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Financial Services (Banking Reform) Act 2013

Type Public General Act

Publication 2013-12-18

Last updated 2025-06-19

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(410A) (1) The Treasury may by regulations— (a) enable the Treasury from time to time by direction to require the FCA, the PRA or the Bank of England (each a “regulator”) to require the payment of fees by relevant persons, or such class of relevant person as may be specified in, or determined by the regulator in accordance with, the direction, for the purpose of meeting relevant expenses incurred by the Treasury; (b) make provision about how the regulator to which a direction is given is to comply with the direction; (c) require the regulator to pay to the Treasury, by such time or times as may be specified in the direction, the amount of any fees received by the regulator. (2) “Relevant expenses” are expenses (including any expenses of a capital nature) which are attributable to United Kingdom membership of, or Treasury participation in, a prescribed international organisation so far as those expenses— (a) represent a contribution (by way of subscription or otherwise) to the resources of the international organisation, and (b) are in the opinion of the Treasury attributable to functions of the organisation which relate to financial stability or financial services. (3) The regulations must provide for the charging of fees in pursuance of a direction given under the regulations to the FCA or the PRA to be by rules made by that regulator. (4) The provisions of Chapter 2 of Part 9A apply to rules of the FCA or the PRA providing for the charging of fees in pursuance of a direction given under the regulations— (a) in the case of the FCA, as they apply to rules relating to the payment of fees under paragraph 23 of Schedule 1ZA; (b) in the case of the PRA, as they apply to rules relating to the payment of fees under paragraph 31 of Schedule 1ZB. (5) Paragraph 36(1) of Schedule 17A applies to the charging of fees by the Bank of England in pursuance of a direction given to the Bank under the regulations. (6) The regulations may in particular— (a) make provision about what is, or is not, to be regarded as an expense; (b) specify requirements that the Treasury must comply with before giving a direction; (c) enable a direction to be varied or revoked by a subsequent direction; (d) confer functions on a regulator. (7) An amount payable to a regulator as a result of— (a) any provision of rules made by the FCA or the PRA as a result of the regulations, or (b) the imposition of fees by the Bank of England as a result of a direction given under the regulations to the Bank, may be recovered as a debt due to the regulator. (8) “Relevant persons” means— (a) in the case of a direction given to the PRA, PRA-authorised persons; (b) in the case of a direction given to the FCA, authorised persons and recognised investment exchanges who (in either case) are not PRA-authorised persons; (c) in the case of a direction given to the Bank of England, recognised clearing houses, other than those falling within paragraph (a) or (b). (9) This section is subject to section 410B. (410B) (1) In this section “a fees direction” means a direction given by the Treasury as a result of regulations under section 410A. (2) Before giving a fees direction to the FCA, the PRA or the Bank of England (each a “regulator”), the Treasury must consult the regulator concerned. (3) A fees direction must— (a) be in writing; (b) except in the case of a direction that revokes a previous direction or a direction that varies a previous direction without affecting the total amount intended to be raised by the fees, specify the total amount intended to be raised by the fees to be charged by the regulator and explain how that amount is calculated; (c) contain such other information as may be prescribed. (4) As soon as practicable after giving a fees direction, the Treasury must lay before Parliament a copy of the direction.

(2) In section 3A of FSMA 2000 (meaning of “regulator”), in subsection (3)—

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

(b) after paragraph (b) insert

or (c) the meaning of “regulator” in sections 410A and 410B (fees to meet certain expenses of Treasury).

Parliamentary control of statutory instruments under FSMA 2000

Amendments of section 429 of FSMA 2000

136

(1) Section 429 of FSMA 2000 (Parliamentary control of statutory instruments) is amended as follows.

(2) In subsection (1)(a) (orders subject to affirmative procedure)—

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) for “144(4), 192(b) or (e), 138K(6)(c)” substitute “ 138K(6)(c), 144(4), 192(b) or (e) ”.

(3) In subsection (2) (regulations subject to affirmative procedure), after “90B,” insert “ 142W, ”.

(4) After subsection (2) insert—

(2A) Regulations to which subsection (2B) applies are not to be made unless a draft of the regulations has been laid before Parliament and approved by a resolution of each House. (2B) This subsection applies to regulations which contain provision made under section 410A, other than provision made only by virtue of subsection (2) of that section.

(5) In subsection (8), for “or 23A” substitute “ , 23A or 142Z ”.

Bank of England

Accounts of Bank of England and its wholly-owned subsidiaries

137

(1) The Bank of England Act 1998 is amended as follows.

(2) In section 7 (accounts), in subsection (4), for the words from “appropriate” to the end substitute “ necessary to do so having regard to the Financial Stability Objective ”.

(3) After section 7 insert—

(7A) (1) If the Bank considers it necessary to do so having regard to the Financial Stability Objective, the Bank may by direction to a qualifying company exclude the application to the qualifying company of any of the relevant Companies Act requirements. (2) The relevant Companies Act requirements are the requirements to which the directors of the qualifying company would otherwise be subject under the Companies Act 2006 (except sections 412 and 413 (directors' benefits)) in relation to the preparation of accounts under section 394 of that Act. (3) A direction under subsection (1) may relate to one or more specified accounting periods of the qualifying company, or to a specified accounting period and all subsequent accounting periods of the qualifying company. (4) The Bank must consult the Treasury before giving a direction under subsection (1). (5) The Treasury may by notice in writing to the Bank require it to publish in such manner as it thinks fit such information relating to the accounts of a qualifying company as the Treasury may specify in the notice. (6) The information specified in a notice under subsection (5) may include information which as a result of a direction under subsection (1) was excluded from accounts prepared in accordance with the Companies Act 2006. (7) The Treasury must consult the Bank before giving a notice under subsection (5). (8) A direction under subsection (1) or a notice under subsection (5) may be revoked by a subsequent direction or notice (as the case may be). (9) “Qualifying company” means any company which is wholly owned by the Bank other than— (a) the Prudential Regulation Authority, or (b) a company which is a bridge bank for the purposes of section 12(3) of the Banking Act 2009. (10) For the purposes of subsection (9), a company is wholly owned by the Bank if— (a) it is a company of which no person other than the Bank or a nominee of the Bank is a member, or (b) it is a wholly-owned subsidiary of a company within paragraph (a).

Building societies

138

Schedule 9 (which contains provision about building societies) has effect.

Claims management services

Power to impose penalties on persons providing claims management services

139

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recovery of expenditure incurred by Office for Legal Complaints

140

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Minor amendments

141

Schedule 10 (which contains amendments of, or connected with, the Financial Services Act 2012 and amendments of provisions amended by that Act) has effect.

PART 8 — Final provisions

Orders and regulations: general

142

(1) Any power of the Treasury, the Secretary of State or the Lord Chancellor to make an order or regulations under this Act is exercisable by statutory instrument.

(2) Subsection (1) does not apply to an order under section 43 (payment systems: designation orders).

(3) An order or regulations made by the Treasury, the Secretary of State or the Lord Chancellor under this Act may—

(a) make different provision for different cases, and

(b) contain such incidental or transitional provision as the person making the order or regulations considers appropriate.

Orders and regulations: Parliamentary control

143

(1) A statutory instrument containing an order or regulations under this Act is subject to annulment in pursuance of a resolution of either House of Parliament, unless—

(a) the instrument contains only provision made under section 148 (commencement), or

(b) the instrument is required by subsection (3) or any other enactment to be laid in draft before, and approved by a resolution of, each House.

(2) Subsection (3) applies to a statutory instrument that contains (with or without other provisions)—

(a) regulations under section 7 (building societies: power to make provision about ring-fencing);

(aa) regulations under section 41(2C) (meaning of “digital settlement asset”);

(b) an order under section 41(4) (meaning of “payment system”);

(ba) regulations under section 102B (matters to consider when imposing generally applicable requirements);

(bb) regulations under section 104F (power to require imposition of generally applicable requirements);

(c) an order under section 145 (power to make further consequential amendments) that amends or repeals primary legislation;

(d) an order under paragraph 6 of Schedule 6 (conduct of FMI administration).

(3) A statutory instrument to which this subsection applies may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.

(4) In subsection (2)(c) “primary legislation” means—

(a) an Act of Parliament,

(b) an Act of the Scottish Parliament,

(d) Northern Ireland legislation.

Interpretation

144

In this Act—

“enactment” includes—an enactment contained in subordinate legislation,an enactment contained in, or in an instrument made under, an Act of the Scottish Parliament,an enactment contained in, or in an instrument made under, a Measure or Act of the National Assembly for Wales, andan enactment contained in, or in an instrument made under, Northern Ireland legislation;

“the FCA” means the Financial Conduct Authority;

“FSMA 2000” means the Financial Services and Markets Act 2000;

“the PRA” means the Prudential Regulation Authority.

