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The Bank Recovery and Resolution (No. 2) Order 2014

Type Statutory-Instrument

Publication 2014-12-18

Last updated 2026-01-01

State In force

Department King's Printer of Acts of Parliament

Source legislation.gov.uk

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(2) If the UK parent undertaking submits to the appropriate regulator an application for authorisation of the amendment (“the amendment application”), the appropriate regulator must treat the amendment application as if it were an application for authorisation of a group financial support agreement.

(3) Articles 84 to 89 apply for that purpose, but have effect in relation to the amendment application as if—

(a) each reference to a group financial support agreement were a reference to the amendment set out in the amendment application; and

(b) each reference to the application were a reference to the amendment application.

CHAPTER 2 — Authorisation of agreement for group financial support where neither the PRA nor the FCA is the consolidating supervisor

Application and interpretation of Chapter 2

91

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Review of group financial support agreement and decision on authorisation

92

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Joint decision with other competent authorities

93

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References to EBA

94

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Requesting the assistance of EBA

95

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Amendment of authorised agreement

96

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CHAPTER 3 — Approval of authorised agreements by the members of a UK group entity

Interpretation of Chapter 3

97

(1) In this Chapter—

“authorised agreement” means a group financial support agreement (within the meaning given in Chapter 1) authorised by the PRA or FCA, and includes any amendment authorised by the PRA or FCA;

“director” includes—a director of a company;a member of a limited liability partnership; anda director of a building society established under the Building Societies Act 1986 ;

“member” includes—a shareholder of a company;a member of a limited liability partnership; anda shareholding or borrowing member of a building society established under the Building Societies Act 1986 (“shareholding member” and “borrowing member” have the meaning given in paragraph 5(2) of Schedule 2 to that Act);

“ordinary resolution”—in relation to a resolution passed at a meeting on a show of hands, means a resolution passed by a simple majority of the votes cast by those entitled to vote;in relation to a resolution passed on a poll taken at a meeting, means a resolution passed by members representing a simple majority of the total voting rights of the members who (being entitled to do so) vote on the resolution;in relation to a written resolution, means a resolution passed by members representing a simple majority of the total voting rights of those eligible to vote on a written resolution; and

“UK group entity”, in relation to an authorised agreement, means—the relevant parent undertaking, if it is set up in the United Kingdom;a group subsidiary set up in the United Kingdom.

(2) In this article, for the interpretation of “UK group entity”, the expressions “group subsidiary” and “relevant parent undertaking” have the meaning given in Chapter 1.

Requirement for approval of authorised agreement

98

(1) An authorised agreement entered into by a UK group entity is only valid in respect of that entity if its members have approved the agreement in accordance with this article.

(2) An authorised agreement is deemed to be approved by the members of a UK group entity if an ordinary resolution approving the agreement is passed by the members—

(a) present and voting either in person or by proxy at a meeting; or

(b) by way of a written resolution proposed by the directors of the entity.

(3) An ordinary resolution may not be passed unless the directors of the entity make available to its members a memorandum setting out the proposed resolution and the terms of the authorised agreement—

(a) in the case of a written resolution, by sending the memorandum to every member at or before the time at which the proposed resolution is submitted to the members;

(b) in the case of a resolution at a meeting, by making the memorandum available for inspection by the members—

(i) at the entity's registered office for not less than fifteen days ending with the date of the meeting; and

(ii) at the meeting itself.

Revocation of authorised agreement

99

(1) This article applies where a UK group entity has entered into an authorised agreement which has been approved in accordance with article 98.

(2) The authorised agreement remains valid in respect of the UK group entity for as long as the members of the entity have not revoked their approval in accordance with this article.

(3) Paragraph (4) applies where at least five per cent. of the members of the entity require the directors to—

(a) call a general meeting of the entity to determine whether their approval of the authorised agreement should be revoked; or

(b) circulate a written resolution proposing that the approval should be revoked.

(4) The members' approval of the authorised agreement is revoked if an ordinary resolution revoking it is passed by the members—

(a) present and voting either in person or by proxy at a general meeting; or

(b) by way of a written resolution proposed by the directors.

(5) An ordinary resolution may not be passed unless the directors of the entity make available to its members a memorandum setting out the proposed resolution—

(a) in the case of a written resolution, by sending the memorandum to every member at or before the time at which the proposed resolution is submitted to the members;

(b) in the case of a resolution at a general meeting, by making the memorandum available for inspection by the members—

(i) at the entity's registered office for not less than fifteen days ending with the date of the meeting; and

(ii) at the meeting itself.

Obligation to provide annual report

100

(1) The directors of the UK group entity which has entered into an authorised agreement must prepare an annual report on the performance of the agreement and the implementation of any decision taken pursuant to it.

(2) The directors must deliver a copy of the annual report to every member of the entity, electronically or by other means, no later than the first and each subsequent anniversary of the date on which the entity enters into the agreement.

CHAPTER 4 — Provision of group financial support

Interpretation of Chapter 4

101

(1) In this Chapter—

“authorised agreement” has the same meaning as in Chapter 3;

“conditions for financial support” has the same meaning as in Chapter 1;

“financial support” has the same meaning as in Chapter 1;

“group entity” means a relevant parent undertaking or group subsidiary which has entered into a group financial support agreement authorised by the PRA or FCA (“the agreement”);

“intended recipient” means the group institution named in a relevant notice as the recipient of the financial support referred to in the notice;

“notifying group entity” means the group entity which has given a relevant notice;

“relevant competent authority” means a competent authority, other than the consolidating supervisor, which has authorised a group entity;

“relevant notice” means a notice— given by a group entity;stating an intention to provide financial support under an authorised agreement; andrequired by rules made by the PRA or FCA under Part 9A of FSMA;

“UK group entity” means a group entity set up in the United Kingdom.

(2) In this article, for the interpretation of “group entity” and “intended recipient”, the expressions “group subsidiary”, “group financial support agreement”, “group institution” and “relevant parent undertaking” have the meaning given in Chapter 1.

Relevant notice from UK group entity: decision by the PRA or FCA

102

(1) Where the PRA or FCA receives a relevant notice from a UK group entity, it must, within five business days beginning with the date on which it receives the notice, decide whether to—

(a) agree the provision of the financial support to which the notice refers; or

(b) prohibit or restrict the provision of that financial support on the ground that the conditions for financial support have not been met.

(2) The regulator must give written notice of its decision, including a reasoned account of the decision—

(a) to the notifying group entity; and

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

(d) unless the regulator is the competent authority for the intended recipient, to that authority; and

(e) where the regulator has authorised the intended recipient, to the intended recipient.

(3) In this article “the regulator”—

(a) where the relevant notice is received from a PRA-authorised person, means the PRA; and

(b) where the relevant notice is received from any other UK group entity, means the FCA.

(4) In this article “business day” has the same meaning as in section 70D(1) of the Banking Act 2009 .

Duties of consolidating supervisor where financial support agreed, prohibited or restricted

103

(1) This article applies where the PRA or FCA is the consolidating supervisor.

