Banking Act 1987 (repealed)

Part I — Regulation of Deposit-Taking Business

The Bank of England and the Board of Banking Supervision

Functions and duties of the Bank of England

1

• (1) The Financial Services Authority (in this Act referred to as “the Authority”) shall have the powers conferred on it by this Act and the duty generally to supervise the institutions authorised by it in the exercise of those powers.

• (2) It shall also be the duty of the Authority to keep under review the operation of this Act and developments in the field of banking which appear to it to be relevant to the exercise of its powers and the discharge of its duties.

• (3) The Authority shall, as soon as practicable after the end of each of its financial years, make to the Chancellor of the Exchequer and publish in such manner as it thinks appropriate a report on its activities under this Act in that year; and the Chancellor of the Exchequer shall lay copies of every such report before Parliament.

• (4) Neither the Authority nor any person who is, or is acting as, an officer or servant of the Authority shall be liable in damages for anything done or omitted in the discharge or purported discharge of the functions of the Authority under this Act unless it is shown that the act or omission was in bad faith.

The Board of Banking Supervision

2

• (1) There shall continue to be a committee known as the Board of Banking Supervision.

• (2) The Board shall consist of—

• (a) two ex officio members, namely, the Chairman of the Authority and the holder of such other office within the Authority as the Chairman of the Authority may designate for the purposes of this provision; and

• (b) six independent members, that is to say, members appointed jointly by the Chancellor of the Exchequer and the Chairman of the Authority, being persons having no executive responsibility in the Authority.

• (2A) The independent members shall elect one of their number to chair the Board.

• (3) It shall be the duty of the independent members to give such advice as they think fit to the ex officio members—

• (a) on the exercise by the Authority of its functions under this Act, either generally or in any particular respect or in relation to a particular institution or institutions; and

• (b) on any matter relating to or arising out of the exercise of those functions.

• (4) The Authority shall make regular reports to the Board on matters which the Authority considers relevant to the discharge by the independent members of their duty under subsection (3) above and shall provide them with such other information as they may reasonably require.

• (5) The ex officio members shall give written notice to the Chancellor of the Exchequer in any case in which it is decided that the advice of the independent members should not be followed and the independent members shall be entitled to place before the Chancellor the reasons for their advice.

• (6) The Board shall prepare an annual report on its activities and that report shall be included in the report made by the Authority under section 1(3) above for the financial year in question.

• (7) Section 1(4) above shall apply to an act or omission by a member of the Board in the discharge or purported discharge of his functions under this section as it applies to an act or omission of a person there mentioned in the discharge or purported discharge of the functions of the Authority.

• (8) Schedule 1 to this Act shall have effect with respect to the Board.

Restriction on acceptance of deposits

Restriction on acceptance of deposits

3

• (1) Subject to section 4 below, no person shall in the United Kingdom accept a deposit in the course of carrying on (whether there or elsewhere) a business which for the purposes of this Act is a deposit-taking business unless that person is an institution for the time being authorised by the Authority under the following provisions of this Part of this Act.

• (2) Any person who contravenes this section shall be guilty of an offence and liable—

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

• (b) on summary conviction, to imprisonment for a term not exceeding six months or to a fine not exceeding the statutory maximum or to both.

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

Exempted persons and exempted transactions

4

• (1) Section 3 above shall not apply to the acceptance of a deposit by the Bank or by a person for the time being specified in Schedule 2 to this Act.

• (2) The exemption of a person specified in that Schedule shall be subject to any restriction there specified in the case of that person.

• (3) The Treasury may after consultation with the Authority by order amend that Schedule—

• (a) by adding any person or relaxing any restriction; or

• (b) by removing any person for the time being specified in it or imposing or extending any restriction.

• (4) Section 3 above shall not apply to any transaction prescribed for the purposes of this subsection by regulations made by the Treasury.

• (5) Regulations under subsection (4) 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—

• (a) the amount of the deposit;

• (b) the total liability of the person accepting the deposit to his depositors or to any other creditors;

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

• (d) the identity of the person by whom the deposit is made or accepted, including his membership of a class whose membership is determined otherwise than by the Treasury;

• (e) the number of, or the amount involved in, transactions of any particular description carried out by the person accepting the deposit or the frequency with which he carries out transactions of any particular description.