Power to make further consequential amendments

145

(1) The Treasury, the Secretary of State or the Lord Chancellor may by order make such provision amending, repealing, revoking or applying with modifications any enactment to which this section applies as the person making the order considers necessary or expedient in consequence of any provision made by or under this Act.

(2) This section applies to—

(a) any enactment passed or made before the passing of this Act, and

(b) any enactment passed or made on or before the last day of the Session in which this Act is passed.

(3) Amendments and repeals made under this section are additional to those made by or under any other provision of this Act.

Transitional provisions and savings

146

(1) The Treasury, the Secretary of State or the Lord Chancellor may by order make such provision as the person making the order considers necessary or expedient for transitory, transitional or saving purposes in connection with the commencement of any provision made by or under this Act.

(2) An order under this section may—

(a) confer functions on the FCA or the PRA;

(b) modify, exclude or apply (with or without modifications) any enactment (including any provision of, or made under, this Act).

Extent

147

(1) The provisions of this Act extend to England and Wales, Scotland and Northern Ireland.

This is subject to subsection (2).

(2) The amendments made by the following sections have the same extent as the enactments amended—

(a) section 13 (preferential debts: Great Britain),

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commencement and short title

148

(1) This Part comes into force on the day on which this Act is passed.

(2) The following provisions—

section 131, and

section 138 and Schedule 9, apart from paragraph 4 of that Schedule,

come into force at the end of the period of 2 months beginning with the day on which this Act is passed.

(3) Sections 139 and 140(1) to (3) come into force on such day as the Secretary of State may by order appoint.

(4) Section 140(4) to (6) comes into force on such day as the Lord Chancellor may by order appoint.

(5) The remaining provisions of this Act come into force on such day as the Treasury may by order appoint.

(6) Different days may be appointed for different purposes.

(7) This Act may be cited as the Financial Services (Banking Reform) Act 2013.

SCHEDULE 1

1

Part 7 of FSMA 2000 (control of business transfer schemes) is amended as follows.

2

For “the authorised person concerned”, wherever occurring in Part 7 (including Schedule 12), substitute “ the transferor concerned ”.

3

(1) Section 103A (meaning of “the appropriate regulator”) is amended as follows.

(2) In subsection (1), in paragraph (a), for “a scheme” substitute “ a ring-fencing transfer scheme or a scheme (other than a ring-fencing transfer scheme) ”.

(3) At the end of subsection (2) insert—

(d) in the case of a ring-fencing transfer scheme, means the body to whose business the scheme relates.

4

In section 106 (banking business transfer schemes), at the end of subsection (1)(c) insert “ or a ring-fencing transfer scheme ”.

5

After section 106A insert—

(106B) (1) A scheme is a ring-fencing transfer scheme if it— (a) is one under which the whole or part of the business carried on— (i) by a UK authorised person, or (ii) by a qualifying body, is to be transferred to another body (“the transferee”), (b) is to be made for one or more of the purposes mentioned in subsection (3), and (c) is not an excluded scheme or an insurance business transfer scheme. (2) “Qualifying body” means a body which— (a) is incorporated in the United Kingdom, (b) is a member of the group of a UK authorised person, and (c) is not itself an authorised person. (3) The purposes are— (a) enabling a UK authorised person to carry on core activities as a ring-fenced body in compliance with the ring-fencing provisions; (b) enabling the transferee to carry on core activities as a ring-fenced body in compliance with the ring-fencing provisions; (c) making provision in connection with the implementation of proposals that would involve a body corporate whose group includes the body corporate to whose business the scheme relates becoming a ring-fenced body while one or more other members of its group are not ring-fenced bodies; (d) making provision in connection with the implementation of proposals that would involve a body corporate whose group includes the transferee becoming a ring-fenced body while one or more other members of the transferee's group are not ring-fenced bodies. (4) A scheme is an excluded scheme for the purposes of this section if— (a) the body to whose business the scheme relates is a building society or credit union, or (b) the scheme is a compromise or arrangement to which Part 27 of the Companies Act 2006 (mergers and divisions of public companies) applies. (5) For the purposes of subsection (1)(a) it is immaterial whether or not the business to be transferred is carried on in the United Kingdom. (6) “UK authorised person” has the same meaning as in section 105. (7) “Building society” and “credit union” have the same meanings as in section 106. (8) “The ring-fencing provisions” means ring-fencing rules and the duty imposed as a result of section 142G.

6

(1) Section 107 (application for order sanctioning transfer scheme) is amended as follows.

(2) In subsection (1), for “or a reclaim fund business transfer scheme” substitute “ , a reclaim fund business transfer scheme or a ring-fencing transfer scheme ”.

(3) After subsection (2) insert—

(2A) An application relating to a ring-fencing transfer scheme may be made only with the consent of the PRA. (2B) In deciding whether to give consent, the PRA must have regard to the scheme report prepared under section 109A in relation to the ring-fencing transfer scheme.

7

For the heading to section 109 substitute “ Scheme reports: insurance business transfer schemes ”.

8

After section 109 insert—

(109A) (1) An application under section 106B in respect of a ring-fencing transfer scheme must be accompanied by a report on the terms of the scheme (a “scheme report”). (2) A scheme report may be made only by a person— (a) appearing to the PRA to have the skills necessary to enable the person to make a proper report, and (b) nominated or approved for the purpose by the PRA. (3) A scheme report must be made in a form approved by the PRA. (4) A scheme report must state— (a) whether persons other than the transferor concerned are likely to be adversely affected by the scheme, and (b) if so, whether the adverse effect is likely to be greater than is reasonably necessary in order to achieve whichever of the purposes mentioned in section 106B(3) is relevant. (5) The PRA must consult the FCA before— (a) nominating or approving a person under subsection (2)(b), or (b) approving a form under subsection (3).

9

(1) Section 110 (right to participate in proceedings) is amended as follows.

(2) In subsection (1), after “section 107” insert “ relating to an insurance business transfer scheme, a banking business transfer scheme or a reclaim fund business transfer scheme ”.

(3) After subsection (2) insert—

(3) Subsections (4) and (5) apply where an application under section 107 relates to a ring-fencing transfer scheme. (4) The following are also entitled to be heard— (a) the PRA, (b) where the transferee is an authorised person, the FCA, and (c) any person (“P”) (including an employee of the transferor concerned or of the transferee) who alleges that P would be adversely affected by the carrying out of the scheme. (5) P is not entitled to be heard by virtue of subsection (4)(c) unless before the hearing P has— (a) filed (in Scotland, lodged) with the court a written statement of the representations that P wishes the court to consider, and (b) served copies of the statement on the PRA and the transferor concerned.

10

(1) Section 111 (sanction of court for business transfer schemes) is amended as follows.

(2) In subsection (1), for “or a reclaim fund business transfer scheme” substitute “ , a reclaim fund business transfer scheme or a ring-fencing transfer scheme ”.

(3) In subsection (2), after paragraph (aa) insert—

(ab) in the case of a ring-fencing transfer scheme, the appropriate certificates have been obtained (as to which see Part 2B of that Schedule);

11

In section 112 (effect of order sanctioning business transfer scheme), in subsection (10), after “transfer scheme” insert “ or ring-fencing transfer scheme ”.

12

In section 112A (rights to terminate etc.), in subsection (1), for “or a banking business transfer scheme” substitute “ , a banking business transfer scheme or a ring-fencing transfer scheme ”.

13

In Schedule 12 (transfer schemes: certificates) after Part 2A insert—

(9B) (1) For the purposes of section 111(2) the appropriate certificates, in relation to a ring-fencing transfer scheme, are— (a) a certificate given by the PRA certifying its approval of the application, (b) a certificate under paragraph 9C, and (c) if sub-paragraph (2) applies, a certificate under paragraph 9D. (2) This sub-paragraph applies if the transferee is an EEA firm falling within paragraph 5(a) or (b) of Schedule 3. (9C) (1) A certificate under this paragraph is one given by the relevant authority and certifying that, taking the proposed transfer into account, the transferee possesses, or will possess before the scheme takes effect, adequate financial resources. (2) “Relevant authority” means— (a) if the transferee is a PRA-authorised person with a Part 4A permission or with permission under Schedule 4, the PRA; (b) if the transferee is an EEA firm falling within paragraph 5(a) or (b) of Schedule 3, its home state regulator; (c) if the transferee does not fall within paragraph (a) or (b) but is subject to regulation in a country or territory outside the United Kingdom, the authority responsible for the supervision of the transferee's business in the place in which the transferee has its head office; (d) in any other case, the FCA. (3) In sub-paragraph (2), any reference to a transferee of a particular description includes a reference to a transferee who will be of that description if the proposed ring-fencing transfer scheme takes effect. (9D) A certificate under this paragraph is one given by the appropriate regulator and certifying that the home state regulator of the transferee has been notified of the proposed scheme and that— (a) the home state regulator has responded to the notification, or (b) the period of 3 months beginning with the notification has elapsed.