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) Paragraph (4) applies where—

(a) a competent authority prohibits or restricts the provision of financial support to which a relevant notice refers;

(b) the group recovery plan refers to the provision of group financial support; and

(i) the relevant competent authority for the intended recipient asks the appropriate regulator for a re-assessment of the plan; or

(ii) the appropriate regulator is the competent authority for the intended recipient.

(4) The appropriate regulator—

(a) must consider whether to require the group recovery plan to be reviewed under article 34; and

(b) if the appropriate regulator is the competent authority for the intended recipient and the intended recipient has drawn up a recovery plan on an individual basis, must consider whether to require that plan to be reviewed under article 33.

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Re-assessment of recovery plans by the PRA or FCA where it is not the consolidating supervisor

104

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Requesting the assistance of EBA

105

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Reciprocal support

106

Where the PRA or FCA agrees the provision, with or without restrictions, of the financial support to which a relevant notice refers, the notifying group entity may agree with the intended recipient of that support to receive financial support from the intended recipient.

PART 8 — Early intervention

CHAPTER 1 — Early intervention with respect to an institution

Interpretation of Chapter 1

107

In this Chapter—

“measure for early intervention” means a relevant measure which may be taken by the PRA or FCA in exercise of its powers under FSMA with the object of addressing the conditions for early intervention; ...

“relevant institution” means an institution which is authorised by the PRA or FCA and is not part of a group subject to supervision on a consolidated basis in accordance with the capital requirements regulation and CRR rules , and

“relevant measure” means a measure— requiring an institution to—implement one or more of the arrangements or measures set out in the recovery plan; orreview and (if appropriate) amend a recovery plan in accordance with article 33 when the circumstances that led to early intervention are different from the assumptions set out in the initial recovery plan and implement one or more of the arrangements or measures set out in the updated plan within a specified timeframe and to ensure that the conditions referred to in the introductory phase no longer apply;requiring the management body of an institution to examine the situation, identify measures to overcome any problems identified and draw up an action programme to overcome those problems and a timetable for its implementation;requiring the management body of an institution to convene, or, if the management body fails to comply with the requirement, to convene directly, a meeting of shareholders of the institution, and in both cases setting the agenda and requiring certain decisions to be considered for adoption by the shareholders;requiring any person to be removed or replaced if an approval is withdrawn from that person under section 63 of FSMA;requiring the management body of an institution to draw up a plan for negotiation on restructuring of debt with some or all of its creditors in accordance with any recovery plan;requiring changes to the institution's business strategy;requiring changes to the legal or operational structures of the institution; oracquiring (including through on-site inspections) and providing to the Bank all the information necessary to update the resolution plan and preparing for the possible resolution of the institution and for valuation of the assets and liabilities of the institution in accordance with section 6E or 48X of the Banking Act 2009;

“temporary manager” means a temporary manager appointed by the appropriate regulator under section 71C of FSMA.

Notice that institution meets the conditions for early intervention

108

(1) The appropriate regulator must notify the Bank without delay if it determines that a relevant institution meets the conditions for early intervention or the appointment of a temporary manager.

(2) The PRA and the FCA may each make technical standards relating to the circumstances in which a relevant institution may be taken as meeting the conditions for early intervention.

Deadline for compliance with measure for early intervention

109

The appropriate regulator may not take a measure for early intervention in respect of a relevant institution without prescribing a date before which the action required to be taken in compliance with the measure is to be completed.

CHAPTER 2 — Early intervention with respect to groups where the PRA or FCA is the consolidating supervisor

Application and interpretation of Chapter 2

110

(1) This Chapter applies where the PRA or FCA is the consolidating supervisor in relation to a relevant group.

(2) In this Chapter—

“measure for early intervention”—... has the same meaning as in Chapter 1;...

temporary manager” means—in relation to a UK group entity, a temporary manager appointed by the appropriate regulator under section 71C of FSMA;...

“UK group entity” means—the UK parent undertaking...;a group subsidiary which is an institution authorised by the PRA or FCA.

Procedure for early intervention in respect of a UK group entity

111

(1) This article applies where the appropriate regulator proposes to take a measure for early intervention or appoint a temporary manager in respect of a UK group entity.

(2) The appropriate regulator must without delay give notice of its proposal to the Bank....

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) The appropriate regulator must give the Bank notice of a decision to take a measure for early intervention or to appoint a temporary manager in respect of a UK group entity.

(5) The appropriate regulator may not take a measure for early intervention without prescribing a date before which the action required to be taken in compliance with the measure is to be completed.

(6) The appropriate regulator must give the UK group entity referred to in a notice given under paragraph (4) and the UK parent undertaking, if it is not the entity concerned, written notice of its decision to take a measure for early intervention or to appoint a temporary manager, including a reasoned account of the decision.

Procedure for early intervention in respect of a non-UK group entity

112

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Joint decisions about early intervention

113

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References to EBA

114

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Requesting the assistance of EBA

115

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CHAPTER 3 — Early intervention with respect to groups where neither the PRA nor the FCA is the consolidating supervisor

Application and interpretation of Chapter 3

116

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Procedure for early intervention in respect of a UK group entity

117

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Joint decisions about early intervention

118

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References to EBA

119

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Requesting the assistance of EBA

120

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PART 9 — Minimum requirement for own funds and eligible liabilities

CHAPTER 1 — Determination of minimum requirement for an institution

Interpretation of Chapter 1

121

(1) In this Chapter—

“covered bond” means a regulated covered bond within the meaning of regulation 1(2) of the Regulated Covered Bonds Regulations 2008; and;

“relevant institution” means an institution, other than a mortgage credit institution, which is authorised by the PRA or FCA and is not part of a group subject to supervision on a consolidated basis in accordance with the capital requirements regulation and CRR rules.

(2) “Mortgage credit institution” means an institution—

(a) which does not have permission under Part 4A of FSMA to carry on the regulated activity of accepting deposits (within the meaning given by section 22 of that Act, read with Schedule 2 and any order under section 22); and

(b) whose lending—

(i) relates to an agreement under which the obligation of the borrower to repay is secured, or is to be secured, by a legal mortgage on land; and

(ii) is financed by covered bonds .

(3) In this Chapter, references to the “minimum requirement for own funds and eligible liabilities” include any transitional minimum requirement which the Bank determines that an institution is required to hold in accordance with article 123(1C).

Duties of the Bank in relation to minimum requirement

122

(1) The Bank must exercise the powers conferred by section 3A of the Banking Act 2009 (removal of impediments to the exercise of stabilisation powers etc)—

(a) to ensure that a relevant institution is required at all times to maintain a minimum requirement for own funds and eligible liabilities ...; and

(b) with the object of ensuring that at all times the institution meets the minimum requirement specified in a direction given for that purpose.

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Determination of minimum requirement

123

(1) This article applies for the purpose of the determination by the Bank of the minimum requirement for own funds and eligible liabilities.

(1A) The Bank may determine a transitional period for a relevant institution, during which time a transitional minimum requirement applies.

(1B) The Bank may amend or revoke a determination under paragraph (1A), or determine a further transitional period in relation to a relevant institution, at any time including where a previous transitional period has expired.

(1C) Where the Bank determines a transitional period under paragraph (1A) or paragraph (1B), it must determine the transitional minimum requirement that applies during that period.

