The Bank Insolvency (Scotland) Rules 2009

EXPLANATORY NOTE

(This note is not part of the Rules)

These Rules set out the procedure for the bank insolvency process under Part 2 of the Banking Act 2009.

The main features of bank insolvency are as follows. In the event of a deposit-taking bank becoming insolvent, it enables those depositors who are eligible for compensation under the Financial Services Compensation Scheme (“the FSCS”) to either–

(a) receive compensation for their lost deposits as soon as possible after the bank goes into bank insolvency; or

(b) have their account transferred to a different bank.

This is the first objective of the bank insolvency process.

The procedure can only be initiated by the Bank of England, the Financial Services Authority (“the FSA”) or the Secretary of State by application to the court. The court then makes a bank insolvency order, appointing a bank liquidator. In the initial stages, the bank liquidator is accountable to a liquidation committee formed of the FSA, the Bank of England and the FSCS.

Once the bank liquidator considers that the first objective is achieved, the liquidation committee will pass a resolution to that effect and the bank insolvency will move to the second objective which is to wind up the affairs of the bank so as to achieve the best results for the creditors as a whole.

The Rules are based on the Insolvency (Scotland) Rules 1986 and certain provisions of the 1986 Rules are applied to these Rules, subject to a number of general and specific modifications.

Part 2 of these Rules sets out the application process for a bank insolvency order.

Part 3 sets out the procedure for appointing a provisional bank liquidator.

Part 4 sets out provisions relating to the statement of affairs.

Part 5 makes provision in relation to creditors and contributories.

Part 6 sets out the procedure concerning meetings of contributories.

Part 7 sets out procedure concerning claims.

Part 8 sets out provisions relating to the liquidator.

Part 9 sets out provisions concerning the liquidation committee.

Part 10 set out provisions relating to the distribution of bank assets.

Parts 11 to 13 set out miscellaneous procedures.

Part 14 sets out provisions relating to meetings.

Part 15 contains general provisions.