SCHEDULE 2

PART 1 — Amendments of Banking Act 2009

1

The Banking Act 2009 is amended as follows.

New stabilisation option: bail-in

2

After section 12 insert—

(12A) (1) The third stabilisation option is exercised by the use of the power in subsection (2). (2) The Bank of England may make one or more resolution instruments (which may contain provision or proposals of any kind mentioned in subsections (3) to (6)). (3) A resolution instrument may— (a) make special bail-in provision with respect to a specified bank; (b) make other provision for the purposes of, or in connection with, any special bail-in provision made by that or another instrument. (4) A resolution instrument may— (a) provide for securities issued by a specified bank to be transferred to a bail-in administrator (see section 12B) or another person; (b) make other provision for the purposes of, or in connection with, the transfer of securities issued by a specified bank (whether or not the transfer has been or is to be effected by that instrument, by another resolution instrument or otherwise). (5) A resolution instrument may set out proposals with regard to the future ownership of a specified bank or of the business of a specified bank, and any other proposals (for example, proposals about making special bail-in provision) that the Bank of England may think appropriate. (6) A resolution instrument may make any other provision the Bank of England may think it appropriate to make in exercise of specific powers under this Part. (7) Provision made in accordance with subsection (4) may relate to— (a) specified securities, or (b) securities of a specified description. (8) Where the Bank of England has exercised the power in subsection (4) to transfer securities to a bail-in administrator, the Bank of England must exercise its functions under this Part (see, in particular, section 48V) with a view to ensuring that any securities held by a person in the capacity of a bail-in administrator are so held only for so long as is, in the Bank of England's opinion, appropriate having regard to the special resolution objectives. (9) References in this Part to “special bail-in provision” are to provision made in reliance on section 48B. (12B) (1) The Bank of England may, in a resolution instrument, appoint an individual or body corporate as a bail-in administrator. (2) A bail-in administrator is appointed— (a) to hold any securities that may be transferred or issued to that person in the capacity of bail-in administrator; (b) to perform any other functions that may be conferred under any provision of this Part. (3) The Bank of England may appoint more than one bail-in administrator to perform functions in relation to a bank (but no more than one of them may at any one time be authorised to hold securities as mentioned in subsection (2)(a)). (4) Securities held by a bail-in administrator (in that capacity, and whether as a result of a resolution instrument or otherwise) are to be held in accordance with the terms of a resolution instrument that transfers those, or other, securities to the bail-in administrator. (5) For example, the following provision may be made by virtue of subsection (4)— (a) provision that specified rights of a bail-in administrator with respect to all or any of the securities are to be exercisable only as directed by the Bank of England; (b) provision specifying rights or obligations that the bail-in administrator is, or is not, to have in relation to some or all of the securities. (6) A bail-in administrator must have regard, in performing any functions of the office, to any objectives that may be specified in a resolution instrument. (7) Where one or more objectives are specified in accordance with subsection (6), the objectives are to be taken to have equal status with each other, unless the contrary is stated in the resolution instrument. (8) See sections 48I to 48K for further provision about bail-in administrators.

3

After section 8 insert—

(8A) (1) The Bank of England may exercise a stabilisation power in respect of a bank in accordance with section 12A(2) only if satisfied that the condition in subsection (2) is met. (2) The condition is that the exercise of the power is necessary, having regard to the public interest in— (a) the stability of the financial systems of the United Kingdom, (b) the maintenance of public confidence in the stability of those systems, (c) the protection of depositors, or (d) the protection of any client assets that may be affected. (3) Before determining whether that condition is met, and if so how to react, the Bank of England must consult— (a) the PRA, (b) the FCA, and (c) the Treasury. (4) The condition in this section is in addition to the conditions in section 7.