(1D) The Bank may amend or revoke any determination under paragraph (1C) at any time.

(2) The amount of the relevant institution's total liabilities must include total liabilities under any derivative contracts held by the institution.

(3) An assessment of total liabilities under a derivative contract must take account of the rights of the parties to the contract to set off or net under a title transfer collateral arrangement, set-off arrangement or netting arrangement (within the meaning given by section 48(1)(b), (c) and (d) of the Banking Act 2009).

(4) An eligible liability must be excluded from the amount of the relevant institution's own funds and eligible liabilities if—

(a) the instrument that creates the liability is not issued or fully paid up;

(b) the liability is owed to, or secured or guaranteed by, the institution itself;

(c) the purchase of the instrument that creates the liability was funded directly or indirectly by the institution itself;

(d) the liability has a remaining maturity of less than one year;

(e) the liability arises from a derivative contract held by the institution;

(f) the liability arises from a deposit in respect of which the depositor's rights, in any proceedings relating to the insolvency of the institution, would be preferred to the rights of other creditors; or

(g) the instrument that creates the liability is governed by the law of a third country and the Bank is not satisfied that a decision by the Bank to convert or write down the liability would be effective under that law.

(5) For the purpose of paragraph (4)(d), where the instrument that creates the liability confers on a party to the instrument a right to the repayment of a sum before maturity, the maturity date is the first date on which that party would become entitled to repayment if the right were exercised.

(6) The determination must be based on an assessment of the following criteria—

(a) the need to ensure that the relevant institution can be resolved by the application of the resolution tools including, where appropriate, by making special bail-in provision within the meaning of section 48B of the Banking Act 2009, in a way that meets the special resolution objectives;

(b) the need to ensure, in appropriate cases , taking into account whether recapitalisation payments under section 214E of FSMA (recapitalisation payments) may be available, that the relevant institution has sufficient eligible liabilities to ensure that, if mandatory reduction provision within the meaning of section 6B of the Banking Act 2009 or special bail-in provision were made—

(i) losses could be absorbed; and

(ii) the capital ratio and, as applicable, the leverage ratio, of the relevant institution could be restored,

to a level necessary to enable it to continue to comply with the conditions for authorisation under Part 4A of FSMA and to continue to carry out the activities for which it is authorised;

(c) the need to ensure that, if the resolution plan anticipates that certain classes of eligible liabilities might be excluded from bail-in under section 48B(10) of the Banking Act 2009 or that certain classes of eligible liabilities might be transferred to a recipient in full under a partial transfer—

(i) the relevant institution has sufficient other eligible liabilities or own funds to ensure that losses could be absorbed; and

(ii) the capital ratio and, as applicable, the leverage ratio, of the relevant institution could be restored,

to the level necessary to enable it to continue to comply with the conditions for authorisation under Part 4A of FSMA and to continue to carry out the activities for which it is authorised;

(d) the size, the business model, the funding model and the risk profile of the relevant institution; ...

(e) the extent to which the failure of the relevant institution would have adverse effects on financial stability, including, due to its interconnectedness with other institutions or entities or with the rest of the financial system, through contagion to other institutions or entities; and

(f) relevant assessment criteria specified in the Bank of England’s Statement of Policy on its approach to setting a minimum requirement for own funds and eligible liabilities issued pursuant to section 3B(9) of the Banking Act 2009, as that Statement of Policy may be amended from time to time.

(7) The Bank must make that assessment in consultation with the appropriate regulator.

(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Review of minimum requirement

124

(1) The Bank must review the minimum requirement for own funds and eligible liabilities when, in accordance with Chapter 4 of Part 5, it reviews the resolution plan (within the meaning given in Chapter 1 or 3 of that Part) adopted for the relevant institution.

(2) Article 123 applies for the purpose of the review, but paragraph (6) of that article has effect for that purpose as if the reference to the determination (of the minimum requirement for own funds and eligible liabilities) were a reference to the re-determination of the requirement on review.

CHAPTER 2 — Determination of minimum consolidated requirement where the PRA or FCA is the consolidating supervisor

Application and interpretation of Chapter 2

125

(1) This Chapter applies where the PRA or FCA is the consolidating supervisor in relation to a relevant group.

(2) In this Chapter—

“group entity” includes an undertaking which is—a parent undertaking of the UK parent undertaking; anda mixed activity holding company which has at least one subsidiary which—is an institution; andis not a subsidiary of a financial holding company which is also a subsidiary of the mixed activity holding company;

“group institution” means—the UK parent undertaking, if it is a relevant institution;a group subsidiary which is a relevant institution;a group entity, other than an institution, which is—required under article 139 ... to maintain a minimum requirement for own funds and eligible liabilities; ......where the group resolution plan does not provide for the separate resolution of a subsidiary set up in a third country, that subsidiary if it would be a relevant institution if it were set up in the UK;

“minimum consolidated requirement” means the requirement for a minimum level of own funds and eligible liabilities of the group institutions , including any transitional minimum consolidated requirement of the group institutions in accordance with article 126(2C) ...;

“minimum requirement”, in relation to a group institution, means a minimum requirement for own funds and eligible liabilities , including any transitional minimum requirement in accordance with article 135(2C) ...; and

“netting arrangement”—in relation to an institution authorised by the PRA or FCA, means a title transfer collateral arrangement, set-off arrangement or netting arrangement (within the meaning given by section 48(1)(b), (c) and (d) of the Banking Act 2009);...

(3) “Relevant institution”, in the definition of “group institution”, means an institution which—

(a) if authorised by the PRA or FCA, is not a mortgage credit institution within the meaning given in Chapter 1; and

(b) if set up in a country other than the United Kingdom, does not meet criteria which are equivalent in that country to the criteria set out in article 121(2).

Determination of minimum consolidated requirement

126

(1) This article applies for the purpose of determining the minimum consolidated requirement for each resolution group.

(2) ... The Bank must determine the minimum consolidated requirement, and is solely responsible for the determination.

(2A) The Bank may determine a transitional period for a resolution group, during which time a transitional minimum consolidated requirement applies.

(2B) The Bank may amend or revoke a determination under paragraph (2A), or determine a further transitional period in relation to a resolution group, at any time including where a previous transitional period has expired.

(2C) Where the Bank determines a transitional period under paragraph (2A) or paragraph (2B), it must determine the transitional minimum consolidated requirement that applies during that period.

(2D) The Bank may amend or revoke any determination under paragraph (2C) at any time.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) The amount of each group institution's total liabilities must include total liabilities under any derivative contracts held by the institution.

(5) An assessment of total liabilities under a derivative contract must take account of the rights of the parties to the contract to set off or net under a netting arrangement.

(6) An eligible liability must be excluded from the amount of the group institution's own funds and eligible liabilities if—

(a) the instrument that creates the liability is not issued or fully paid up;

(b) the liability is owed to, or secured or guaranteed by, the institution itself;

(c) the purchase of the instrument that creates the liability was funded directly or indirectly by the institution itself;

(d) the liability has a remaining maturity of less than one year;

(e) the liability arises from a derivative contract held by the institution;

(f) the liability arises from a deposit in respect of which the depositor's rights, in any proceedings relating to the insolvency of the institution, would be preferred to the rights of other creditors; or

(g) the instrument that creates the liability is governed by the law of a third country and the Bank is not satisfied that a decision by the Bank to convert or write down the liability would be effective under that law.

