The Deposit Guarantee Scheme Regulations 2015

Made: 4th March 2015

Laid before Parliament: 5th March 2015

Coming into force in accordance with regulation 1(2) and (3)

The Treasury are designated for the purposes of section 2(2) of the European Communities Act 1972 in relation to financial services.

The Treasury, in exercise of the powers conferred by section 2(2) of that Act, make the following Regulations.

PART 1 — Introductory Provisions

Citation and commencement

1

• (1) These Regulations may be cited as the Deposit Guarantee Scheme Regulations 2015.

• (2) Subject to paragraph (3), the provisions of these Regulations come into force on 26th March 2015.

• (3) Regulations 5 and 7 come into force on 3rd July 2015.

Interpretation

2

• (1) In these Regulations—

• “compensation scheme rules” means rules made under section 213 of FSMA ;

• “the compensation scheme” has the meaning given in section 213(2) of FSMA;

• “credit union” means—a registered society (within the meaning given by section 1 of the Co-operative and Community Benefit Societies Act 2014 ) that is registered as a credit union; ora society registered under the Credit Unions (Northern Ireland) Order 1985 or a society registered under the Industrial and Provident Societies Act (Northern Ireland) 1969 as a credit union;

• “deposit” means— a deposit within the meaning of point (23A) of Article 2(1) of Regulation (EU) No. 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012; a share in a building society, as defined in section 119 of the Building Societies Act 1986, other than a share of a capital nature that is own funds, as defined in point (118) of Article 4.1 of Regulation No. 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012; ora share in a credit union other than—a deferred share within the meaning given by section 31A of the Credit Unions Act 1979; or a deferred share issued by a society registered under the Credit Unions (Northern Ireland) Order 1985 or a society registered under the Industrial and Provident Societies Act (Northern Ireland) 1969 as a credit union;

• “deposit guarantee schemes directive” means Directive 2014/49/EU of the European Parliament and of the Council of 16 April 2014 on deposit guarantee schemes (recast), repealing directive 94/19/EC ;

• “eligible deposit” has the meaning given in section 70A(7) of the Banking Act 2009

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

• ...

• (2) Except as provided by paragraph (1) or article 3—

• (a) any expression used in these Regulations which is defined in Article 2 (definitions) of the deposit guarantee schemes directive has the meaning given by that Article;

• (b) any other expression used in these Regulations which is defined in section 417 (definitions) of FSMA has the meaning given by that section.

Meaning of “compensation scheme member”

3

• (1) In these Regulations “compensation scheme member” means an institution that—

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

• (b) falls into one of the categories of institution specified in paragraph (2).

• (2) The categories of institution mentioned in paragraph (1)(b) are—

• (a) an institution that—

• (i) is incorporated in or formed under the law of any part of the United Kingdom;

• (ii) is not an insurer; and

• (iii) has permission under Part 4A of FSMA to carry on the regulated activity of accepting deposits;

• (b) a building society within the meaning of section 119 of the Building Societies Act 1986 ;

• (c) a credit union; or

• (d) an institution that—

• (i) has its head office outside the United Kingdom;

• (ii) is not ... an insurer; and

• (iii) has permission under Part 4A of FSMA to carry on the regulated activity of accepting deposits.

• (3) For the purposes of this regulation—

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

• (b) “insurer” means an institution which is authorised under Part 4A of FSMA to carry on the regulated activity of effecting or carrying out contracts of insurance as principal.

PART 2 — The compensation scheme

Designation of competent authority and designated authority

4

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Notification to the scheme manager of problems with a compensation scheme member

5

The PRA must notify the scheme manager in writing as soon as reasonably practicable if the PRA becomes aware that a compensation scheme member has financial difficulties which are likely to require the intervention of the scheme manager under compensation scheme rules in respect of eligible deposits .

Time limit for determining that a compensation scheme member is unable to repay deposits

6

• (1) If the relevant administrative authority is satisfied that a compensation scheme member has failed to repay a deposit which is due and payable, the relevant administrative authority must determine whether in its view the compensation scheme member appears unable for the time being, for reasons which are directly related to its financial circumstances, to repay the deposit and the compensation scheme member has no current prospect of being able to do so.

• (2) The determination must be notified in writing to—

• (a) the compensation scheme member; and

• (b)

• (i) the scheme manager, or

• (ii) if the scheme manager is the relevant administrative authority, the PRA,

as soon as reasonably practicable and in any event before the end of the period of five working days beginning with the day on which the relevant administrative authority becomes satisfied that the compensation scheme member has failed to repay a deposit which is due and payable.