Further provision about the bail-in option

4

After section 48A insert—

(48B) (1) “Special bail-in provision”, in relation to a bank, means any of the following (or any combination of the following)— (a) provision cancelling a liability owed by the bank; (b) provision modifying, or changing the form of, a liability owed by the bank; (c) provision that a contract under which the bank has a liability is to have effect as if a specified right had been exercised under it. (2) “Special bail-in provision”, in relation to a bank, also includes any associated provision (see subsection (3)) that the Bank of England may think it appropriate to make in consequence of any provision under subsection (1) that— (a) is made in the same resolution instrument, or (b) has been made in another resolution instrument in respect of the bank. (3) “Associated provision” means provision cancelling or modifying a contract under which a banking group company has a liability. (4) A power to make special bail-in provision— (a) may be exercised only for the purpose of, or in connection with, reducing, deferring or cancelling a liability of the bank; (b) may not be exercised so as to affect any excluded liability. (5) The following rules apply to the interpretation of subsection (1). (1) The reference to cancelling a liability owed by the bank includes a reference to cancelling a contract under which the bank has a liability. (2) The reference to modifying a liability owed by the bank includes a reference to modifying the terms (or the effect of the terms) of a contract under which the bank has a liability. (3) The reference to changing the form of a liability owed by the bank, includes, for example— (a) converting an instrument under which the bank owes a liability from one form or class to another, (b) replacing such an instrument with another instrument of a different form or class, or (c) creating a new security (of any form or class) in connection with the modification of such an instrument. (6) Examples of special bail-in provision include— (a) provision that transactions or events of any specified kind have or do not have (directly or indirectly) specified consequences or are to be treated in a specified manner for specified purposes; (b) provision discharging persons from further performance of obligations under a contract and dealing with the consequences of persons being so discharged. (7) The form and class of the instrument (“the resulting instrument”) into which an instrument is converted, or with which it is replaced, do not matter for the purposes of paragraphs (a) and (b) of rule 3 in subsection (5); for instance, the resulting instrument may (if it is a security) fall within Class 1 or any other Class in section 14. (8) The following liabilities of the bank are “excluded liabilities”— (a) liabilities representing protected deposits; (b) any liability, so far as it is secured; (c) liabilities that the bank has by virtue of holding client assets; (d) liabilities with an original maturity of less than 7 days owed by the bank to a credit institution or investment firm; (e) liabilities arising from participation in designated settlement systems and owed to such systems or to operators of, or participants in, such systems; (f) liabilities owed to central counterparties recognised by the European Securities and Markets Authority in accordance with Article 25 of Regulation (EU) 648/2012 of the European Parliament and the Council; (g) liabilities owed to an employee or former employee in relation to salary or other remuneration, except variable remuneration; (h) liabilities owed to an employee or former employee in relation to rights under a pension scheme, except rights to discretionary benefits; (i) liabilities owed to creditors arising from the provision to the bank of goods or services (other than financial services) that are critical to the daily functioning of the bank's operations. (9) The following special rules apply in cases involving banking group companies— (a) a liability mentioned in subsection (8)(d) is not an excluded liability if the credit institution or investment firm to which the liability is owed is a banking group company in relation to the bank (see section 81D); (b) in subsection (8)(i) the reference to creditors does not include companies which are banking group companies in relation to the bank. (48C) (1) A deposit is “protected” so far as it is covered by the Financial Services Compensation Scheme. (2) A deposit is “protected” so far as it is covered by a scheme which— (a) operates outside the United Kingdom, and (b) is comparable to the Financial Services Compensation Scheme. (3) If one or both of subsections (1) and (2) apply to a deposit, the amount of the deposit “protected” is the highest amount which results from either of those subsections. (4) In subsections (1) and (2) and section 48B(8)(a), “deposit” has the meaning given by article 5(2) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544), but ignoring the exclusions in article 6. (48D) (1) In section 48B— - “client assets” means assets which the bank has undertaken to hold on trust for, or on behalf of, a client; - “contract” includes any instrument; - “credit institution” means any credit institution as defined in Article 4.1(1) of Regulation (EU) No 575/2013 of the European Parliament and of the Council, other than an entity mentioned in Article 2.5(2) to (23) of Directive 2013/36/EU of the European Parliament and of the Council; - “designated settlement system” means a system designated in accordance with Directive 98/26/EC of the European Parliament and of the Council (as amended by Directives 2009/44/EC and 2010/78/EU); - “employee” includes the holder of an office; - “investment firm” means an investment firm as defined in Article 4.1(2) of Regulation (EU) No 575/2013 of the European Parliament and of the Council that is subject to the initial capital requirement specified in Article 28(2) of Directive 2013/36/EU of the European Parliament and of the Council; - “pension scheme” includes any arrangement for the payment of pensions, allowances and gratuities; - “secured” means secured against property or rights, or otherwise covered by collateral arrangements. (2) In subsection (1)— - “assets” has the same meaning as in section 232(4) (ignoring for these purposes section 232(5A)(b)); - “collateral arrangements” includes arrangements which are title transfer collateral arrangements for the purposes of section 48. (3) For the purposes of section 48B(8)(h), a benefit under a pension scheme is discretionary so far as the employee's right to the benefit resulted from the exercise of a discretion. (48E) (1) This section applies where the Bank of England makes a resolution instrument containing special bail-in provision (see section 48B). (2) The Bank of England must report to the Chancellor of the Exchequer stating the reasons why that provision has been made in the case of the liabilities concerned. (3) If the provision departs from the insolvency treatment principles, the report must state the reasons why it does so. (4) The insolvency treatment principles are that where an instrument includes special bail-in provision— (a) the provision made by the instrument must be consistent with treating all the liabilities of the bank in accordance with the priority they would enjoy on a liquidation, and (b) any creditors who would have equal priority on a liquidation are to bear losses on an equal footing with each other. (5) A report must comply with any other requirements as to content that may be specified by the Treasury. (6) A report must be made as soon as reasonably practicable after the making of the resolution instrument to which it relates. (7) The Chancellor of the Exchequer must lay a copy of each report under subsection (2) before Parliament. (48F) (1) The Treasury may by order amend section 48B(8) by— (a) adding to the list of excluded liabilities; (b) amending or omitting any paragraph of that subsection, other than paragraphs (a) to (c). (2) The Treasury may by order amend section 48C or 48D. (3) The powers conferred by subsections (1) and (2) include power to make consequential and transitional provision. (4) An order under this section— (a) is to be made by statutory instrument, and (b) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament. (5) The Treasury must consult before laying a draft order under this section before Parliament. (48G) (1) The Treasury may, for the purpose of ensuring that the treatment of liabilities in any instrument that contains special bail-in provision is aligned to an appropriate degree with the treatment of liabilities on an insolvency, by order specify matters or principles to which the Bank of England is to be required to have regard in making any such instrument. (2) An order may, for example, specify the insolvency treatment principles (as defined in section 48E(4)) or alternative principles. (3) An order may specify the meaning of “insolvency” for one or more purposes of the order. (4) An order may amend sections 44C(4) and 48E(4). (5) An order— (a) is to be made by statutory instrument, and (b) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament. (48H) (1) A resolution instrument may require a bail-in administrator, or one or more directors of the bank, to— (a) draw up a business reorganisation plan with respect to the bank, and (b) submit it to the Bank of England within the period allowed by (or under) the instrument. (2) “Business reorganisation plan” means a plan that includes— (a) an assessment of the factors that caused Condition 1 in section 7 to be met in the case of the bank, (b) a description of the measures to be adopted with a view to restoring the viability of the bank, and (c) a timetable for the implementation of those measures. (3) Where a person has submitted a business reorganisation plan to the Bank of England under subsection (1) (or has re-submitted a plan under subsection (4)), the Bank of England— (a) must approve the plan if satisfied that the plan is appropriately designed for meeting the objective mentioned in subsection (2)(b); (b) must otherwise require the person to amend the plan in a specified manner. (4) Where the Bank of England has required a person to amend a business re-organisation plan, the person must re-submit the amended plan within the period allowed by (or under) the resolution instrument. (5) Before deciding what action to take under subsection (3) the Bank of England must (for each submission or re-submission of a plan) consult— (a) the PRA, and (b) the FCA. (6) A business reorganisation plan may include recommendations by the person submitting the plan as to the exercise by the Bank of England of any of its powers under this Part in relation to the bank. (7) Where a resolution instrument contains provision under subsection (1), the instrument may— (a) specify further matters (in addition to those mentioned in subsection (2)) that must be dealt with in the business reorganisation plan; (b) make provision about the timing of actions to be taken in connection with the making and approval of the plan; (c) enable any provision that the Bank of England has power under paragraph (a) or (b) to make in the instrument to be made instead in an agreement between the Bank of England and the person required to draw up the business reorganisation plan. (8) For the purposes of subsection (2)(b) the viability of a bank is to be assessed by reference to whether the bank satisfies, and (if so) for how long it may be expected to continue to satisfy, the threshold conditions (as defined in section 55B of the Financial Services and Markets Act 2000). (48I) (1) A resolution instrument may— (a) authorise a bail-in administrator to manage the bank's business (or confer on a bail-in administrator any other power with respect to the management of the bank's business); (b) authorise a bail-in administrator to exercise any other powers of the bank; (c) confer on a bail-in administrator any other power the Bank of England may consider appropriate; (d) provide that the exercise of any power conferred by the instrument in accordance with this section is to be subject to conditions specified in the instrument. (2) A resolution instrument may require a bail-in administrator to make reports to the Bank of England— (a) on any matter specified in the instrument, and (b) at the times or intervals specified in the instrument. (3) If a resolution instrument specifies a matter in accordance with subsection (2)(a), it may provide for further requirements as to the contents of the report on that matter to be specified in an agreement between the Bank of England and the bail-in administrator. (4) A resolution instrument may— (a) require a bail-in administrator to consult specified persons before exercising specified functions (and may specify particular matters on which the specified person must be consulted); (b) provide that a bail-in administrator is not to exercise specified functions without the consent of a specified person. (48J) (1) A bail-in administrator may do anything necessary or desirable for the purposes of or in connection with the performance of the functions of the office. (2) A bail-in administrator is not a servant or agent of the Crown (and, in particular, is not a civil servant). (3) Where a bail-in administrator is appointed under this Part, the Bank of England— (a) must make provision in a resolution instrument for resignation and replacement of the bail-in administrator; (b) may remove the bail-in administrator from office only (i) on the ground of incapacity or misconduct, or (ii) on the ground that there is no further need for a person to perform the functions conferred on the bail-in administrator. (48K) (1) A resolution instrument may provide for the payment of remuneration and allowances to a bail-in administrator. (2) Provision made under subsection (1) may provide that the amounts are— (a) to be paid by the Bank of England, or (b) to be determined by the Bank of England and paid by the bank. (3) A bail-in administrator is not liable for damages in respect of anything done in good faith for the purposes of or in connection with the functions of the office (subject to section 8 of the Human Rights Act 1998). (48L) (1) A resolution instrument may— (a) cancel or modify any securities to which this subsection applies; (b) convert any such securities from one form or class into another. (2) Subsection (1) applies to securities issued by the bank that fall within Class 1 in section 14. (3) A resolution instrument may— (a) make provision