(7) For the purpose of paragraph (6)(d), where the instrument that creates the liability confers on a party to the instrument a right to the repayment of a sum before maturity, the maturity date is the first date on which that party would become entitled to repayment if the right were exercised.

(8) The determination—

(a) must be based on an assessment of the following criteria—

(i) the need to ensure that each group institution can be resolved by the application of the resolution tools including, where appropriate, by making special bail-in provision within the meaning of section 48B of the Banking Act 2009, in a way that meets the special resolution objectives;

(ii) the need to ensure, in appropriate cases , taking into account whether recapitalisation payments under section 214E of FSMA may be available, that each group institution has sufficient eligible liabilities to ensure that, if mandatory reduction provision within the meaning of section 6B of the Banking Act 2009 or special bail-in provision were made—

(aa) losses could be absorbed; and

(ab) the capital ratio and, if applicable, the leverage ratio, of the group institution could be restored,

to a level necessary to enable it to continue to comply with the conditions for authorisation under Part 4A of FSMA and to continue to carry out the activities for which it is authorised;

(iii) the need to ensure that, if the resolution plan anticipates that certain classes of eligible liabilities might be excluded from bail-in under section 48B(10) of the Banking Act 2009 or that certain classes of eligible liabilities might be transferred to a recipient in full under a partial transfer—

(aa) each group institution has sufficient other eligible liabilities or own funds to ensure that losses could be absorbed; and

(ab) the capital ratio and, if applicable, the leverage ratio, of the group institution could be restored,

to the level necessary to enable it to continue to comply with the conditions for authorisation under Part 4A of FSMA and to continue to carry out the activities for which it is authorised;

(iv) the size, the business model, the funding model and the risk profile of each group institution; ...

(v) the extent to which the failure of each group institution would have an adverse effect on financial stability, including, due to its interconnectedness with other institutions or entities or with the rest of the financial system, through contagion to other institutions or entities; and

(vi) relevant assessment criteria specified in the Bank of England’s Statement of Policy on its approach to setting a minimum requirement for own funds and eligible liabilities issued under section 3B(9) of the Banking Act 2009, as that Statement of Policy may be amended from time to time. and

(b) must take account of any provision made in the group resolution plan for the separate resolution of a subsidiary set up in a third country.

(9) Where the Bank makes an assessment under paragraph (8)(a) with respect to a group institution authorised by the PRA or FCA, it must make the assessment in consultation with the appropriate regulator.

Joint determination

127

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References to EBA: determination of minimum consolidated requirement

128

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Review of minimum consolidated requirement

129

(1) The Bank must review the minimum consolidated requirement for each resolution group when, in accordance with Chapter 4 of Part 5, it reviews the group resolution plan.

(2) Article 126 applies for the purpose of the review, but have effect for that purpose as if each reference to determining (or the determination of) the minimum consolidated requirement were a reference to re-determining (or the re-determination of) the requirement on review.

CHAPTER 3 — Determination of minimum consolidated requirement where neither the PRA nor the FCA is the consolidating supervisor

Application and interpretation of Chapter 3

130

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Joint determination of minimum consolidated requirement

131

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Review of minimum consolidated requirement

132

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CHAPTER 4 — Determination of minimum requirements for group institutions where the PRA or FCA is the consolidating supervisor

Application and interpretation of Chapter 4

133

(1) This Chapter applies where the PRA or FCA is the consolidating supervisor in relation to a relevant group.

(2) In this Chapter—

... “group entity” and “minimum requirement” have the same meaning for the relevant group as they have for a relevant group in Chapter 2;

“group institution” means an institution, other than a mortgage credit institution within the meaning given in Chapter 1, that— is authorised by the PRA or FCA andforms part of a relevant group;

“minimum consolidated requirement” means the minimum consolidated requirement (within the meaning given in Chapter 2) which is determined for the relevant group;

“netting arrangement” has the same meaning as in Chapter 2;

Duties of the Bank in relation to minimum requirement

134

(1) The Bank must exercise the powers conferred by section 3A of the Banking Act 2009—

(a) to ensure that a group institution is required at all times to maintain a minimum requirement; and

(b) with the object of ensuring that at all times the institution meets the minimum requirement specified in a direction given for that purpose.

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Determination of minimum requirement

135

(1) This article applies for the purpose of determining the minimum requirement for a group institution.

(2) The amount of the institution's total liabilities must include total liabilities under any derivative contracts held by the institution.

(2A) The Bank may determine a transitional period for an institution, during which time a transitional minimum requirement applies.

(2B) The Bank may amend or revoke a determination under paragraph (2A), or determine a further transitional period in relation to an institution, at any time including where a previous transitional period has expired.

(2C) Where the Bank determines a transitional period under paragraph (2A) or paragraph (2B), it must determine the transitional minimum requirement that applies during that period.

(2D) The Bank may amend or revoke any determination under paragraph (2C) at any time.

(3) An assessment of total liabilities under a derivative contract must take account of the rights of the parties to the contract to set off or net under a netting arrangement.

(4) An eligible liability must be excluded from the amount of the institution's own funds and eligible liabilities if—

(a) the instrument that creates the liability is not issued or fully paid up;

(b) the liability is owed to, or secured or guaranteed by, the institution itself;

(c) the purchase of the instrument that creates the liability was funded directly or indirectly by the institution itself;

(d) the liability has a remaining maturity of less than one year;

(e) the liability arises from a derivative contract held by the institution;

(f) the liability arises from a deposit in respect of which the depositor's rights, in any proceedings relating to the insolvency of the institution, would be preferred to the rights of other creditors; or

(g) the instrument that creates the liability is governed by the law of a third country and the Bank is not satisfied that a decision by the Bank to convert or write down the liability would be effective under that law.

(5) For the purpose of paragraph (4)(d), where the instrument that creates the liability confers on a party to the instrument a right to the repayment of a sum before maturity, the maturity date is the first date on which that party would become entitled to repayment if the right were exercised.

(6) The determination—

(a) must be based on an assessment of the criteria set out in article 126(8)(a); and

(b) must take account of the minimum consolidated requirement.

(7) ... The Bank must make the assessment under paragraph (6)(a) in consultation with—

(a) the PRA, if the institution is a PRA-authorised person;

(b) the FCA, if the institution is any other UK authorised person.

Joint determination of minimum requirements

136

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

References to EBA: determination of minimum requirement

137

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

Review of minimum requirements

138

(1) The Bank must review the minimum requirements for group institutions when, in accordance with Chapter 4 of Part 5, it reviews the group resolution plan.

(2) Articles 134 and 135 apply for the purpose of the review, but have effect for that purpose as if each reference to determining (or the determination of) a minimum requirement were a reference to re-determining (or the re-determination of) the requirement on review.

Minimum requirement for other group entities set up in the United Kingdom

139

(1) The Bank may decide, after consulting the regulator, that a group entity, other than a group institution, set up in the United Kingdom should be required to maintain a minimum requirement for own funds and eligible liabilities ....

