Credit Institutions (Stabilisation) Act 2010

PART 1 Preliminary

1. Short title and commencement.

1.— (1) This Act may be cited as the Credit Institutions (Stabilisation) Act 2010.

(2) This Act comes into operation on such day or days as the Minister may appoint by order or orders either generally or with reference to a particular purpose or provision and different days may be so appointed for different purposes or different provisions.

(3) An order under subsection (2) may, in respect of the amendments of Acts and Regulations set out in Part 8 and the Schedules, appoint different days for the commencement of amendments of different Acts or Regulations or different provisions of them.

2. Interpretation.

2.— (1) In this Act—

“Act of 2008” means the Credit Institutions (Financial Support) Act 2008;

“articles of association” includes—

F1[(a) in the case of a credit institution that is established by charter, its bye-laws, and

(b) in the case of a credit institution that is a building society, its rules;]

“Bank” means the Central Bank of Ireland;

“charge” includes—

(a) a mortgage, judgment mortgage, charge, lien, pledge, hypothecation or other security interest or encumbrance or collateral in or over any property,

(b) an assignment by way of security, and

(c) an undertaking or agreement by any person (including a solicitor) to give or create a security interest in property;

“CIWUD Directive” means Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 ^1;

“Court” means the High Court;

“credit institution” means a person authorised in the State to accept deposits or other repayable funds from the public and to grant credit on its own account;

“debt security” includes a note, bill, bond or similar financial instrument;

“direction order” has the meaning given by section 9;

“enactment” means—

(a) an Act of the Oireachtas,

(b) a statute that was in force in Saorstát Éireann immediately before the date of the coming into operation of the Constitution and that continues in force by virtue of Article 50 of the Constitution, or

(c) an instrument made under—

(i) an Act of the Oireachtas, or

(ii) a statute referred to in paragraph (b);

“financial support” has the same meaning as in the Act of 2008;

F2["functions" includes powers, duties, rights and entitlements, and references to the performance of a function include reference to—

(a) in relation to a power, the exercise of the power,

(b) in relation to a duty, the performance of the duty, and

(c) in relation to a right or entitlement, the exercise of the right or entitlement;]

“Governor” means the Governor of the Bank;

“holding company” means a holding company (within the meaning of section 155 of the Companies Act 1963) or a parent undertaking (within the meaning given by the European Communities (Companies: Group Accounts) Regulations 1992 (S.I. No. 201 of 1992));

“interest”, in relation to an asset or liability, means—

(a) the whole or any part or fraction of the asset or liability,

(b) any other estate in, right or title to, or interest in the asset or liability (whether legal or beneficial), or

(c) any interest, other than a legal or beneficial interest, in the asset or liability;

“loan instrument” means a document that creates or acknowledges a debt or liability (other than a deposit account);

“memorandum of association” includes, in the case of a credit institution that is established by charter, its charter;

“Minister” means the Minister for Finance;

“regulated market” has the same meaning as in the European Communities (Markets in Financial Instruments) Regulations 2007 (S.I. No. 60 of 2007);

“Regulations of 2004” means the European Communities (Reorganisation and Winding-Up of Credit Institutions) Regulations 2004 (S.I. No. 198 of 2004);

“relevant institution” means (subject to section 55)—

(a) a body—

(i) that has its registered office in the State,

(ii) that is, or was on the date on which this Act came into operation, a bank licensed under section 9 of the Central Bank Act 1971, and

(iii) to which financial support F3[, other than a financial incentive under section 38, or undersection 46of theCentral Bank and Credit Institutions (Resolution) Act 2011,No. — of 2011),] has been given or is to be given by the Minister,

(b) a body that has its chief office in the State and is, or was on the date on which this Act came into operation, a building society within the meaning of the Building Societies Act 1989,

(c) F4[…]

(d) a person or body prescribed under section 3,

(e) a subsidiary of a person or body referred to in any of paragraphs (a) to (d), and

(f) a holding company of a person or body referred to in any of paragraphs (a) to (d);

“security” includes—

(a) a charge,

(b) a mortgage,

(c) a guarantee, indemnity or surety,

(d) a right of set-off,

(e) a debenture,

(f) a bill of exchange,

(g) a promissory note,

(h) collateral,

(i) any other means of securing—

(i) the payment of a debt, or

(ii) the discharge or performance of an obligation or liability,

and

(j) any other agreement or arrangement having a similar effect;

“share” includes a share of any type or class including ordinary shares, preference shares, deferred shares, share warrants and stock and in the case of a building society includes investment shares, special investment shares and deferred shares but does not include share accounts;

“special management order” has the meaning given by section 14;

“special manager” means any person appointed as such by the Court or the Minister;