with respect to rights attaching to securities issued by the bank; (b) provide for the listing of securities issued by the bank to be discontinued. (4) The reference in subsection (1)(b) to converting securities from one form or class into another includes creating a new security in connection with the modification of an existing security. (5) The provision that may be made under subsection (3)(a) includes, for example— (a) provision that specified rights attaching to securities are to be treated as having been exercised; (b) provision that the Bank of England, or a bail-in administrator, is to be treated as authorised to exercise specified rights attaching to securities; (c) provision that specified rights attaching to securities may not be exercised for a period specified in the instrument. (6) In subsection (3)(b) the reference to “listing” is to listing under section 74 of the Financial Services and Markets Act 2000. (7) The provision that may be made under this section in relation to any securities is in addition to any provision that the Bank of England may have power to make in relation to them under section 48B. (48M) (1) In this section “default event provision” has the same meaning as in section 22. (2) A resolution instrument may provide for subsection (3) or (4) to apply (but need not apply either). (3) If this subsection applies, the resolution instrument is to be disregarded in determining whether a default event provision applies. (4) If this subsection applies, the resolution instrument is to be disregarded in determining whether a default event provision applies except so far as the instrument provides otherwise. (5) In subsections (3) and (4) a reference to the resolution instrument is a reference to— (a) the making of the instrument, (b) anything that is done by the instrument or is to be, or may be, done under or by virtue of the instrument, and (c) any action or decision taken or made under this or another enactment in so far as it resulted in, or was connected to, the making of the instrument. (6) Provision under subsection (2) may apply subsection (3) or (4)— (a) generally or only for specified purposes, cases or circumstances, or (b) differently for different purposes, cases or circumstances. (7) A thing is not done by virtue of a resolution instrument for the purposes of subsection (5)(b) merely by virtue of being done under a contract or other agreement rights or obligations under which have been affected by the instrument. (48N) (1) A resolution instrument may enable the Bank of England— (a) to remove a director of a specified bank; (b) to vary the service contract of a director of a specified bank; (c) to terminate the service contract of a director of a specified bank; (d) to appoint a director of a specified bank. (2) Subsection (1) also applies to a director of any undertaking which is a banking group company in respect of a specified bank. (3) Appointments under subsection (1)(d) are to be on terms and conditions agreed with the Bank of England. (48O) (1) A resolution instrument may— (a) require one or more directors of the bank to comply with any general or specific directions that may be set out in the instrument; (b) enable the Bank of England to give written directions (whether general or specific) to one or more directors of the bank. (2) A director— (a) is not to be regarded as failing to comply with any duty owed to any person (for example, a shareholder, creditor or employee of the bank) by virtue of any action or inaction in compliance with a direction given under subsection (1)(a) or (b); (b) is to be immune from liability in damages in respect of action or inaction in accordance with a direction. (3) A director must comply with a direction within the period of time specified in the direction, or if no period of time is specified, as soon as reasonably practicable. (4) A direction under subsection (1)(a) or (b) is enforceable on an application made by the Bank of England, by injunction or, in Scotland, by an order for specific performance under section 45 of the Court of Session Act 1988. (48P) (1) In this section “protected arrangements” means security interests, title transfer collateral arrangements, set-off arrangements and netting arrangements. (2) In subsection (1)— - “netting arrangements” means arrangements under which a number of claims or obligations can be converted into a net claim or obligation, and includes, in particular, “close-out” netting arrangements, under which actual or theoretical debts are calculated during the course of a contract for the purpose of enabling them to be set off against each other or to be converted into a net debt; - “security interests” means arrangements under which one person acquires, by way of security, an actual or contingent interest in the property of another; - “set-off arrangements” means arrangements under which two or more debts, claims or obligations can be set off against each other; - “title transfer collateral arrangements” means arrangements under which Person 1 transfers assets to Person 2 on terms providing for Person 2 to transfer assets if specified obligations are discharged. (3) The Treasury may by order— (a) restrict the exercise of any power within the scope of this paragraph in cases that involve, or where the exercise of the power might affect, protected arrangements; (b) impose conditions on the exercise of any power within the scope of this paragraph in cases that involve, or where the exercise of the power might affect, protected arrangements; (c) require any instrument that makes special bail-in provision to include specified provision, or provision to a specified effect, in respect of or for purposes connected with protected arrangements; (d) provide for an instrument to be void or voidable, or for other consequences to arise, if or in so far as the instrument is made or purported to be made in contravention of a provision of the order (or of another order under this section); (e) specify principles to which the Bank of England is to be required to have regard in exercising specified powers— (i) that involve protected arrangements, or (ii) where the exercise of the powers might affect protected arrangements. (4) References to exercising a power within the scope of paragraph (a) or (b) of subsection (3) are to making an instrument containing provision made in reliance on section 12A(3)(a) or 44B (special bail-in provision). (5) An order may apply to protected arrangements generally or only to arrangements— (a) of a specified kind, or (b) made or applying in specified circumstances. (6) An order may include provision for determining which arrangements are to be, or not to be, treated as protected arrangements; in particular, an order may provide for arrangements to be classified not according to their description by the parties but according to one or more indications of how they are treated, or are intended to be treated, in commercial practice. (7) In this section “arrangements” includes arrangements which— (a) are formed wholly or partly by one or more contracts or trusts; (b) arise under or are wholly or partly governed by the law of a country or territory outside the United Kingdom; (c) wholly or partly arise automatically as a matter of law; (d) involve any number of parties; (e) operate partly by reference to other arrangements between parties. (8) An order— (a) is to be made by statutory instrument, and (b) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament. (48Q) (1) A resolution instrument may provide for anything (including legal proceedings) that relates to anything affected by the instrument and is in the process of being done immediately before the instrument takes effect to be continued from the time the instrument takes effect. (2) A resolution instrument may modify references (express or implied) in an instrument or document. (3) A resolution instrument may require or permit any person to provide information and assistance to the Bank of England or another person, for the purposes of or in connection with provision made or to be made in that or another resolution instrument. (48R) (1) A resolution instrument may permit or require the execution, issue or delivery of an instrument. (2) A resolution instrument may provide for any provision in the instrument to have effect irrespective of— (a) whether an instrument has been produced, delivered, transferred or otherwise dealt with; (b) registration. (3) A resolution instrument may provide for the effect of an instrument executed, issued or delivered in accordance with the resolution instrument. (4) A resolution instrument may— (a) entitle a person to be registered in respect of a security; (b) require a person to effect registration. (48S) (1) Provision made in a resolution instrument takes effect despite any restriction arising by virtue of contract or legislation or in any other way. (2) A resolution instrument may include incidental, consequential or transitional provision. (3) In relying on subsection (2) a resolution instrument— (a) may make provision generally or only for specified purposes, cases or circumstances, and (b) may make different provision for different purposes, cases or circumstances. (48T) (1) As soon as is reasonably practicable after making a resolution instrument in respect of a bank the Bank of England must send a copy to— (a) the bank, (b) the Treasury, (c) the PRA, (d) the FCA, and (e) any other person specified in the code of practice under section 5. (2) As soon as is reasonably practicable after making a resolution instrument the Bank of England must publish a copy— (a) on the Bank's internet website, and (b) in two newspapers, chosen by the Bank of England to maximise the likelihood of the instrument coming to the attention of persons likely to be affected. (3) Where the Treasury receive a copy of a resolution instrument under subsection (1) they must lay a copy before Parliament. (48U) (1) This section applies where the Bank of England has made a resolution instrument (“the original instrument”) with respect to a bank. (2) The Bank of England may make, with respect to the bank, one or more resolution instruments designated by the Bank of England as supplemental resolution instruments. (3) Sections 7 and 8A do not apply to a supplemental resolution instrument (but it is to be treated in the same way as a resolution instrument for all other purposes, including for the purposes of the application of a power under this Part). (4) Before making a supplemental resolution instrument the Bank of England must consult— (a) the PRA, (b) the FCA, and (c) the Treasury. (5) The possibility of making a supplemental resolution instrument in reliance on subsection (2) is without prejudice to the possibility of making a new instrument in accordance with section 12A(2) (and not in reliance on subsection (2) above). (48V) (1) This section applies where the Bank of England has made a resolution instrument (“the original instrument”) providing for securities issued by a specified bank to be transferred to any person. (2) The Bank of England may make one or more onward transfer resolution instruments. (3) An onward transfer resolution instrument is a resolution instrument which— (a) provides for the transfer of— (i) securities which were issued by the bank before the original instrument and have been transferred by the original instrument or a supplemental resolution instrument, or (ii) securities which were issued by the bank after the original instrument; (b) makes other provision for the purposes of, or in connection with, the transfer of securities issued by the bank (whether the transfer has been or is to be effected by that instrument, by another instrument or otherwise). (4) An onward transfer resolution instrument may not transfer securities to the transferor under the original instrument. (5) Sections 7 and 8A do not apply to an onward transfer resolution instrument (but it is to be treated in the same way as any other resolution instrument for all other purposes, including for the purposes of the application of a power under this Part). (6) Before making an onward transfer resolution instrument the Bank of England must consult— (a) the PRA, (b) the FCA, and (c) the Treasury. (7) Section 48U applies where the Bank of England has made an onward transfer resolution instrument. (48W) (1) This section applies where the Bank of England has made an instrument (“the original instrument”) that is either— (a) a resolution instrument providing for the transfer of securities issued by a bank to a person (“the transferee”), or (b) an onward transfer resolution instrument (see section 48V) providing for the transfer of securities issued by a bank to a person (“the onward transferee”). (2) In a case falling within subsection (1)(a) the Bank of England may make one or more reverse transfer resolution instruments in respect of securities issued by the bank and held by the transferee (whether or not they were transferred by the original instrument). (3) In a case falling within subsection (1)(b), the Bank of England may make one or more reverse transfer resolution instruments in respect of securities issued by the bank and held by the onward transferee. (4) A reverse transfer resolution instrument is a resolution instrument which— (a) provides for transfer to the transferor under the original instrument; (b) makes other provision for the purposes of, or in connection with, the transfer of securities which are, or could be or could have been, transferred under paragraph (a). (5) Except where subsection (6) applies, the Bank of England may make a reverse transfer resolution instrument under subsection (2) only with the written consent of the transferee. (6) This subsection applies where the transferee is— (a) a bail-in administrator, or (b) a person who is not to be authorised to exercise any rights attaching to the securities except on the Bank of England's instructions. (7) The Bank of England may make a reverse transfer resolution instrument under subsection (3) only with the written consent of the onward transferee. (8) Sections 7 and 8A do not apply to a reverse transfer resolution instrument (but it is to be treated in the same way as any other resolution instrument for all other purposes including for the purposes of an application of a power under this Part). (9) Before making a reverse transfer resolution instrument the Bank of England must consult— (a) the PRA, (b) the FCA, and (c) the Treasury. (10) Section 48U applies where the Bank of England has made a reverse transfer resolution instrument.