• (6) Regulations under subsection (4) above may make any exemption for which they provide subject to compliance with specified conditions or requirements.

• (7) Any order under subsection (3)(a) above and any regulations under subsection (4) above shall be subject to annulment in pursuance of a resolution of either House of Parliament, and no order shall be made under subsection (3)(b) above unless a draft of it has been laid before and approved by a resolution of each House of Parliament.

Meaning of "deposit"

5

• (1) Subject to the provisions of this section, in this Act “deposit” means a sum of money (whether denominated in a currency or in ecus) 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 the giving of security;

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

• (1A) In subsection (1) above ’ecu’ means—

• (a) the European currency unit as defined in Article 1 of Council Regulation No. 3320/94/EC

• (b) any other unit of account which is defined by reference to the European currency unit as so defined.

• (2) For the purposes of subsection (1)(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 under a contract for the sale, hire or other provision of property or services, and is repayable only in the event that the property or services is not or are not in fact sold, hired or otherwise provided;

• (b) it is paid by way of security for the performance of a contract or by way of security in respect of loss which may result from the non-performance of a contract; or

• (c) without prejudice to paragraph (b) above, 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.

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

• (a) a sum paid by the Bank or an authorised institution;

• (b) a sum paid by a person for the time being specified in Schedule 2 to this Act;

• (c) a sum paid by a person, other than a person within paragraph (a) or (b) above, in the course of carrying on a business consisting wholly or mainly of lending money;

• (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 the same individual is a majority or principal shareholder controller of both of them; or

• (e) a sum which is paid by a person who, at the time when it is paid, is a close relative of the person receiving it or who is, or is a close relative of, a director, controller or manager of that person.

• (4) In the application of paragraph (e) of subsection (3) above to a sum paid by a partnership that paragraph shall have effect as if for the reference to the person paying the sum there were substituted a reference to each of the partners.

• (5) In subsection (3)(e) above “close relative”, in relation to any person, means—

• (a) his spouse;

• (b) his children and step-children, his parents and step-parents, his brothers and sisters and step-brothers and step-sisters; and

• (c) the spouse of any person within paragraph (b) above.

Meaning of "deposit-taking business"

6

• (1) Subject to the provisions of this section, 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.

• (2) Notwithstanding that paragraph (a) or (b) of subsection (1) above applies to a business, it is not a deposit-taking business for the purposes of this Act if—

• (a) the person carrying it on does not hold himself out as accepting 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.

• (3) For the purposes of subsection (1) above all the activities which a person carries on by way of business shall be regarded as a single business carried on by him.

• (4) In determining for the purposes of subsection (2)(b) above whether deposits are accepted only on particular occasions regard shall be had to the frequency of those occasions and to any characteristics distinguishing them from each other.

• (5) For the purposes of subsection (2) above there shall be disregarded any deposit in respect of the acceptance of which the person in question is exempt from the prohibition in section 3 above and any money received by way of deposit which is not used in the manner described in subsection (1) above.

Power to amend definitions

7

• (1) The Treasury may after consultation with the Authority by order amend the meaning of deposit or deposit-taking business for the purposes of all or any provisions of this Act.

• (2) Without prejudice to the generality of the power conferred by subsection (1) above, an order under that subsection amending the meaning of deposit-taking business may provide for taking into account as activities of an institution the activities of any person who is connected with it in such manner as is specified in the order.

• (3) Any order under this section shall be subject to annulment in pursuance of a resolution of either House of Parliament.

• (4) An order under this section may contain such transitional provisions as the Treasury think necessary or expedient and may exclude or modify the effect of the order on any other enactment which is expressed to have effect in relation to a deposit or a deposit-taking business within the meaning of this Act.

Authorisations

Applications for authorisation

8

• (1) Any institution may make an application for authorisation to the Authorityother than—

• (a) a credit institution incorporated in or formed under the law of any part of the United Kingdom whose principal place of business is outside the United Kingdom; and

• (b) a credit institution incorporated in or formed under the law of another member State.

