Banking Act 1979

PART I — Control of Deposit-Taking

Ambit of control

Control of deposit-taking and meaning of " deposit"

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• (1) Except as provided by section 2 below, no person may accept a deposit in the course of carrying on a business which is a deposit-taking business for the purposes of this Act.

• (2) Subject to subsection (3) below, a business is a deposit-taking business for the purposes of this Act if—

• (a) in the course of the business money received by way of deposit is lent to others, or

• (b) any other activity of the business is financed, wholly or to any material extent, out of the capital of or the interest on money received by way of deposit.

• (3) Notwithstanding that paragraph (a) or paragraph (b) of subsection (2) above applies to a business, it is not a deposit-taking business for the purposes of this Act if, in the normal course of the business.—

• (a) the person carrying it on does not hold himself out to accept deposits on a day to day basis; and

• (b) any deposits which are accepted are accepted only on particular occasions, whether or not involving the issue of debentures or other securities.

• (4) Subject to subsection (5) below, in this Act "deposit" means a sum of money paid on terms—

• (a) under which it will be repaid, with or without interest or a premium, and either on demand or at a time or in circumstances agreed by or on behalf of the person making the payment and the person receiving it; and

• (b) which are not referable to the provision of property or services or to the giving of security ;

and references in this Act to money deposited and to the making of deposits shall be construed accordingly.

• (5) Except in so far as any provision of this Act otherwise provides, in this Act " deposit " does not include—

• (a) a loan made by the Bank, a recognised bank or a licensed institution; or

• (b) a loan made by a person for the time being specified in Schedule 1 to this Act; or

• (c) a loan made by a person, other than a person falling within paragraph (a) or paragraph (b) above, in the course of a business of lending money carried on by him; or

• (d) a sum which is paid by one company to another at a time when one is a subsidiary of the other or both are subsidiaries of another company ; or

• (e) a sum which is paid to an institution by a person who at the time it is paid is a director, controller or manager of the institution or the wife, husband, son or daughter of such a person.

• (6) For the purposes of subsection (4)(b) above, money is paid on terms which are referable to the provision of property or services or to the giving of security if, and only if.—

• (a) it is paid by way of advance or part payment for the sale, hire or other provision of property or services of any kind and is repayable only in the event that the property or services is or are not in fact sold, hired or otherwise provided; or

• (b) it is paid by way of security for payment for the provision of property or services of any kind provided or to be provided by the person by whom or on whose behalf the money is accepted; or

• (c) it is paid by way of security for the delivery up or return of any property, whether in a particular state of repair or otherwise.

• (7) Any person who accepts a deposit in contravention of subsection (1) above shall be liable—

• (a) on summary conviction to a fine not exceeding the statutory maximum; and

• (b) on conviction on indictment to imprisonment for a term not exceeding two years or to a fine or both.

• (8) The fact that a deposit is taken in contravention of this section shall not affect any civil liability arising in respect of the deposit or the money deposited.

Exceptions from prohibition in section 1(1)

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• (1) The prohibition in section 1(1) above on the acceptance of a deposit does not apply to—

• (a) the Bank; or

• (b) a recognised bank; or

• (c) a licensed institution; or

• (d) a person for the time being specified in Schedule 1 to this Act;

and does not apply to a transaction prescribed for the purposes of this section by regulations made by the Treasury.

• (2) The Treasury may from time to time by order made by statutory instruments—

• (a) add a person to the list set out in Schedule 1 to this Act, or

• (b) remove a person from that list (whether that person was included in the list as originally enacted or was added to it by virtue of this subsection).

• (3) A statutory instrument containing an order under paragraph (a) of subsection (2) above shall be subject to annulment in pursuance of a resolution of either House of Parliament and no order under paragraph (b) of that subsection shall be made unless a draft of it has been laid before Parliament and approved by a resolution of each House.

• (4) In the case of a body which on the appointed day was carrying on a deposit-taking business in the United Kingdom, the prohibition in section 1(1) above on the acceptance of a deposit does not apply—

• (a) at any time during the period of six months beginning on that day; nor

• (b) if within that period the body makes an application for recognition or a licence, at any time after the end of that period and before the date on which the body is granted recognition or, as the case may be, a licence or on which the Bank notifies the body of its decision to refuse to grant it recognition or a licence.

• (5) Regulations under subsection (1) above may prescribe transactions by reference to any factors appearing to the Treasury to be appropriate and, in particular, by reference to all or any of the following, namely.—

• (a) the amount of the deposit;

• (b) the total liability of the body concerned to its depositors;

• (c) the circumstances in which or the purpose for which the deposit is made ; and

• (d) the identity of the person by whom the deposit is made or accepted.