“subordinated creditor” means a creditor of a relevant institution, to any extent that the creditor holds a subordinated liability;

“subordinated liability” means, in respect of a relevant institution, an obligation or a liability in the form of a debt security or loan instrument (or any other document howsoever described or constituted) which is expressed to be, or otherwise ranks, subordinate in right of payment to the claims of depositors and unsubordinated creditors of the relevant institution, whether on a winding up or otherwise, and includes a guarantee;

“subsidiary” means a subsidiary (within the meaning given by section 155 of the Companies Act 1963) or a subsidiary undertaking (within the meaning given by the European Communities (Companies: Group Accounts) Regulations 1992 (S.I. No. 201 of 1992));

“subordinated liabilities order” has the meaning given by section 29;

“transfer order” has the meaning given by section 34.

(2) A reference in this Act to an agreement includes—

(a) any instrument (however described) that creates an obligation, whether made in writing or under seal, and without limiting the generality of the foregoing includes an agreement, an arrangement, an undertaking, a scheme, a licence, a security or an obligation, and

(b) an oral agreement of any kind referred to in paragraph (a).

(3) In this Act—

(a) a reference to an asset includes an interest in an asset, and

(b) a reference to a liability includes an interest in a liability.

(4) A reference in this Act to disposing of an asset or liability includes selling or otherwise transferring, and creating a security or equitable interest in, the asset or liability. For the purposes of this subsection “transfer” includes—

(a) any form of legal or beneficial transfer, including a vesting by operation of law,

(b) a synthetic transfer,

(c) a risk transfer,

(d) a novation,

(e) an assignment,

(f) an assumption,

(g) sub-participation,

(h) sub-contracting, and

(i) any other form of transfer, acquisition, assumption or vesting recognised by law.

F5[(5) A reference in this Act to the preservation of the financial position of a relevant institution shall be taken to include the need for the relevant institution to comply with such one or more of the following as apply to it:

(a) an order made in relation to it under this Act;

(b) a requirement imposed on it undersection 50;

(c) the European Communities (Capital Adequacy of Credit Institutions) Regulations 2006 (S.I. No. 661 of 2006).]

3. Prescribed institutions.

3.— The Minister may make regulations to prescribe a person (including a body corporate that is incorporated after the coming into operation of this Act) for the purposes of paragraph (d) of the definition of “relevant institution” in section 2 (1) if—

(a) in the case of a body, it has its registered office, chief office or principal place of business in the State,

(b) in the case of an individual, his or her ordinary residence is in the State,

(c) all or any of a relevant institution’s assets or liabilities are transferred, after the coming into operation of this section, to the person under this Act, the Companies Acts, F6[theCentral Bank Act 1971or theBuilding Societies Act 1989], and

(d) the Minister is of the opinion that it is necessary or desirable for the purposes of this Act that the person be so prescribed.

4. Purposes of Act.

4.— The purposes of this Act are—

(a) to address the serious and continuing disruption to the economy and the financial system and the continuing serious threat to the stability of certain credit institutions in the State and the financial system generally,

(b) to implement the reorganisation of credit institutions in the State to achieve the financial stabilisation of those credit institutions and their restructuring (consistently with the state aid rules of the European Union) in the context of the National Recovery Plan 2011 - 2014 and the European Union/International Monetary Fund Programme of Financial Support for Ireland,

(c) to continue the process of reorganisation, preservation and restoration of the financial position of Anglo Irish Bank Corporation Limited begun with the Anglo Irish Bank Corporation Act 2009,

(d) to continue the process of preservation and restoration of the financial position of building societies through the issue of special investment shares under section 18(1A) of the Building Societies Act 1989,

(e) to protect the interests of depositors in credit institutions,

(f) to address the compelling need—

(i) to facilitate the availability of credit in the economy of the State,

(ii) to protect the State’s interest in respect of the guarantees given by the State under the Act of 2008 and to support the steps taken by the Government in that regard,

(iii) to protect the interests of taxpayers,

(iv) to restore confidence in the banking sector and to underpin Government support measures in relation to that sector, and

(v) to align the activities of the relevant institutions and the duties and responsibilities of their officers and employees with the public interest and the other purposes of this Act,

(g) to F7[preserve or restore] the financial position of a relevant institution, and

(h) to empower the Court to impose reorganisation measures through orders made in reliance on the CIWUD Directive.

5. Independence of Bank and Governor not affected.

5.— (1) Nothing in this Act prevents the performance by the Governor or the Bank of their functions in relation to any credit institution authorised or regulated in the State, or affects any obligation arising under the treaties governing the European Union or the European Communities (within the meaning given by section 1 of the European Communities Act 1972) or the ESCB Statute (within the meaning given by section 2 of the Central Bank Act 1942).

