UK proposes tighter insolvency rules post-Lehman

LONDON (Reuters) - Britain will propose changes to insolvency rules on Monday to give greater protection to investors and markets in the event of the failure of an investment bank, a source said on Sunday.

Britain has been looking to improve its insolvency regime since the collapse of Lehman Brothers, with a focus on allowing clients to secure an early return of assets and letting counterparties know the status of outstanding trades.

A government source said the proposals would include forcing banks to have contingency plans that are reviewed by the Financial Services Authority and placing continuity of service obligations on administrators in any insolvency proceedings.

The proposals are based on consultations with banking and legal experts, the FSA and the Bank of England.

The rules are also expected to reassure that factors in the insolvency regime, which give Britain a competitive advantage, will not be affected.

(Reporting by Matt Falloon, editing by Leslie Gevirtz)