• (6) The power to make regulations under subsection (1) above shall be exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

The system of recognition and licensing by the Bank

Recognition and licences

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• (1) Recognition as a bank for the purposes of this Act may be granted by the Bank on an application in that behalf by the institution concerned.

• (2) A full licence to carry on a deposit-taking business may be granted to an institution by the Bank on an application in that behalf or on an application for recognition or on the revocation of the institution's recognition.

• (3) Subject to subsection (5) below.—

• (a) the Bank shall not grant to an institution recognition as a bank unless it is satisfied that the criteria in Part I of Schedule 2 to this Act are fulfilled with respect to the institution; and

• (b) the Bank shall not grant a full licence to an institution unless it is satisfied that the criteria in Part II of that Schedule are fulfilled with respect to the institution.

• (4) The Bank shall grant neither recognition nor a licence to an institution which is not a body corporate if the whole of the assets available to the institution are owned by a single individual.

• (5) In the case of an institution whose principal place of business is in a country or territory outside the United Kingdom, the Bank may regard itself as satisfied that the criteria in paragraphs 3 and 6 of Schedule 2 to this Act or, as the case may be, paragraphs 7 and 10 of that Schedule are fulfilled if—

• (a) the relevant supervisory authorities inform the Bank that they are satisfied with respect to the management of the institution and its overall financial soundness; and

• (b) the Bank is satisfied as to the nature and scope of the supervision exercised by those authorities.

• (6) In subsection (5) above "the relevant supervisory authorities" in relation to an institution whose principal place of business is in a country or territory outside the United Kingdom means the authorities which exercise functions corresponding to those of the Bank under this Act in the country or territory where the institution's principal place of business is.

• (7) A grant of recognition and a full licence shall remain in force until—

• (a) it is surrendered by notice in writing given by the institution concerned to the Bank; or

• (b) it is revoked in accordance with the following provisions of this Act.

• (8) The provisions of Part I of Schedule 3 to this Act shall have effect with regard to transitional licences and the provisions of Part II of that Schedule shall have effect with respect to the grant of recognition to certain corporate institutions which were in existence on 9th November 1978.

Annual report and list of recognised and licensed institutions

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• (1) The Bank shall, as soon as practicable after the end of each of its financial years, make a report to the Chancellor of the Exchequer on its activities in that year in the exercise of the functions conferred on it by this Act

• (2) Every report under this section shall contain a list of the institutions which are recognised or licensed under this Act at the end of the financial year of the Bank to which the report relates.

• (3) Every report under this section shall set out the principles on which the Bank is acting, at the end of the financial year of the Bank to which the report relates, with respect to—

• (a) the interpretation and application of the criteria to be fulfilled by institutions applying for recognition or a licence; and

• (b) the interpretation and application of the grounds for revocation of recognition or a licence ;

and shall specify any material change in those principles which was made in the course of the year in question or is proposed to be made in the following year.

• (4) The Chancellor of the Exchequer shall lay a copy of every report made by the Bank under this section before each House of Parliament and the Bank shall arrange for the publication of every such report in such manner as it thinks appropriate.

• (5) Any reference in this section to a financial year of the Bank is a reference to a period of twelve months ending on the last day of February.

• (6) The Bank shall make available to any person, on request and on payment of such charge (if any) as the Bank may reasonably demand to cover the cost of preparation, a list of all the institutions which are recognised or licensed under this Act either at the date of the request or at such earlier date, being not more than one month earlier, as may be specified in the list.

Recognition and licences: procedure on applications

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• (1) An application for recognition or for a full licence—

• (a) shall be made in such manner as the Bank may specify, either generally or in any particular case; and

• (b) shall be accompanied by such information as the Bank may reasonably require, either generally or in any particular case, in order to reach a decision on the application.

• (2) If required to do so by notice in writing from the Bank given at any time after an application falling within subsection (1) above has been made and before a decision has been reached on the application, the applicant shall furnish to the Bank such additional information as the Bank may reasonably require in order to reach a decision.

• (3) Any person who knowingly or recklessly furnishes any information which is false or misleading in a material particular in connection with an application falling within subsection (1) above shall be liable—

• (a) on summary conviction to a fine not exceeding the statutory maximum; and

• (b) on conviction on indictment to imprisonment for a term not exceeding two years or to a fine or both.