(2) Where the Bank makes a such decision, articles 134 , 135 and 138 apply for the purpose of determining and reviewing the requirement and ensuring that the requirement is maintained and met, but have effect for that purpose as if each reference to an institution ... included a reference to the group entity for which the requirement is being (or has been) determined.

(3) In this article “the regulator”—

(a) where there is a PRA-authorised person and any other UK authorised person in the relevant group, means the PRA and the FCA;

(b) where there is a PRA-authorised person and no other UK authorised person in the relevant group, means the PRA;

CHAPTER 5 — Determination of minimum requirements for group institutions where neither the PRA nor the FCA is the consolidating supervisor

Application and interpretation of Chapter 5

140

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

Duties of the Bank in relation to minimum requirement

141

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

Determination of minimum requirement

142

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

Joint determination of minimum requirements

143

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

References to EBA: determination of minimum requirement

144

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

Review of minimum requirements

145

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

Minimum requirement for other group entities set up in the United Kingdom

146

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

CHAPTER 6 — Minimum requirement for own funds and eligible liabilities: other provisions

Waiver of application of Chapter 4 or 5

147

(1) This article applies in relation to a relevant group.

(2) The Bank may waive the application of Chapter 4 ... in relation to a UK parent institution where it—

(a) complies with the minimum consolidated requirement determined in accordance with Chapter 2 ...; and

(b) benefits from the exercise of the discretion laid down in Article 7.3 of the capital requirements regulation.

(3) The Bank may waive the application of Chapter 4 ... in relation to a group institution which is a group subsidiary where—

(a) both the institution and its parent undertaking are UK authorised persons;

(b) the supervision of the institution by the PRA or FCA (“the regulator”) is part of the supervision on a consolidated basis of the parent undertaking in accordance with the capital requirements regulation and CRR rules;

(c) the highest level UK institution in the relevant group, if that is not the UK parent institution, complies on a sub-consolidated basis with the minimum consolidated requirement determined in accordance with Chapter 2 ...;

(d) there is no legal or other material impediment, whether actual or foreseeable, to the prompt transfer of own funds or repayment of liabilities by the parent undertaking to the institution;

(e) either—

(i) the parent undertaking has satisfied the regulator that no significant risks arise from the institution's operations; or

(ii) the parent undertaking has satisfied the regulator that the institution is prudently managed, and has declared, with the consent of the regulator, that it guarantees the institution's commitments;

(f) the institution is covered by the risk evaluation, measurement and control procedures of the parent undertaking;

(g) the parent undertaking holds more than 50 per cent. of the voting rights attached to shares in the capital of the institution or has the right to appoint or remove the majority of the members of the institution's management body (within the meaning given by point (7) of Article 3.1 of the capital requirements directive); and

(h) the institution benefits from the exercise of the discretion laid down in Article 7.1 of the capital requirements regulation.

(4) In this article—

“parent undertaking”, in relation to a UK institution, means an undertaking which is a parent undertaking of the institution and has no other subsidiary which is also a parent undertaking of the institution; and

“UK institution” means an institution which is authorised by the PRA or FCA and is not a mortgage credit institution within the meaning given in Chapter 1.

Meeting minimum requirement through contractual bail-in instruments etc

148

(1) This article applies where—

(a) a minimum requirement is determined in accordance with Chapter 1 for an institution authorised by the PRA or FCA;

(b) a minimum requirement is determined in accordance with Chapter 4 ... for an undertaking set up in the United Kingdom; or

(2) The Bank may determine that a minimum requirement or minimum consolidated requirement to which this article applies must be met partially through contractual bail-in instruments or composed wholly or partially of own funds or a specified kind of liability.

(3) In this article “contractual bail-in instrument” means an instrument which —

(a) contains a contract term that where the Bank decides to apply the stabilisation option referred to in paragraph (c) of section 1(3) of the Banking Act 2009 (the bail-in option) in respect of the institution, undertaking or relevant group concerned, the instrument is to be written down or converted to the extent required before other eligible liabilities are written down or converted; and

(b) is subject to a binding subordination agreement, undertaking or provision under which, in the event that normal insolvency proceedings are commenced, the instrument ranks below other eligible liabilities and cannot be repaid until other eligible liabilities outstanding on the date of commencement of the insolvency proceedings have been repaid.

(4) “Normal insolvency proceedings” has the meaning given in section 3(1) of the Banking Act 2009.

PART 10 — Requirement to write down or convert capital instruments

Application and interpretation of Part

149

(1) This Part applies in relation to a relevant group.

(2) In this Part—

“alternative measure” means—a measure for early intervention within the meaning given in Chapter 1 of Part 8; a power of the FCA or PRA by or under legislation upon which the United Kingdom relied immediately before IP completion day to meet its obligations with respect to Article 104.1 of the capital requirements directive (supervisory powers); ora transfer of funds or capital from a parent undertaking;

“Case 2”—in relation to a bank, means Case 2 set out in subsection (3) of section 6A of the Banking Act 2009 (cases where mandatory write-down, conversion, etc applies);in relation to a banking group company, means Case 2 set out in subsection (4) of section 81AA of that Act (cases where mandatory write-down, conversion, etc applies: banking group companies);

“Case 3”, in relation to a bank, means Case 3 set out in section 6A(4) of that Act;

“Case 4”, in relation to a bank, means Case 4 set out in section 6A(5) of that Act;

“Case 5”—in relation to a bank, means Case 5 set out in section 6A(6) of that Act;in relation to a banking group company, means Case 3 set out in section 81AA(8) of that Act;

“recognised capital instruments” means Common Equity Tier 1 instruments, Additional Tier 1 instruments or Tier 2 instruments which have been recognised for the purpose of meeting the own funds requirements (within the meaning given in section 3(1) of the Banking Act 2009 ) of institutions on an individual and a consolidated basis; and

“UK group entity” means a group entity which is a bank or banking group company and has issued recognised capital instruments.

(3) In this article, for the interpretation of expressions defined in paragraph (2)—

“Additional Tier 1 instruments”, “Common Equity Tier 1 instruments” and “Tier 2 instruments” have the meaning given in section 3(1) of the Banking Act 2009 (interpretation: other expressions);

“bank” has the meaning given by section 2 of the Banking Act 2009 (interpretation: “bank”), but includes—a building society within the meaning given in section 119 of the Building Societies Act 1986; andan investment firm within the meaning given in section 258A of the Banking Act (“investment firm”);

“banking group company” has the meaning given by section 81D of that Act ; and

“group entity” includes an undertaking which is—...a mixed activity holding company.

Determinations pursuant to Article 59.3 of the recovery and resolution directive: preliminary steps for UK group entities

150

(1) Before the Bank makes a determination that Case 2, 4 or 5 is satisfied in relation to a UK group entity, the Bank must give notice that it is considering whether to make that determination (“a Case 2, 4 or 5 notice”) without delay to the appropriate regulator.

(2) Before the Bank makes a determination ... that Case 3 is satisfied in relation to a UK group entity, the Bank must give notice that it is considering whether to make that determination (“a Case 3 notice”) without delay to the appropriate regulator.

