subordinated liabilities order” which would allow such powers to be introduced.
For me, this raises two questions: First, what is there in this bill that couldn’t have been introduced two years ago? Second, if the bill gives the Minister the powers to make certain rights of subdebt holders cease to be exercisable, then is there a legal impediment to the Minister having the power to deal with other creditors of a bank.