Commentary on Sections Exercise of powers: general Section 8: Specific conditions: private sector purchaser and bridge bank
35.This section sets out alternative conditions one of which must be satisfied before the Bank of England can exercise stabilisation powers so as to effect a transfer of a bank or banking business to a private sector purchaser or to a bridge bank. It provides that the Bank of England can exercise a stabilisation power only if it is satisfied that the exercise of the power is necessary having regard to certain public interest conditions, set out in subsection (2), namely the stability of the UK’s financial systems, the maintenance of public confidence in the stability of the UK’s banking systems and the protection of depositors. Subsection (3) states that before exercising such powers the Bank must consult both the Treasury and the FSA.
36.Subsection (4) provides for the position where the Treasury has provided financial assistance to a bank in order to resolve or reduce a serious threat to the stability of the UK’s financial systems. In this situation, as set out in subsection (5), the Bank of England may only exercise a stabilisation power following a recommendation from the Treasury on the basis of it being necessary to protect the public interest. The Bank then retains the discretion to consider whether the exercise of such a power is an appropriate way to provide that protection. Subsection (6) provides that these conditions are in addition to the conditions in section 7.