(3) Where the Bank gives a Case 2, 4 or 5 notice or a Case 3 notice, it must—

(a) send with the notice an explanation of its reasons for considering whether to make the determination concerned; and

(b) after consulting the authorities to which the notice has been given assess whether—

(i) any alternative measure is available;

(ii) any alternative measure which is available could feasibly be taken; and

(iii) there is any reasonable prospect that any alternative measure which is available and could feasibly be taken would, within a reasonable time, avoid the need for the determination.

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Regulator to take alternative measures

151

(1) Where, in the Bank's assessment, there is a reasonable prospect that an alternative measure which is available and could feasibly be taken would, within a reasonable time, avoid the need for the determination referred to in a Case 2, 4 or 5 notice or a Case 3 notice—

(a) the Bank must notify the regulator of that fact; and

(b) except where the measure is a transfer of funds from a parent undertaking, the regulator must take the alternative measure in exercise of its powers under FSMA.

(2) In this article “the regulator”—

(a) where there is a PRA-authorised person and any other UK authorised person in the relevant group, means the PRA and the FCA;

(b) where there is a PRA-authorised person and no other UK authorised person in the relevant group, means the PRA;

Determination that Case 2, 3, 4 or 5 is satisfied

152

(1) This article applies where, in the Bank's assessment, there is no reasonable prospect that any alternative measure which is available and could feasibly be taken would, within a reasonable time, avoid the need for the determination referred to in a Case 2, 4 or 5 notice or a Case 3 notice.

(2) ... The Bank must decide whether to make the determination referred to in the notice.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Joint determination under Article 59(3)(c) of the recovery and resolution directive in relation to a non-UK group entity

153

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

PART 11 — Removal of procedural impediments to application of bail-in tool

Interpretation of Part

154

In this Part—

“Common Equity Tier 1 instruments” has the meaning given in section 3(1) of the Banking Act 2009 ; and

“relevant capital instruments” has the meaning given in section 3(1) of the Banking Act 2009;

“UK entity” means—an institution which is authorised by the PRA or FCA and is not part of a group subject to supervision on a consolidated basis in accordance with the capital requirements regulation and CRR rules; orin relation to a relevant group, a group entity set up in the United Kingdom.

155

(1) This article applies where—

(a) the memorandum of association of a UK entity which is a company includes a statement of the amount of the entity's authorised share capital; and

(b) the resolution plan being drawn up for the entity or the group resolution plan being drawn up for the relevant group of which the entity is the UK parent undertaking or a group subsidiary includes provision for the application in respect of the entity of the stabilisation option referred to in paragraph (c) of section 1(3) of the Banking Act 2009 (the bail-in option).

(2) The Bank must determine whether it is appropriate to require the entity to alter the memorandum for the purpose of increasing the amount of authorised share capital or removing the statement of that amount.

(3) For this purpose the Bank must have regard to the provision which the plan concerned is to make in relation to resolution tools and resolution powers and to the matters referred to in paragraphs (4) and (5).

(4) The amount of authorised share capital must be adequate to ensure that where the Bank exercises a relevant power, the entity is able to issue new shares or other instruments of ownership to facilitate the conversion of liabilities into shares or other instruments of ownership.

(5) The amount of the authorised share capital must not be less than the sum of the following amounts—

(a) the amount by which the Bank has assessed that Common Equity Tier 1 instruments must be reduced and relevant capital instruments must be written down or converted pursuant to section 6B, 12AA, 48Y or 81AA of the Banking Act 2009; and

(b) the aggregate amount assessed by the Bank pursuant to section 6E or 48X of that Act.

(6) The Bank must make the determination under paragraph (2) when it draws up the resolution plan ....

(7) In this article “relevant power” means the power conferred by sections 12A (bail-in option), 48B (special bail-in provision) and 81BA (bail-in option) of the Banking Act 2009 to convert the entity's eligible liabilities into Common Equity Tier 1 instruments of—

(a) the entity; or

(b) a parent undertaking of the entity.

Removal of impediments to the conversion of liabilities into shares

156

Where the articles or memorandum of association of a UK entity which is a company confer pre-emption rights on shareholders, require the consent of shareholders to an increase in capital or make any other provision which could prevent or otherwise impede the conversion of any liabilities of the company into shares or other instruments of ownership, the Bank must determine whether it is necessary to require the entity to alter the articles or memorandum with the object of removing the impediment created by the provision concerned.

PART 12 — Treatment of derivative contracts where bail-in option is applied

Application and interpretation of Part

157

(1) This Part applies where the Bank has decided to apply the stabilisation option referred to in paragraph (c) of section 1(3) (the bail-in option) in relation to liabilities arising from a derivative contract.

(2) In this Part each reference to a section is a reference to a section of the Banking Act 2009.

Liabilities arising from derivative contracts

158

(1) This article applies for the purposes of valuing a derivative contract and the liabilities arising from it under section 6E(1) (pre-resolution valuation), a provisional valuation by the Bank under section 6E(3) or a valuation under section 48X (replacement of Bank's provisional valuation).

(2) Where the parties to the contract have rights to set off or net under a title transfer collateral arrangement, set-off arrangement or netting arrangement (within the meaning given by section 48(1)(b), (c) and (d)), the Bank must ensure that the value of the contract and of the liabilities arising from it are determined—

(a) on a net basis in accordance with the terms of the contract; and

(b) in accordance with—

(i) appropriate methodologies for determining the value of classes of derivative contracts, including transactions that are subject to netting arrangements;

(ii) principles for establishing the time at which the value of a derivative position should be established; and

(iii) appropriate methodologies for comparing with each other the following amounts—

(aa) the loss in value that would result from closing out a derivative contract and making special bail-in provision (within the meaning given by section 48B) in respect of that contract; and

(bb) the reduction in the liabilities of the institution which is subject to the special bail-in provision as a result of making that provision in respect of the derivative contract.

(3) Subject to paragraph (4), the Bank may make technical standards specifying—

(a) appropriate methodologies for the purposes of paragraph (2)(b)(i);

(b) principles for the purposes of paragraph (2)(b)(ii); or

(4) When exercising its functions under paragraph (3) in relation to derivative contracts that are subject to a netting arrangement, the Bank must take into account the methodology for close-out set out in the netting arrangement.

PART 13 — Preparation of business reorganisation plans after application of bail-in tool

CHAPTER 1 — Assessment of business reorganisation plan drawn up by an institution

Application and interpretation of Chapter 1

159

(1) This Chapter applies where—

(a) an institution is authorised by the PRA or FCA and is not part of a group subject to supervision on a consolidated basis in accordance with the capital requirements regulation and CRR rules;

(b) the Bank has made a resolution instrument under section 12A of the Banking Act 2009 (bail-in option) in respect of the institution; and

(c) the management body of the institution or the resolution administrator submits a business reorganisation plan to the Bank for assessment in accordance with section 48H of the Banking Act 2009 (business reorganisation plan).

(2) In this Chapter—

“resolution administrator” means the individual or body corporate appointed by the Bank under section 62B of the Banking Act 2009 as the resolution administrator of the institution.

Assessment of business reorganisation plan

160

The Bank must assess the business reorganisation plan jointly with the appropriate regulator within one month beginning with the date on which it receives the plan.