(2) The Minister may continue to consult with the Governor in the continuing performance of the Minister’s functions and powers under this Act.

5A. F8[Minister and Bank to have regard to European Union law.

5A.—In performing a function under this Act, the Minister and the Bank shall have regard to the laws of the European Union (including those governing state aid) and any relevant guidance issued by the Commission of the European Union.]

6. Relationship framework.

6.— The Minister may from time to time specify a relationship framework in writing to govern the relationship between the Minister and the Governor in relation to the exercise of the Minister’s powers under this Act.

PART 2 Direction orders

7. Proposed direction orders.

7.— (1) Subject to subsections (2) and (4), the Minister may make a proposed direction order proposing that a relevant institution be directed to take (within a specified period) or refrain from taking (during a specified period) F9[any action, or any series of actions that are together designed to achieve a specified objective,] including, in particular, and without limiting the generality of the foregoing, any one or more of the following:

(a) notwithstanding any statutory or contractual pre-emption rights, the listing rules of a regulated market or the rules of any other market on which the shares of the relevant institution may be traded from time to time, issuing shares to the Minister or to another person nominated by the Minister on terms and conditions that the Minister specifies in the proposed direction order at a consideration that the Minister sets;

(b) applying for the de-listing of the relevant institution’s shares, or the suspension of their listing, on a regulated market, or to change the listing of the relevant institution’s shares from a regulated market to another multi-lateral trading facility;

(c) increasing the authorised share capital (including by the creation of new classes of shares) of the relevant institution to permit it to issue shares to the Minister or to any other person nominated by the Minister;

(d) making a specified alteration to the relevant institution’s memorandum of association and articles of association (including, without prejudice to the generality of the foregoing, the alteration of the rights of shareholders or any class of shareholders);

(e) disposing, on specified terms and conditions, of a specified asset or liability or a specified part of the relevant institution’s undertaking.

(2) The Minister may make a proposed direction order only if the Minister, having consulted with the Governor, is of the opinion that making a direction order in the terms of the proposed direction order is necessary to secure the achievement of a purpose of this Act specified in the proposed direction order.

(3) If the Minister makes a proposed direction order in relation to a relevant institution and the intention of it or part of it is the preservation or restoration of the financial position of a credit institution, the Minister shall declare in the proposed direction order that the proposed direction order or part is made with that intention, in accordance with the CIWUD Directive.

(4) Unless the relevant institution concerned consents to the making of a direction order in the terms of the proposed direction order, or exceptional circumstances (within the meaning of subsection (5)) exist, the Minister shall also, before making a proposed direction order—

(a) deliver a written notice to the relevant institution setting out the terms of the proposed direction order, accompanied by a summary of the reasons why the Minister is of the opinion that a direction order in the terms of the proposed direction order is necessary,

(b) afford the relevant institution 48 hours, or a shorter period on which the Minister and the relevant institution agree, in which to make written submissions to the Minister, and

(c) consider any submissions made under paragraph (b).

(5) Exceptional circumstances for the purposes of subsection (4) exist where—

(a) there is an imminent threat to the financial stability of the relevant institution concerned and the Minister is of the opinion that compliance with that subsection would result in significant damage to the financial stability of that relevant institution,

(b) there is an imminent threat to the stability of the financial system in the State and the Minister is of the opinion that compliance with that subsection would result in significant damage to the stability of that financial system, or

(c) the Minister has reasonable grounds for believing that confidentiality with regard to the proposed direction order, or the possibility of the making of a direction order, would not be maintained and that the breach of such confidentiality would have significant adverse consequences.

8. Relevant institution may act in accordance with proposed direction order.

8.— Where a relevant institution consents to the making of a direction order in the terms of a proposed direction order, it may act in accordance with the terms of the proposed order before the Court makes any direction order.

9. Direction orders.

9.— (1) As soon as may be after completion in relation to a proposed direction order of the procedures required by section 7, the Minister shall apply ex parte to the Court for an order (in this Act called a “direction order”) in the terms of the relevant proposed direction order.

(2) The Court, when hearing an ex parte application under subsection (1), shall, if satisfied that the requirements of section 7 have been complied with and that the opinion of the Minister under that section was reasonable and was not vitiated by any error of law, make a direction order in the terms of the proposed direction order (or those terms as varied after consideration of any submission referred to in section 7(4)(c)).

(3) If in a proposed direction order the Minister has declared the intention of preserving or restoring the financial position of a credit institution, and the Court is satisfied that the Minister made the proposed direction order or part of it with that intention, the Court shall declare in the relevant direction order that the direction order or the relevant part of it is a reorganisation measure for the purposes of the CIWUD Directive.