Banking Safety Net
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The Bank of England has put together a safety net for any potential banking failure. Although the UK's central bank is a lender of last resort, it is thought better to have a level of support from wider banking industry. The European Central Bank and the Basel II Committee have been involved in the process. Basel II is the new accord on regulatory capital that must be held by banks Fourteen of the largest UK banks have been asked to set aside between £40m and £400m. The banks will keep the money on their balance sheet as an asset. A net is required, even though a failure of a major clearing bank has never occurred. However the risk of billions of transactions being halted and damaging Londons reputation, is seen as too high. Each day up to £16bn passes through the system. The Association of Payment Clearing Services has been asked to organise the safety net. All 14 of the banks are represented by the Association. Between them they have agreed how much each is to contribute. Legal documentation is expected shortly.
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