Purpose of assessment

161

(1) The purpose of the assessment of the business reorganisation plan is to determine whether the plan meets the criteria for assessment.

(2) The Bank must approve the plan when the Bank and the appropriate regulator are satisfied that the plan meets the criteria for assessment.

(3) The criteria for assessment are that—

(a) the plan must include the details specified in—

(i) section 48H(2) of the Banking Act 2009;

(ii) any technical standards made under paragraph (4)(a);

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

(c) the arrangements proposed in the plan would, if implemented, be reasonably likely to restore the long-term viability of the institution or of part of its business.

(d) the arrangements proposed in the plan must be based on realistic assumptions as to the economic and financial market conditions under which the institution will operate;

(e) the plan must take account of the current state of the financial markets and their future prospects, reflecting best-case and worst-case assumptions, including a combination of events allowing the identification of the institution's main vulnerabilities;

(f) the assumptions made in the plan must be compared with appropriate sector-wide benchmarks;

(g) the plan meets any further criteria specified in technical standards made under paragraph (4)(b).

(4) The Bank may make technical standards specifying—

(a) further details to be included in business reorganisation plans; or

(b) further criteria for the assessment of business reorganisation plans.

Revision of plan

162

(1) The Bank—

(a) must notify the management body or resolution administrator if the business reorganisation plan is found on assessment to contain any material deficiency or measure which would impede its implementation or the object of restoring the long-term viability of the institution or of part of its business; and

(b) may not require the management body or resolution administrator to revise the plan without giving it an opportunity to state its opinion on that requirement.

(2) If the Bank requires the management body or resolution administrator to revise the plan, the Bank—

(a) must allow two weeks for the preparation of a plan which demonstrates that the impediment has been addressed;

(b) within one week beginning with the date on which a revised plan is submitted, must notify the management body or resolution administrator whether the impediment has been adequately addressed in the revised plan; and

(c) if the impediment has not been adequately addressed in the revised plan, must direct the management body or resolution administrator to make specific changes to the plan.

CHAPTER 2 — Assessment of business reorganisation plan drawn up by a single group entity

Application and interpretation of Chapter 2

163

(1) This Chapter applies where, in relation to a relevant group—

(a) the Bank has made a resolution instrument under section 12A of the Banking Act 2009 in respect of a single group entity which is not an institution (“the relevant entity”); and

(b) the management body of the relevant entity or the resolution administrator submits a to the Bank for assessment ....

(2) In this Chapter “business reorganisation plan” has the meaning given in section 48H of the Banking Act 2009, as applied by section 81BA of that Act and “resolution administrator” has the same meaning for the relevant entity as it has for an institution in Chapter 1.

Assessment etc of business reorganisation plan

164

Chapter 1 applies for the purpose of the assessment and approval of the business reorganisation plan, but has effect for that purpose with the modifications specified in the table—

CHAPTER 3 — Assessment of business reorganisation plan drawn up for relevant group where the PRA or FCA is the consolidating supervisor

Application and interpretation of Chapter 3

165

(1) This Chapter applies where, in relation to a relevant group—

(a) the PRA or FCA is the consolidating supervisor;

(b) a relevant bail-in power has been exercised in respect of two or more group entities; and

(c) a group entity submits a business reorganisation plan to the Bank for assessment in accordance with section 48H of the Banking Act 2009 (including that section as applied in consequence of the provision made by section 81BA, 83A, 84 or 89A of that Act).

(2) In this Chapter—

“four month period” means four months beginning with the date on which the Bank receives the business reorganisation plan under paragraph (1)(c);

“group institution” means—the UK parent undertaking, if it is an institution;a group subsidiary which is an institution;

“impediment”, in relation to the business reorganisation plan, means any material deficiency or measure in the plan which would impede its implementation or the object of restoring the long-term viability of any group entity (or of part of its business) or of the whole or part of the relevant group;

“relevant bail-in power” in relation to a group entity means the power in section 12A(2) of the Banking Act 2009;

“the regulator”—where there is a PRA-authorised person and any other UK authorised person in the relevant group, means the PRA and the FCA;where there is a PRA-authorised person and no other UK authorised person in the relevant group, means the PRA;where there is no PRA-authorised person in the relevant group, means the FCA;

“relevant matters”, in relation to the assessment of the business reorganisation plan, means the following matters for decision—whether the plan meets the criteria for assessment;whether group entities should be required to draw up and submit business reorganisation plans on an individual basis;whether the plan contains an impediment;whether a group entity should be required to revise the plan;whether an impediment has been adequately addressed in a revision of the plan; andwhere an impediment has not been adequately addressed in a revision of the plan, how it can be adequately addressed by directing a group entity to make specific changes to the plan; and

Duty to transmit a copy of business reorganisation plan

166

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

Assessment of business reorganisation plan

167

(1) ... The Bank must assess the business reorganisation plan jointly with the regulator.

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Purpose of assessment

168

(1) The purpose of the assessment of the business reorganisation plan is to determine whether the plan meets the criteria for assessment and decide other relevant matters.

(2) The Bank must approve the plan when the Bank and the regulator ... are satisfied that the plan meets the criteria for assessment.

(3) The criteria for assessment are that—

(a) the plan must include the details specified in section 48H(2) of the Banking Act 2009;

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

(c) the arrangements proposed in the plan would, if implemented, be reasonably likely to restore the long-term viability of the group entities, or parts of the business of the group entities, in respect of which a relevant bail-in power has been exercised and of the whole or part of the relevant group.

(d) the arrangements proposed in the plan must be based on realistic assumptions as to the economic and financial market conditions under which the group entities will operate;

(e) the plan must take account of the current state of the financial markets and their future prospects, reflecting best-case and worst-case assumptions, including a combination of events allowing the identification of the group entities' main vulnerabilities; and

(f) the assumptions made in the plan must be compared with appropriate sector-wide benchmarks.

Assessment of plan where every group entity is set up in the United Kingdom

169

Where the Bank assesses the business reorganisation plan jointly with the regulator, the assessment must be concluded within the four month period.

Joint assessment of plan

170

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

Revision of plan

171

The Bank—

(a) must notify a ... group entity if the business reorganisation plan is found on assessment to contain an impediment; and

(b) may not require a ... group entity to revise the plan without giving it an opportunity to state its opinion on that requirement.

(2) If the Bank requires a ... group entity to revise the plan, the Bank—

(a) must allow two weeks for the preparation of a plan which demonstrates that the impediment has been addressed;

(b) within one week beginning with the date on which a revised plan is submitted, must notify the entity whether the impediment has been adequately addressed in the revised plan; and

(c) if the impediment has not been adequately addressed in the revised plan, must direct the entity to make specific changes to the plan.

Assessment of business reorganisation plans drawn up on an individual basis

172

Where the Bank requires a group entity to draw up and submit a business reorganisation plan on an individual basis, Chapter 1 applies for the purpose of the assessment of the plan, but has effect for that purpose as if each reference to an institution were a reference to the group entity.

