Legal background
The current legal framework which sets out the functions and powers of the FSCS is the Financial Services and Markets Act 2000 (FSMA 2000)1 and the main legislation relevant to the powers of the Bank to resolve banks is the Banking Act 2009.2
	Part 15 of FSMA 2000 makes provision for the FSCS to operate a compensation scheme for claimants in respect of regulated activities and, by virtue of PRA rules which sit underneath it, a scheme of depositor protection for eligible depositors who suffer loss as a consequence of an authorised person’s inability to meet its liabilities. It gives a power to the manager of the FSCS to impose levies on authorised persons for the purpose of both covering the compensation but also the FSCS’s expenses.
	Part 1 of the Banking Act 2009 establishes the special resolution regime and its objectives. The special resolution regime contains options for stabilisation (transfer to a private sector purchaser, transfer to a bridge bank, transfer to an asset management vehicle, bail-in by the Bank and transfer to temporary public ownership) and the powers required to exercise a stabilisation option (including to effect the transfer of shares and other securities or property, rights and liabilities, by operation of law). There is a duty upon the Bank to write down or convert capital instruments before it exercises its powers to carry out a stabilisation option. Part 1 also contains arrangements for compensation that may be available in respect of the transfer of shares or other property or for third parties affected by a transfer.