• (3) For the purposes of this regulation the “relevant administrative authority”—

• (a) is the scheme manager in relation to a compensation scheme member that is a credit union; and

• (b) is the PRA in relation to any other compensation scheme member.

Maximum compensation payable in respect of deposits held with a compensation scheme member

7

• (1) The PRA must make compensation scheme rules which specify the maximum compensation payable in respect of eligible deposits held by a person with a compensation scheme member—

• (a) in relation to categories of eligible deposit which fall within Article 6(2) of the deposit guarantee schemes directive; and

• (b) in relation to all other categories of eligible deposit.

• (2) Compensation scheme rules made by the PRA in accordance with paragraph (1) are subject to regulation 7A.

Determination by PRA whether contributions may be raised by the scheme manager

8

• (1) This regulation specifies conditions which must be met before the scheme manager may request a loan under section 223B of FSMA for the purposes of—

• (a) repaying depositors in accordance with the compensation scheme; or

• (b) contributing to the costs of the special resolution regime under section 214B of FSMA or section 61(2)(b) of the Banking Act 2009.

• (2) The conditions are—

• (a) the PRA has determined whether the scheme manager may raise contributions under the compensation scheme; and

• (b) the PRA has notified that determination in writing to the scheme manager and the Treasury.

Approval of increased levies for the purposes of the compensation scheme

9

If the PRA makes compensation scheme rules in respect of eligible deposits limiting the levy payable by a compensation scheme member in respect of a period specified in those compensation scheme rules, the PRA may on receiving a request in writing from the scheme manager approve a levy on a person that exceeds that limit.

Payment of compensation by the scheme manager on behalf of a non-UK scheme

10

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

Notification of covered deposits and available financial means of the compensation scheme

11

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

Notification of contents of co-operation agreements

12

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

PART 3 — Amendments of primary and secondary legislation

Amendment of FSMA

13

• (1) FSMA is amended as follows.

• (2) In section 55Z2 (notification of EBA) after subsection (1) insert—

(1A) A notification given in accordance with paragraph (a) or (c) of subsection (1) must contain a statement to the effect that the compensation scheme makes provision for cases where the credit institution concerned is unable, or likely to be unable, to satisfy claims against it.

• (3) In section 215 (rights of the scheme in insolvency), after subsection (2) insert—

(2A) Any payment made by the scheme manager under section 214B(2) in connection with the exercise of a stabilisation power in respect of a bank, building society or credit union is to be treated as a debt due to the scheme manager from that bank, building society or (as the case may be) credit union. (2B) In subsection (2)— - “bank” has the meaning given in section 2 of the Banking Act 2009 ; - “building society” has the meaning given in the Building Societies Act 1986 ; - “credit union” means a credit union within the meaning of— 1. the Credit Unions Act 1979 ; or 2. article 2 of the Credit Unions (Northern Ireland) Order 1985 .

• (4) In section 218A (regulators power to require information) , for subsection (1) substitute—

(1) Each regulator may make rules enabling that regulator to require authorised persons to— (a) provide information to the scheme manager on the request of that regulator or the scheme manager; or (b) provide information to that regulator, which may then be made available to the scheme manager by that regulator.

Amendment of the Insolvency Act 1986

14

• (1) The Insolvency Act 1986 is amended as follows.

• (2) In section 386 (categories of preferential debts) , in subsection (1), after “steel production” insert “ ; debts owed to the Financial Services Compensation Scheme ”.

• (3) In Schedule 6 (the categories of preferential debts)—

• (a) after paragraph 15A insert—

(15AA) Any debt owed by the debtor to the scheme manager of the Financial Services Compensation Scheme under section 215(2A) of the Financial Services and Markets Act 2000 .

• (b) in the italic heading before paragraph 15C for “categories 7 and 8” substitute “ categories 6A, 7 and 8. ”;

• (c) in paragraph 15C, before sub-paragraph (1) insert—

(A1) In paragraph 15AA “the scheme manager” has the meaning given in section 212(1) of the Financial Services and Markets Act 2000.

Amendment of the Insolvency (Northern Ireland) Order 1989

15

• (1) The Insolvency (Northern Ireland) Order 1989 is amended as follows.

• (2) In Article 346 (categories of preferential debts) , in paragraph (1), after “steel production” insert “ ; debts owed to the Financial Services Compensation Scheme ”.