• (4) If, on an application falling within subsection (1) above, the Bank proposes to refuse to grant recognition or, in the case of an application for a licence, to refuse to grant the licence applied for, the Bank—

• (a) shall give notice in writing to the applicant of the action it proposes to take with respect to the application and of the reasons for that proposed action; and

• (b) in the notice under paragraph (a) above shall also inform the applicant of the right to make representations in writing with respect to the proposed action of the Bank within such period of not less than twenty-eight days as may be specified in the notice; and

• (c) before reaching a decision on the application shall take account of any representations made as mentioned in paragraph (b) above.

• (5) If, on an application falling within subsection (1) above, the Bank refuses to grant recognition or, as the case may be, the licence applied for, then, subject to subsection (6) below, the Bank shall give notice in writing to the applicant of its decision and the reasons for it before the expiry of the period of six months beginning with the date on which the application was received by the Bank.

• (6) In any case where, under subsection (2) above, the Bank requires additional information with respect to an application, the latest time for the giving of a notice under subsection (5) above with respect to mat application shall be the expiry of whichever of the following periods first expires, namely.—

• (a) the period of six months beginning on the date on which the additional information is furnished to the Bank; and

• (b) the period of twelve months beginning on the date on which the application was received by the Bank.

Revocation of recognition or licence

Grounds for revocation of recognition or licence

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• (1) The powers of the Bank under section 7 below to revoke recognition or a licence shall become exercisable with respect to an institution if it appears to the Bank that—

• (a) any of the information required to be furnished by the institution in connection with its application was false or misleading in a material particular; or

• (b) the institution has not carried on any deposit-taking business within the period of twelve months beginning on the date on which it was granted recognition or, as the case may be, on which the licence took effect, or has ceased to carry on any such business for a period of more than six months; or

• (c) any of the criteria in Part I or Part II of Schedule 2 to this Act which is applicable to the institution is not being or has not been fulfilled with respect to it; or

• (d) in the case of an institution whose principal place of business is in a country or territory outside the United Kingdom, the authorities which exercise in that country or territory functions corresponding to those of the Bank under this Act have withdrawn from the institution the authority which in that country or territory corresponds to the authority conferred in the United Kingdom by recognition or a licence; or

• (e) the institution is a body corporate and any of the events referred to in subsection (2) below has occurred with respect to it; or

• (f) the institution is a partnership and any of the events referred to in subsection (3) below has occurred with respect to it; or

• (g) the institution is an unincorporated institution other than a partnership and is formed under the law of another member State and an event has occurred with respect to it which, in that member State, appears to the Bank to correspond, as near as may be, with any of the events specified in paragraphs (a) to (d) of subsection (2) or paragraphs (a) to (f) of subsection (3) below; or

• (h) the institution has failed to comply with any obligation imposed by this Act; or

• (i) the institution has in any other way so conducted its affairs as to threaten the interests of its depositors.

• (2) The events referred to in subsection (1)(e) above are—

• (a) the making of a winding-up order;

• (b) the passing of a resolution for voluntary winding up;

• (c) the appointment of a receiver or manager of the body's undertaking; and

• (d) the taking of possession, by or on behalf of the holders of any debenture secured by a floating charge, of any property of the body comprised in or subject to the charge;

and also, in the case of a body corporate formed under the law of a country or territory outside the United Kingdom, any event which appears to the Bank to correspond under that law with any of the events specified above.

• (3) The events referred to in subsection (1)(f) above are—

• (a) the dissolution of the partnership ;

• (b) the making of a winding-up order against the firm under Part IX of the Companies Act 1948 or the Companies Act (Northern Ireland) 1960 (unregistered companies);

• (c) if one of the partners is a body corporate, the occurrence with respect to that partner of one of the events specified in subsection (2) above;

• (d) in England and Wales, the making of a receiving order against the firm or against one of the partners or one of the partners executing an instrument to which the Deeds of Arrangement Act 1914 applies ;

• (e) in Scotland, the making of an award of sequestration on the estate of the partnership or one of the partners, or the partnership or one of the partners executing a trust deed for creditors or entering into a composition contract; and

• (f) in Northern Ireland, the making of an order of adjudication of bankruptcy against one of the partners or oneof the partners making a composition or arrangement with his creditors;

and also, in the case of a partnership whose principal place of business is in a country or territory outside the United Kingdom, any event which appears to the Bank to correspond in that country or territory with any of the events specified above.

• (4) It shall be a ground for revoking a full licence held by an institution that the Bank proposes to grant recognition to the institution with effect from the time of the revocation of the licence.

• (5) It shall be a ground for revoking a conditional licence held by an institution that the Bank proposes to grant a full licence to the institution with effect from the time of the revocation of the conditional licence.

Revocation: powers and procedure

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• (1) Where the powers of the Bank under this section have become exercisable with respect to an institution, the Bank may—