References to EBA

173

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

Requesting the assistance of EBA

174

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

CHAPTER 4 — Assessment of business reorganisation plan drawn up for relevant group where neither the PRA nor the FCA is the consolidating supervisor

Application and interpretation of Chapter 4

175

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

Purpose of assessment

176

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

Joint assessment of plan

177

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

Assessment of business reorganisation plans drawn up on an individual basis

178

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

References to EBA

179

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

Requesting the assistance of EBA

180

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

PART 14 — Procedural obligations where an undertaking is failing or likely to fail

Interpretation of Part

181

In this Part—

“crisis prevention measure” has the meaning given in section 48Z(1) of the Banking Act 2009;

“the regulator”—in relation to an undertaking which is a PRA-authorised person, means the PRA; andin relation to any other undertaking, means the FCA.

“supervisory measure” means a power of the FCA or PRA by or under legislation upon which the United Kingdom relied immediately before IP completion day to meet its obligations with respect to Article 104.1 of the capital requirements directive;

“undertaking” means—an institution which is authorised by the PRA or FCA and is not part of a group subject to supervision on a consolidated basis in accordance with the capital requirements regulation and CRR rules;in relation to a relevant group, a group entity set up in the United Kingdom; ora mixed activity holding company set up in the United Kingdom.

Matters to be notified by the regulator to the Bank

182

The regulator must notify the Bank if—

(a) an undertaking notifies the regulator that the undertaking is failing or likely to fail (within the meaning given in section 7(5C) of the Banking Act 2009); or

(b) the regulator requires an undertaking to take crisis prevention measures or a supervisory measure.

Notification that an undertaking is failing or likely to fail

183

(1) Where the regulator is satisfied that an undertaking is failing or likely to fail, it must give notice of that fact to the Bank.

(2) Where the Bank is satisfied, having regard to timing and other relevant circumstances, that it is not reasonably likely that (ignoring the stabilisation powers) action will be taken by or in respect of the undertaking that will prevent the failure of the undertaking, the Bank must give notice of that fact to the regulator.

(3) The Bank must also give notice of that fact—

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

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

(d) to the Treasury ; and

(e) to the Financial Policy Committee...

(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) This article does not require any information to be disclosed if its disclosure would be contrary to section 348 of FSMA.

184

(1) This article applies where, in respect of an undertaking—

(a) the Bank has applied one or more of the resolution tools; or

(b) the Treasury have made a share transfer order for the purpose of taking the undertaking into temporary public ownership.

(2) Except where securities issued by the undertaking have been admitted to trading on a regulated market (within the meaning given in section 103(1) of FSMA), the Bank must send a copy of any property transfer instrument, resolution instrument, share transfer instrument, share transfer order or third-country instrument made in respect of the undertaking to the members and creditors of the undertaking who are known to the Bank.

(3) In this article—

“member” includes—a shareholder of a company;a member of a limited liability partnership; anda shareholding or borrowing member of a building society established under the Building Societies Act 1986 (“shareholding member” and “borrowing member” have the meaning given in paragraph 5(2) of Schedule 2 to that Act);

“property transfer instrument” means a property transfer instrument (within the meaning given by section 33 ) made under section 11 (private sector purchaser), section 41A (transfer of property subsequent to resolution instrument), section 42 (supplemental instruments), section 42A (private sector purchaser: reverse property transfer), section 43 (onward transfer), section 44 (resolution company: reverse property transfer) or section 44A (bail-in: reverse property transfer);

“resolution instrument” means a resolution instrument made under section 12A (bail-in option), section 48U (supplemental resolution instruments), section 48V (onward transfer) or section 48W (reverse transfer) ;

“share transfer instrument” means a share transfer instrument (within the meaning given by section 15) made under section 11, section 26 (supplemental instruments), section 26A (private sector purchaser: reverse share transfer), section 30 (resolution company: share transfers) or section 31 (resolution company: reverse share transfer);

“share transfer order” means a share transfer order (within the meaning given by section 16) made by the Treasury under section 13 (temporary public ownership), section 27 (supplemental orders), section 28 (onward transfer) or section 29 (reverse share transfer); and

“third-country instrument” has the meaning given in section 89I(4) .

(4) In paragraph (3) each reference to a section is a reference to a section of the Banking Act 2009.

PART 15 — Applications to the court in relation to resolution action

Stay of legal proceedings

185

(1) Where—

(a) the Bank has made a mandatory reduction instrument or exercised a stabilisation power in relation to any bank, building society, investment firm or banking group company (“institution under resolution”),

(b) the institution under resolution is a party to legal proceedings before any court in the United Kingdom, and

(c) the Bank reasonably considers that a stay of those proceedings is necessary for an effective application of the resolution tools or the stabilisation powers,

the Bank may apply to that court for a stay of the proceedings.

(2) In this article—

“bank” has the meaning given by section 2 of the Banking Act 2009 ;

“banking group company” has the meaning given in section 81D of the Banking Act 2009 ;

“building society” has the meaning given in section 119 of the Building Societies Act 1986;

“mandatory reduction instrument” has the meaning given in section 6B(1) of the Banking Act 2009 ; and

“stabilisation powers” has the meaning given in section 1(4) of the Banking Act 2009 .

Remedies on judicial review

186

(1) Where an application is made for judicial review of a decision of the Bank to exercise the stabilisation powers in relation to an institution under resolution (“relevant proceedings”)—

(a) a ruling by the court that the decision is unlawful shall not affect—

(i) a relevant transfer,

(ii) special bail-in provision (within the meaning given by section 48B of the Banking Act 2009), or

(iii) provision under section 48L of that Act in relation to securities issued by the institution under resolution,

made by a stabilisation instrument made by the Bank pursuant to that decision; and

(b) the court may not quash any provision in a stabilisation instrument made by the Bank if that provision makes—

(i) a relevant transfer;

(ii) special bail-in provision; or

(iii) provision under section 48L of the Banking Act 2009 in relation to securities issued by the institution under resolution.

(2) For the purposes of paragraph (1)—

(a) “stabilisation instrument” means—

(i) a share transfer instrument,

(ii) a property transfer instrument,

(iii) a resolution instrument, or

(iv) a third-country instrument,

made by the Bank in the exercise of the stabilisation powers provided for in section 1(4) of the Banking Act 2009, and for these purposes “share transfer instrument”, “property transfer instrument”, “resolution instrument” and “third country instrument” have the meaning given in article 184;

(b) a transfer is a “relevant transfer” if it transfers to any person—

(i) property, rights or liabilities of the institution under resolution or of a relevant resolution company; or

(ii) securities issued by the institution under resolution or by a relevant resolution company;

(i) “resolution company” has the meaning given by section 29A of the Banking Act 2009 ; and

(ii) a resolution company is a relevant resolution company if property, rights or liabilities of the institution under resolution have been transferred to it.

(3) For the purposes of this article “institution under resolution” has the meaning given in article 185.

(4) Paragraph (1) does not affect the power of the court, subject to section 244 of the Banking Act 2009 (immunity), to award damages as a remedy in relevant proceedings.

PART 16 — Cross-border group resolution

CHAPTER 1 — General provisions

Principles for reaching decisions which may have an impact in two or more EEA States

187

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

Information exchange

188

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

Requirements for group resolution schemes

189

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

CHAPTER 2 — Resolution colleges

Application of Chapter 2

190

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