Wednesday, April 17, 2019

Proposals for Ring-Fencing and Loss Absorbency Essay - 44

Proposals for Ring-Fencing and Loss Absorbency - Essay ExampleThe Commission was given up to the curiosity of September 2015, to report their findings to the Cabinet Committee on Banking Reform. The white paper discussed many elements such as ring-fencing, high net worth individuals, prohibited services, SMEs for the purposes of ring-fencing, financial product restrictions, geographical restrictions, exposure to financial institutions, intra-group relationships, supplemental activities, legal and operational links, governance, economic links, scope, PLAC, PLAC composition, leverage ratio, loss absorbency, ring-fence buffer, bail-in, the bail-in process and depositor preference (ICB 2011, p. 19). Keeping in declination with two of the stated topics above, this paper will describe the proposals for (i) ring-fencing and (ii) loss absorbency put forward by the 2011 delineate of the Independent Commission on Banking (Vickers Report). The paper will discuss whether these measures likel y to succeed in ensuring financial stability and how are these proposals cosmos enacted into UK law.Ring-fencing or ringfencing is a situation in which a figure of a firms assets or profits are financially split without essentially being considered as a separate entity (Freixas & Mayer 2011, p. 397). This might be forRing-fencing in asset protection is used by separating crabbed liabilities and assets into different organizations of a corporate group. At times, it is utilized to mitigate liquidation risk or to enhance corporate credit rating (Haldane & Alessandri 2009, p. 12). In the UK, ring fence profits stem from gains and income from anele rights oil or extraction activities in the UK plus its continental shelf and experience a higher(prenominal) rate from corporation tax (ICB 2011, p. 35). In the case of bonds or loans, ringfencing ensures that an investor has a link to a particular asset they possess.

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