Transfers of property

5

(1) After section 41 insert—

(41A) (1) This section applies where the Bank of England has made a resolution instrument. (2) The Bank of England may make one or more property transfer instruments in respect of property, rights or liabilities of the bank. (3) Sections 7 and 8A do not apply to a property transfer instrument under subsection (2). (4) Before making a property transfer instrument under subsection (2) the Bank of England must consult— (a) the PRA, (b) the FCA, and (c) the Treasury.

(2) In section 42 (supplemental property transfer instruments)—

(a) in subsection (1) for “12(2)” substitute “ 12(2) or 41A(2) ”;

(b) in subsection (4) for “and 8” substitute “ , 8 and 8A ”;

(3) After section 44 insert—

(44A) (1) This section applies where the Bank of England has made a property transfer instrument in accordance with section 41A(2) (“the original instrument”). (2) The Bank of England may make one or more bail-in reverse property transfer instruments in respect of property, rights or liabilities of the transferee under the original instrument. (3) A bail-in reverse property transfer instrument is a property transfer instrument which— (a) provides for a transfer to the transferor under the original instrument; (b) makes other provision for the purposes of, or in connection with, the transfer of property, rights or liabilities which are, or could be or could have been, transferred under paragraph (a) (whether the transfer has been or is to be effected by that instrument or otherwise). (4) The Bank of England may make a bail-in reverse property transfer instrument only with the written consent of the transferee under the original instrument. (5) Sections 7 and 8A do not apply to a bail-in reverse property transfer instrument (but it is to be treated in the same way as any other property transfer instrument for all other purposes, including for the purposes of the application of a power under this Part). (6) Before making a bail-in reverse property transfer instrument the Bank of England must consult— (a) the PRA, (b) the FCA, and (c) the Treasury. (7) Section 42 (supplemental instruments) applies where the Bank of England has made a bail-in reverse property transfer instrument. (44B) (1) A property transfer instrument under section 12(2) or 41A(2), or an associated supplemental property transfer instrument, may make special bail-in provision with respect to the bank (see section 48B). (2) The reference in subsection (1) to an “associated” supplemental property transfer instrument is to a supplemental property transfer instrument in relation to which the original instrument (as defined in section 42(1)) is a property transfer instrument under section 12(2) or 41A(2). (3) In the case of a property transfer instrument under section 12(2), or a supplemental property transfer instrument in relation to which the original instrument is a property transfer instrument under section 12(2), the power under subsection (1) to make the provision described in section 48B(1)(b) (see also rule 3(a) and (b) of section 48B(5)) includes power to make provision replacing a liability (of any form) of the bank mentioned in subsection (1) with a security (of any form or class) of the bridge bank mentioned in section 12(1). (4) Where securities of the bridge bank (“B”) are, as a result of subsection (3), held by a person other than the Bank of England, that does not prevent B from being regarded for the purposes of this Part (see particularly section 12(1)) as being wholly owned by the Bank of England, as long as the Bank of England continues to hold all the ordinary shares issued by B. (44C) (1) This section applies where the Bank of England makes a property transfer instrument containing provision made in reliance on section 44B. (2) The Bank of England must report to the Chancellor of the Exchequer stating the reasons why that provision was made in the case of the liabilities concerned. (3) If the provision departs from the insolvency treatment principles, the report must state the reasons why it does so. (4) The insolvency treatment principles are that where an instrument includes special bail-in provision— (a) the provision made by the instrument must be consistent with treating all the liabilities of the bank in accordance with the priority they would enjoy on a liquidation, and (b) any creditors who would have equal priority on a liquidation are to bear losses on an equal footing with each other. (5) A report must comply with any other requirements as to content that may be specified by the Treasury. (6) A report must be made as soon as reasonably practicable after the making of the property transfer instrument to which it relates. (7) The Chancellor of the Exchequer must lay a copy of each report under subsection (2) before Parliament.

(4) In section 48A (creation of liabilities), in subsection (1), after “44(4)(c)” insert “ , 44A(3)(b) ”.

Compensation

6

(1) In section 49 (orders)—

(a) in subsection (1), for “three” substitute “ four ” and for “and property transfer instruments” substitute “ , property transfer instruments and orders and resolution instruments ”;

(b) after subsection (2) insert—

(2A) A “bail-in compensation order” is an order establishing a scheme for determining, in accordance with section 52A, whether any transferors or others should be paid compensation.

(2) In section 52 (transfer to bridge bank), in subsection (3)(b), for “specified classes of creditor,” substitute “ persons of a specified description, ”.

(3) After section 52 insert—

(52A) (1) Subsection (2) applies if the Bank of England makes— (a) a resolution instrument under section 12A(2), or (b) a property transfer instrument under section 41A(2). (2) The Treasury must make a bail-in compensation order (see section 49(2A)). (3) A bail-in compensation order may include provision for— (a) an independent valuer (in which case sections 54 to 56 are to apply); (b) valuation principles (in which case section 57(2) to (5) is to apply).

(4) In section 53 (onward and reverse transfers), in subsection (1)—

(a) before paragraph (za) insert—

(zza) the Bank of England makes a supplemental share transfer instrument under section 26,

;

(b) after paragraph (za) insert—

(zb) the Treasury makes a supplemental share transfer order under section 27,

;

(dza) the Bank of England makes a supplemental property transfer instrument under section 42,

;

(d) after paragraph (f) insert—

(fa) the Bank of England makes a reverse property transfer instrument under section 44A(2),

;

(e) omit the “or” after paragraph (g);

(f) after paragraph (h) insert—

(i) the Bank of England makes a supplemental resolution instrument under section 48U, (j) the Bank of England makes an onward transfer resolution instrument under section 48V(2), or (k) the Bank of England makes a reverse transfer resolution instrument under section 48W(2) or (3).

;

(g) in the heading, after “transfers” insert “ etc ”.

(5) In section 54 (independent valuer)—

(a) in subsection (1), after “compensation scheme order” insert “ or bail-in compensation order ”;

(b) in subsection (4)(b), after “order” insert “ or bail-in compensation order ”.

(6) In section 56 (independent valuer: money), in subsection (2)(b) for “or third party compensation order” substitute “ , third party compensation order or bail-in compensation order ”.

(7) In section 57 (valuation principles), in subsection (1), after “order” insert “ or bail-in compensation order ”.

(8) After section 60 insert—

(60A) (1) The Treasury may make regulations about compensation arrangements in the case of— (a) resolution instruments under section 12A(2) and supplemental resolution instruments under section 48U(2), and (b) instruments (made under any provision) that include special bail-in provision. (2) Regulations may— (a) require a resolution fund order, a compensation scheme order, a third party compensation order or a bail-in compensation order to include provision of a specified kind or to specified effect; (b) make provision that is to be treated as forming part of any such order (whether (i) generally, (ii) only if applied, (iii) unless disapplied, or (iv) subject to express modification). (3) Regulations may provide for whether compensation is to be paid, and if so what amount is to be paid, to be determined by reference to any factors or combination of factors; in particular, the regulations may provide for entitlement— (a) to depend in part upon the amounts which are or may be payable under a resolution fund order; (b) to be contingent upon the occurrence or non-occurrence of specified events; (c) to be determined wholly or partly by an independent valuer (within the meaning of sections 54 to 56) appointed in accordance with a compensation scheme order or bail-in compensation order. (4) Regulations may make provision about payment including, in particular, provision for payments— (a) on account subject to terms and conditions; (b) by instalment. (5) Regulations— (a) are to be made by statutory instrument, and (b) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament. (60B) (1) In making regulations under section 60A the Treasury must, in particular, have regard to the desirability of ensuring that pre-resolution shareholders and creditors of a bank do not receive less favourable treatment than they would have received had the bank entered insolvency immediately before the coming into effect of the initial instrument. (2) References in this section to the initial instrument are— (a) in relation to compensation arrangements in the case of property transfer instruments under section 12(2), to the first instrument to be made under that provision with respect to the bank; (b) in relation to compensation arrangements in other cases, to the first resolution instrument to be made under section 12A with respect to the bank. (3) The “pre-resolution shareholders and creditors” of a bank are the persons who held securities issued by the bank, or were creditors of the bank, immediately before the coming into effect of the initial instrument. (4) References in this section to insolvency include a reference to (i) liquidation, (ii) bank insolvency, (iii) administration, (iv) bank administration, (v) receivership, (vi) composition with creditors, and (vii) a scheme of arrangement.

(9) In section 61(1) (sources of compensation),—

(a) omit the “and” at the end of paragraph (c);

(b) after paragraph (c) insert—

(ca) bail-in compensation orders,

;

(e) regulations under section 60A.

