Alistair Darling asks investment banks to plan for doomsday scenario
In a bizarre exercise it is believed Alistair Darling has requested that all UK investment companies should be made to plan for their future demise. This is on the back of the Lehman Bros collapse which caused significant problems in a number of investment markets with over 1.5 million positions left open. The idea is that UK banks will be asked to draw up plans in the event of their demise which will then be picked up by administrators and regulators as a way to prevent market meltdown.
It will be interesting to see what form and basis these contingency plans take and ultimately whether they are worth the paper they're written on. While it would be wrong to suggest that the ongoing recession has not severely impacted the UK investment and financial sector this is literally a "one-off" the likes of we may never see again. Surely it should be the duty of UK regulators to put in place contingency plans and discuss rescue packages with institutions which may fall foul of market conditions or financial difficulties?
If the regulators are asking banks to look after themselves then what exactly will the regulators be doing?
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