The Department of Finance is to publish the Bank Resolution Bill on Monday. The legislation will give the Financial Regulator new powers to deal with financially distressed banks. Publication of the Bill is part of the EU-IMF agreement.
Special resolution regimes give the authorities legal powers to take swift and decisive action to deal with failing banks. It was the absence of such powers that saw may countries - including Ireland - struggle to keep up with events when the credit crunch hit and banks started to fail.
On Monday the Department of Finance will publish a Bank Resolution Bill that will propose giving the Financial Regulator new powers, likely to include the power to split banks into good and bad parts, and transfer parts of banks to other institutions.
It is likely to provide for the appointment of special managers to run banks on behalf of the regulator, and to have so-called bridge banks - effectively subsidiaries of the Central Bank, where parts of banks can be held pending their sale to other institutions.
The new resolution scheme will be the long term replacement for the Credit Stabilisation Act, which was used yesterday to transfer the deposits of Anglo Irish and Irish Nationwide.
Britain introduced its resolution scheme in 2009, with the intention of protecting the stability of the bank system, and the funds of depositors and taxpayers. It also provides the legal right to impose losses - or haircuts - on bank creditors.