(10) In section 62(1) (procedure), omit the “and” at the end of paragraph (b), and after that paragraph insert—

(ba) bail-in compensation orders, and

Groups

7

(1) After section 81B insert—

(81BA) (1) The Bank of England may exercise a stabilisation power in respect of a banking group company in accordance with section 12A(2) if the following conditions are met. (2) Condition 1 is that the PRA is satisfied that the general conditions for the exercise of a stabilisation power set out in section 7 are met in respect of a bank in the same group. (3) Condition 2 is that the Bank of England is satisfied that the exercise of the power in respect of the banking group company is necessary, having regard to the public interest in— (a) the stability of the financial systems of the United Kingdom, (b) the maintenance of public confidence in the stability of those systems, (c) the protection of depositors, or (d) the protection of any client assets that may be affected. (4) Condition 3 is that the banking group company is an undertaking incorporated in, or formed under the law of any part of, the United Kingdom. (5) Before determining whether Condition 2 is met, and if so how to react, the Bank of England must consult— (a) the Treasury, (b) the PRA, and (c) the FCA. (6) In exercising a stabilisation power in reliance on this section the Bank of England must have regard to the need to minimise the effect of the exercise of the power on other undertakings in the same group.

(2) After section 81C insert—

(81CA) (1) This section applies where the Bank of England has power under section 81BA to exercise a stabilisation power in respect of a banking group company. (2) The provisions relating to the stabilisation powers and the bank administration procedure contained in this Act (except sections 7 and 8A) and any other enactment apply (with any necessary modifications) as if the banking group company were a bank. (3) Where the banking group company mentioned in subsection (1) is a parent undertaking of the bank mentioned in section 81BA(2) (“the bank”)— (a) the provisions in this Act relating to resolution instruments are to be read in accordance with the general rule in subsection (4), but (b) that is subject to the modifications in subsection (5); and provisions in this Act and any other enactment are to be read with any modifications that may be necessary as a result of paragraphs (a) and (b). (4) The general rule is that the provisions in this Act relating to resolution instruments (including supplemental resolution instruments) are to be read (so far as the context permits)— (a) as applying in relation to the bank as they apply in relation to the parent undertaking, and (b) so, in particular, as allowing any provision that may be made in a resolution instrument in relation to the parent undertaking to be made (also or instead) in relation to the bank. (5) Where the banking group company mentioned in subsection (1) is a parent undertaking of the bank mentioned in section 81BA(2) (“the bank”)— (a) section 41A (transfer of property subsequent to resolution instrument) applies as if the reference in subsection (2) to the bank were to the parent undertaking, the bank and any other bank which is or was in the same group; (b) section 48V (onward transfer)— (i) applies as if the references in subsection (3) to “the bank” included the bank, the parent undertaking and any other bank which is or was in the same group, and with the omission of subsection (4) of that section, and (ii) is to be read as permitting the transfer of securities only if they are held by (or for the benefit of) the parent undertaking or a subsidiary company of the parent undertaking; (c) section 48W (reverse transfer) applies as if the references in subsections (2) and (3) to “the bank” included the bank, the parent undertaking and any other bank which is or was in the same group. (6) Where section 48B (special bail-in provision) applies in accordance with subsection (4) (so that section 48B applies in relation to the bank mentioned in section 81BA(2) as it applies in relation to the parent undertaking mentioned in subsection (3)), the provision that may be made in accordance with section 48B(1)(b) (see also rule 3(a) and (b) of section 48B(5)) includes provision replacing a liability (of any form) of that bank with a security (of any form or class) of the parent undertaking. (7) Where the banking group company mentioned in subsection (1) is a parent undertaking of the bank mentioned in section 81BA(2)— (a) section 214B of the Financial Services and Markets Act 2000 (contribution to costs of special resolution regime) applies, and (b) the reference in subsection (1)(b) of that section to the bank, and later references in that section, are treated as including references to any other bank which is a subsidiary undertaking of the parent undertaking (but not the parent undertaking itself).

(3) In section 81D (interpretation: “banking group company” etc)—

(a) in subsection (6), for “, 81C” substitute “ to 81CA ”;

(b) in subsection (7) for “section 81B” substitute “ sections 81B to 81CA ”.

Banks regulated by the Financial Conduct Authority

8

In section 83A (modifications of Part 1 as it applies to banks not regulated by the Prudential Regulation Authority), in the table in subsection (2) insert the following entries at the appropriate places—

Section 8A	Subsection (3)(a) does not apply unless the bank has as a member of its immediate group a PRA-authorised person.”
“Section 41A	Subsection (4)(a) does not apply unless the bank has as a member of its immediate group a PRA-authorised person.”
---	---
“Section 44A	Subsection (6)(a) does not apply unless the bank has as a member of its immediate group a PRA-authorised person.”
---	---
“Section 48H	Subsection (5)(a) does not apply unless the bank has as a member of its immediate group a PRA-authorised person.
---	---
Section 48U	Subsection (4)(a) does not apply unless the bank has as a member of its immediate group a PRA-authorised person.
Section 48V	Subsection (6)(a) does not apply unless the bank has as a member of its immediate group a PRA-authorised person.
Section 48W	Subsection (9)(a) does not apply unless the bank has as a member of its immediate group a PRA-authorised person.”
“Section 81BA	Subsection (5)(b) does not apply unless the bank has as a member of its immediate group a PRA-authorised person.
---	---

Recognised central counterparties

9

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Insolvency proceedings

10

In section 120 (notice to Prudential Regulation Authority of preliminary steps to certain insolvency proceedings)—

(a) in subsection (7)(b)(ii), after “Part 1” insert “ (and Condition 5 has been met, if applicable) ”;

(b) after subsection (8) insert—

(8A) Condition 5— (a) applies only if a resolution instrument has been made under section 12A with respect to the bank in the 3 months ending with the date on which the PRA receives the notification under Condition 1, and (b) is that the Bank of England has informed the person who gave the notice that it consents to the insolvency procedure to which the notice relates going ahead.

;

, and (d) if Condition 5 applies, the Bank of England must, within the period in Condition 3(a), inform the person who gave the notice whether or not it consents to the insolvency procedure to which the notice relates going ahead.

;

(d) after subsection (10) insert—

(11) References in this section to the insolvency procedure to which the notice relates are to the procedure for the determination, resolution or appointment in question (see subsections (1) to (4)).

State aid

11

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other amendments of the Act

12

(1) Section 1 (overview) is amended as follows.

(2) In subsection (2)(a), for “three” substitute “ four ”.

(3) For subsection (3) substitute—

(3) The four “stabilisation options” are— (a) transfer to a private sector purchaser (section 11), (b) transfer to a bridge bank (section 12), (c) the bail-in option (section 12A), and (d) transfer to temporary public ownership (section 13).

(4) In subsection (4)—

(a) for “three” substitute “ four ”;

(b) before paragraph (a) insert—

(za) the resolution instrument powers (sections 12A(2) and 48U to 48W),

;

13

In section 13 (temporary public ownership), in subsection (1), for “third” substitute “ fourth ”.

14

In section 17 (share transfers: effect)—

(a) in subsection (1), after “order” insert, “ or by a resolution instrument ”;

(b) in subsection (5), after “order” insert “ or a resolution instrument ”;

15

In section 18 (share transfers: continuity), after subsection (5) insert—

(6) This section applies to a resolution instrument as it applies to a share transfer instrument; and in relation to a resolution instrument references in this section to a “transfer” are to a transfer of securities (whether made by that or another resolution instrument) and “transferor” and “transferee” are to be read accordingly.

16

In section 44 (reverse property transfer)—

(a) in subsection (2), after “more” insert “ bridge bank ”;

(b) in subsection (3), after “more” insert “ bridge bank ”;

(d) in subsection (4A)—

(i) after “make a” insert “ bridge bank ”, and

(ii) in paragraph (b), for “the reverse” substitute “ the bridge bank reverse ”;

(e) in subsection (5), for “a reverse” substitute “ a bridge bank reverse ”;

(f) in subsection (6), for “a reverse” substitute “ a bridge bank reverse ”;

(g) in subsection (7), for “a reverse” substitute “ a bridge bank reverse ”;

(h) in the heading, for “Reverse” substitute “ Bridge bank: reverse ”.

17

In section 63 (general continuity obligation: property transfers), in subsection (1)(a), for “or 12(2)” substitute “ , 12(2) or 41A(2) ”.

18

In section 66 (general continuity obligation: share transfers)—

(a) in subsection (1)(a), after “13(2)” insert “ , or which falls within subsection (1A) ”;

(b) in subsection (1)(d)(i), after “11(2)(a)” insert “ , or in a case falling within subsection (1A) ”;

(1A) A bank falls within this subsection if a resolution instrument (or supplemental resolution instrument) has changed the ownership of the bank (wholly or partly) by providing for the transfer, cancellation or conversion from one form or class to another of securities issued by the bank (and the reference in subsection (1)(b) to “the transfer” includes such a cancellation or conversion).

19

In section 67 (special continuity obligation: share transfers), in subsection (4)(c), after “order” insert “ or resolution instrument ”.

