ABSTRACT
The approach to the prevention and resolution of banking crises in the UK comprises four elements. First is the system of regulation introduced by Financial Services and Markets Act (FSMA) which gives the Financial Services Authority (FSA) responsibility for regulation and powers to make and enforce its detailed set of rules. Second is the role of the central bank, the Bank of England, in safeguarding the stability of the financial system as a whole. The third element is the provision of a financial compensation scheme. The fourth element is the use of insolvency laws. By addressing these four elements, the legal system is able to reduce the risk of a banking crisis and provide the stability that is so important to an efficient financial system and a successful economy. It is recognised that rules on capital adequacy are only one part of the structure for the prevention and resolution of banking crises.
