Financial Services (Banking Reform) Act 2013

PART 1 — Ring-fencing

Ring-fencing

Preferential debts: Great Britain

1

• (1) Section 2B of FSMA 2000 (the PRA's general objective) is amended as follows.

• (2) In subsection (3)—

• (a) at the end of paragraph (a), omit “and”, and

• (b) after paragraph (b) insert

, and (c) discharging its general functions in relation to the matters mentioned in subsection (4A) in a way that seeks to— (i) ensure that the business of ring-fenced bodies is carried on in a way that avoids any adverse effect on the continuity of the provision in the United Kingdom of core services, (ii) ensure that the business of ring-fenced bodies is protected from risks (arising in the United Kingdom or elsewhere) that could adversely affect the continuity of the provision in the United Kingdom of core services, and (iii) minimise the risk that the failure of a ring-fenced body or of a member of a ring-fenced body's group could affect the continuity of the provision in the United Kingdom of core services.

• (3) In subsection (4), for “subsection (3)” substitute “ subsection (3)(a) and (b) ”.

• (4) After subsection (4) insert—

(4A) The matters referred to in subsection (3)(c) are— (a) Part 9B (ring-fencing); (b) ring-fenced bodies (see section 142A); (c) any body corporate incorporated in the United Kingdom that has a ring-fenced body as a member of its group; (d) applications under Part 4A which, if granted, would result, or would be capable of resulting, in a person becoming a ring-fenced body.

• (5) In section 2J of FSMA 2000 (interpretation of Chapter 2 of Part 1)—

• (a) in subsection (3), for “a PRA-authorised” substitute “ an authorised ”,

• (b) after that subsection insert—

(3A) For the purposes of this Chapter, the cases in which a person (“P”) other than an authorised person is to be regarded as failing include any case where P enters insolvency.

, and

• (c) in subsection (4), for “subsection (3)(a)” substitute “ subsections (3)(a) and (3A) ”.

Modification of objectives of Financial Conduct Authority

2

After section 1I of FSMA 2000 insert—

(1IA) (1) If and so long as any regulated activity is a core activity (see section 142B) without also being a PRA-regulated activity (see section 22A), the provisions of this Chapter are to have effect subject to the following modifications. (2) Section 1B is to have effect as if— (a) in subsection (3), after paragraph (c) there were inserted— (d) in relation to the matters mentioned in section 1EA(2), the continuity objective (see section 1EA). (b) in subsection (4), for “or the integrity objective,” there were substituted “ , the integrity objective or (in relation to the matters mentioned in section 1EA(2)) the continuity objective, ”. (3) After section 1E there is to be taken to be inserted— (1EA) (1) In relation to the matters mentioned in subsection (2), the continuity objective is: protecting the continuity of the provision in the United Kingdom of core services (see section 142C). (2) Those matters are— (a) Part 9B (ring-fencing); (b) ring-fenced bodies (see section 142A); (c) any body corporate incorporated in the United Kingdom that has a ring-fenced body as a member of its group; (d) applications under Part 4A which, if granted, would result, or would be capable of resulting, in a person becoming a ring-fenced body. (3) The FCA's continuity objective is to be advanced primarily by— (a) seeking to ensure that the business of ring-fenced bodies is carried on in a way that avoids any adverse effect on the continuity of the provision in the United Kingdom of core services, (b) seeking to ensure that the business of ring-fenced bodies is protected from risks (arising in the United Kingdom or elsewhere) that could adversely affect the continuity of the provision in the United Kingdom of core services, and (c) seeking to minimise the risk that the failure of a ring-fenced body or of a member of a ring-fenced body's group could adversely affect the continuity of the provision in the United Kingdom of core services. (4) In subsection (3)(c), “failure” is to be read in accordance with section 2J(3) to (4).

Amendment of PRA power of direction

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In section 3I of FSMA 2000 (power of PRA to require FCA to refrain from specified action), in subsection (4)—

• (a) at the end of paragraph (a), omit “or”, and

• (b) at the end of paragraph (b), insert

, or (c) threaten the continuity of core services provided in the United Kingdom.

Ring-fencing of certain activities

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• (1) After Part 9A of FSMA 2000 insert—