20

In section 68 (continuity obligations: onward share transfers), in subsection (1)(a), after “transferred by” insert “ a resolution instrument under section 12A(2) or supplemental resolution instrument under section 48U(2) or a ”.

21

In section 71 (pensions), in subsection (1)—

(a) omit the “and” at the end of paragraph (b);

(b) after paragraph (c) insert

, and (d) resolution instruments.

22

In section 72 (enforcement), in subsection (1)—

(a) omit the “or” at the end of paragraph (b);

(b) after paragraph (c) insert

, or (d) a resolution instrument.

23

In section 73 (disputes), in subsection (1)—

(a) omit the “and” at the end of paragraph (b);

(b) after paragraph (c) insert

, and (d) resolution instruments.

24

In section 74 (tax), in subsection (6), for “or 45” substitute “ , 45, 48U or 48V ”.

25

After section 80 insert—

(80A) (1) This section applies where the Bank of England makes one or more resolution instruments under section 12A(2) in respect of a bank. (2) The Bank of England must, on request by the Treasury, report to the Chancellor of the Exchequer about— (a) the exercise of the power to make a resolution instrument under section 12A(2), (b) the activities of the bank, and (c) any other matters in relation to the bank that the Treasury may specify. (3) In relation to the matters in subsection (2)(a) and (b), the report must comply with any requirements that the Treasury may specify. (4) The Chancellor of the Exchequer must lay a copy of each report under subsection (2) before Parliament.

26

In section 81A (accounting information to be included in reports under sections 80 and 81)—

(a) in subsection (1), for “or 81” substitute “ , 80A(2)(b) or 81 ”;

(b) in the heading, for “and 81” substitute “ , 80A(2)(b) and 81 ”.

27

In section 85 (temporary public ownership), in subsection (1), for “third” substitute “ fourth ”.

28

In section 136 (overview), in the Table in subsection (3), for “152” substitute “ 152A ”.

29

After section 152 insert—

(152A) (1) This section applies where the Bank of England— (a) makes a resolution instrument that transfers securities issued by a bank (or a bank's parent undertaking), in accordance with section 12A(2), and (b) later makes a property transfer instrument from the bank or from another bank which is or was in the same group as the bank, in accordance with section 41A(2). (2) This Part applies to the transferor under the property transfer instrument made in accordance with section 41A(2) as to the transferor under a property transfer instrument made in accordance with section 12(2). (3) For that purpose this Part applies with any modifications specified by the Treasury in regulations; and any regulations— (a) are to be made by statutory instrument, and (b) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.

30

In section 220 (insolvency etc), after subsection (4) insert—

(4A) The fact that ownership of an authorised bank is transferred or otherwise changed as a result of a resolution instrument (or an instrument treated as a resolution instrument) does not itself prevent the bank from relying on section 213.

31

In section 259 (statutory instruments)—

(a) in the Table in subsection (3), in Part 1, in the entry relating to section 60 for “Third party compensation” substitute “ Third party compensation: partial property transfers ”;

(b) in the Table in subsection (3), in Part 1, at the appropriate places insert—

48F(1) and (2)	Power to amend definition of “excluded liabilities”	Draft affirmative resolution
48G	Insolvency treatment principles	Draft affirmative resolution
48P	Safeguarding of certain financial arrangements	Draft affirmative resolution
52A	Bail-in compensation orders	Draft affirmative resolution”
“60A	Third party compensation: instruments containing special bail-in provision	Draft affirmative resolution
---	---	---

;

152A	Property transfer from transferred institution	Draft affirmative resolution

;

(d) in subsection (5), after paragraph (d) insert—

(da) section 60A (special resolution regime: instruments containing special bail-in provision),

;

(e) in subsection (5), after paragraph (k) insert—

(ka) section 152A (bank administration: property transfer from transferred institution),

32

In section 261 (index of defined terms), in the Table, at the appropriate places insert—

Bail-in compensation order	49”
“Resolution instrument	12A”
---	---
“Special bail-in provision	48B
---	---

PART 2 — Modification of Investment Bank Special Administration Regulations 2011

33

(1) This paragraph modifies the application of the Investment Bank Special Administration Regulations 2011 (S.I. 2011/245) (“the regulations”) in cases where a resolution instrument has been made under section 12A of the Banking Act 2009 with respect to the investment bank in the relevant 3-month period.

(2) In sub-paragraph (1) “the relevant 3-month period” means the 3 months ending with the date on which the FCA receives the notification under Condition 1 in regulation 8 of the regulations.

(3) In their application to those cases, the regulations have effect with the modifications in sub-paragraph (4); and any enactment that refers to the regulations is to be read accordingly.

(4) In regulation 8 (in its application to those cases)—

(a) in paragraph (5)(c)(ii), for “appropriate regulator” substitute “ Bank of England ” and after “notice” insert “ and the appropriate regulator ”;

(b) in paragraph (6), omit sub-paragraph (a) (but continue to read “that” in sub-paragraph (b) as a reference to the insolvency procedure to which the notice relates);

(6A) Where the FCA receives notice under Condition 1, it must also inform the Bank of England of the contents of the notice. (6B) Where the Bank of England receives notice under paragraph (6A), it must, within the period in Condition 3, inform the person who gave the notice and the appropriate regulator whether or not it consents to the insolvency procedure to which the notice relates going ahead.

SCHEDULE 3

Financial Services and Markets Act 2000

1

(1) Section 59 of FSMA 2000 (approval for particular arrangements) is amended as follows.

(2) In subsection (1), for the words from “the appropriate regulator” to the end substitute “ that person is acting in accordance with an approval given by the appropriate regulator under this section. ”

(3) In subsection (2), for the words from “the appropriate regulator” to the end substitute “ that person is acting in accordance with an approval given by the appropriate regulator under this section. ”

2

(1) Section 59A of FSMA 2000 (specifying functions as controlled functions: supplementary) is amended as follows.

(2) In subsection (1)(a) and (b), for “significant-influence” substitute “ senior management ”.

(3) After subsection (3) insert—

(3A) Senior management function” has the meaning given by section 59ZA.

3

(1) Section 63 of FSMA 2000 (withdrawal of approval) is amended as follows.

(2) In subsection (1A)(a), for “significant-influence function” substitute “ relevant senior management function ”.

(3) For subsection (1B) substitute—

(1B) In subsection (1A) “relevant senior management function” means a function which the PRA is satisfied is a senior management function as defined in section 59ZA (whether or not the function has been designated as such by the FCA).

4

In section 63A of FSMA 2000 (power to impose penalties), in subsection (2), for paragraph (b) substitute—

(b) P, when performing the function, is not acting in accordance with an approval given under section 59.

5

(1) Section 66 of FSMA 2000 (disciplinary powers) is amended as follows.

(2) In subsection (3), for paragraph (ab) (and the “or” following it) substitute—

(ab) impose, for such period as it considers appropriate, any conditions in relation to any such approval which it considers appropriate; (ac) limit the period for which any such approval is to have effect;

(3) In subsection (3A), for “restriction” substitute “ condition ”.

(4) In subsection (3B), for “or restriction” substitute “ , condition or limitation ”.

(5) In subsection (3C), for “restriction” substitute “ condition ”.

(6) In subsection (3D)—

(a) in paragraph (a), for “or restriction” substitute “ , condition or limitation ”,

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

(d) after that paragraph insert—

(c) vary a limitation so as to increase the period for which the approval is to have effect.

(7) In subsection (9), for “restriction” substitute “ condition ”.

6

(1) Section 67 of FSMA 2000 (disciplinary measures: procedure and right to refer to Tribunal) is amended as follows.

(2) In subsection (1), for “or (ab)” substitute “ , (ab) or (ac) ”.

(3) In subsection (2A), for “restriction” (in both places) substitute “ condition ”.

(4) After subsection (2A) insert—

(2B) A warning notice about a proposal to limit the period for which an approval is to have effect must state the length of that period.

(5) In subsection (4), for “or (ab)” substitute “ , (ab) or (ac) ”.

(6) In subsection (5A), for “restriction” (in both places) substitute “ condition ”.

(7) After subsection (5A) insert—

(5B) A decision notice about limiting the period for which an approval is to have effect must state the length of that period.

(8) In subsection (7), for “or (ab)” substitute “ , (ab) or (ac) ”.

7

In section 69 of FSMA 2000 (statement of policy), in subsection (1)—

(a) in paragraph (a), for “or restrictions” substitute “ , conditions or limitations ”;

(b) omit the “and” at the end of paragraph (b);

(d) at the end of paragraph (c) insert

; and (d) the period for which approvals under section 59 are to have effect as a result of a limitation under section 66.

8

In section 138A of FSMA 2000 (modification or waiver of rules), in subsection (2), before paragraph (a) insert—

(za) rules made by either regulator under section 64A (rules of conduct);

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