• (2) Any such application—

• (a) shall be made in such manner as the Authority may direct; and

• (b) shall be accompanied by—

• (i) a statement setting out the nature and scale of the deposit-taking business which the applicant intends to carry on, any plans of the applicant for the future development of that business and particulars of the applicant’s arrangements for the management of that business; and

• (ii) such other information or documents as the Authority may reasonably require for the purpose of determining the application.

• (3) At any time after receiving an application and before determining it the Authority may by written notice require the applicant or any person who is or is to be a director, controller or manager of the applicant to provide additional information or documents.

• (4) The directions and requirements given or imposed under subsections (2) and (3) above may differ as between different applications.

• (5) Any information or statement to be provided to the Authority under this section shall be in such form as the Authority may specify; and the Authority may by written notice require the applicant or any such person as is mentioned in subsection (3) above to provide a report by an accountant or other qualified person approved by the Authority on such aspects of that information as may be specified by the Authority.

• (6) An application may be withdrawn by written notice to the Authority at any time before it is granted or refused.

Grant and refusal of authorisation

9

• (1) The Authority may, on an application duly made in accordance with section 8 above and after being provided with all such information, documents and reports as it may require under that section, grant or refuse the application.

• (2) The Authority shall not grant an application unless satisfied that the criteria specified in Schedule 3 to this Act are fulfilled with respect to the applicant.

• (3) In the case of an application by an applicant whose principal place of business is in a country or territory outside the United Kingdom the Authority may regard itself as satisfied that the criteria specified in paragraphs 1, 4 and 5 of that Schedule are fulfilled if—

• (a) the relevant supervisory authority in that country or territory informs the Authority that it is satisfied with respect to the prudent management and overall financial soundness of the applicant; and

• (b) the Authority is satisfied as to the nature and scope of the supervision exercised by that authority.

• (3A) The Authority shall refuse an application made by a credit institution if it appears to the Authority that—

• (a) the institution is an undertaking which is closely linked with any person; and

• (b) the institution’s close links with that person, or any matters relating to any non-EEA laws or administrative provisions to which that person is subject, are such as would prevent the effective exercise by the Authority of its supervisory functions in relation to the institution;

and in this subsection and subsection (1B) of section 11 below ’non-EEA laws’ means laws of a country or territory which is not a contracting party to the agreement on the European Economic Area signed at Oporto on 2nd May 1992 as adjusted by the Protocol signed at Brussels on 17th March 1993, and “non-EEA administrative provisions” shall be construed accordingly.

• (4) In determining whether to grant or refuse an application the Authority may take into account any matters relating—

• (a) to any person who is or will be employed by or associated with the applicant for the purposes of the applicant’s deposit-taking business; and

• (b) if the applicant is a body corporate, to any other body corporate in the same group or to any director or controller of any such other body.

• (5) No authorisation shall be granted to a partnership or unincorporated association if the whole of the assets available to it are owned by a single individual.

• (6) An authorisation granted to a partnership shall be granted in the partnership name and, without prejudice to sections 11 and 12 below, shall not be affected by any change in the partners.

• (7) Before granting an authorisation to a credit institution incorporated in or formed under the law of any part of the United Kingdom which is—

• (a) a subsidiary undertaking;

• (b) a subsidiary undertaking of the parent undertaking; or

• (c) controlled by the parent controller,

of a credit institution which is for the time being authorised to act as such an institution by the relevant supervisory authority in another member State, the Authority shall consult that authority.

Notice of grant or refusal

10

• (1) Where the Authority grants an application for authorisation it shall give written notice of that fact to the applicant.

• (2) Where the Authority proposes to refuse an application for authorisation it shall give the applicant written notice of its intention to do so, stating the grounds on which it proposes to act and giving particulars of the applicant’s rights under subsection (4) below.

• (3) Where the ground or a ground for the proposed refusal is that the Authority is not satisfied that the criterion in paragraph 1 of Schedule 3 to this Act is fulfilled in the case of any such person as is there mentioned, the Authority shall give that person a copy of the notice mentioned in subsection (2) above, together with a statement of his rights under subsection (4) below.