• (3) In Schedule 4 (categories of preferential debts)—

• (a) after paragraph 17 insert—

(17A) Any debt owed by the debtor to the scheme manager of the Financial Services Compensation Scheme under section 215(2A) of the Financial Services and Markets Act 2000.

• (b) in the heading before paragraph 21, for “7 and 8” substitute “ 6A, 7 and 8 ”;

• (c) in paragraph 21, before sub-paragraph (1) insert—

(A1) In paragraph 17A “the scheme manager” has the meaning given in section 212(1) of the Financial Services and Markets Act 2000.

Amendment of the Bankruptcy (Scotland) Act 1985

16

In Schedule 3 to the Bankruptcy (Scotland) Act 1985 —

• (a) after paragraph 6A insert—

(6AA) Any debt owed by the debtor to the scheme manager of the Financial Services Compensation Scheme under section 215(2A) of the Financial Services and Markets Act 2000.

• (b) after paragraph 9 insert—

(9ZA) In paragraph 6AA “the scheme manager” has the meaning given in section 212(1) of the Financial Services and Markets Act 2000.

Credit Institutions (Protection of Depositors) Regulations 1995: revocation

17

Regulations 46 to 48 of the Credit Institutions (Protection of Depositors) Regulations 1995 are revoked.

PART 4 — Review

Review

18

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Signed

Mark Lancaster — Harriett Baldwin — Two of the Lords Commissioners of Her Majesty's Treasury — 2015-03-04

Explanatory note

(This note is not part of the Regulations)

Footnotes

[^f00001]: S.I. 2012/1759.

[^f00002]: 1972 c.68. Section 2(2) was amended by section 27 of the Legislative and Regulatory Reform Act 2006 (c.51) and by section 3 of, and the Schedule to, the European Union (Amendment) Act 2008 (c.7). By virtue of the amendment of section 1(2) by section 1 of the European Economic Area Act 1993 (c.51), regulations may be made under s. 2(2) of the European Communities Act 1972 to implement obligations of the United Kingdom created or arising by or under the Agreement on the European Economic Area signed at Oporto on 2nd May 1992 (Cm 2073) and the Protocol adjusting the Agreement signed in Brussels on 17th March 1993 (Cm 2183).

[^f00003]: Section 213 of FSMA was amended by the Financial Services Act 2012 (c. 21), section 38 and Schedule 10. Subsections (10) and (11) of section 213 were substituted for the original subsection (10) by S.I. 2011/1613.

[^f00004]: 2014 c. 14.

[^f00005]: S.I. 1985/1205 (N.I. 12).

[^f00006]: 1969 c.24 (N.I.).

[^f00007]: OJ L173, 12.6.2014, p 149.

[^f00008]: 2000 c. 8.

[^f00009]: “regulated activity” is defined in section 417 of FSMA.

[^f00010]: 1986 c. 53.

[^f00011]: Section 193(1) was amended by S.I. 2011/1613; S.I. 2013/1773.

[^f00012]: “PRA” is defined in section 417 of FSMA.

[^f00013]: “competent authority” is defined in point (17) of Article 2(1) of the deposit guarantee schemes directive.

[^f00014]: “designated authority” is defined in point (18) of Article 2(1) of the deposit guarantee schemes directive.

[^f00015]: “EBA” is defined in section 417 of FSMA.

[^f00016]: “scheme manager” is defined in section 212(1) of FSMA.

[^f00017]: “eligible deposits” is defined in point (4) of Article 2(1) of the deposit guarantee schemes directive.

[^f00018]: “deposit” is defined in point (3) of Article 2(1) of the deposit guarantee schemes directive.

[^f00019]: “ available financial means” is defined in point (12) of Article 2(1) of the deposit guarantee schemes directive.

[^f00020]: “credit institution” is defined in point (9) of Article 2(1) of the deposit guarantee schemes directive.

[^f00021]: “branch” is defined in point (10) of Article 2.1 of the deposit guarantee schemes directive.

[^f00022]: Section 222(1) was amended by the Banking Act 2009 (c.1), section 179(2) and the Financial Services Act 2012 (c. 21), section 38(1) and Schedule 10.

[^f00023]: “EBA” is defined in section 417 of FSMA.

[^f00024]: “covered deposits” has the meaning given in point (5) of Article 2.1 of the deposit guarantee schemes directive.

[^f00025]: “available financial means” has the meaning given in point (12) of Article 2.1 of the deposit guarantee schemes directive.

[^f00026]: Section 55Z2 was inserted by the Financial Services Act 2012, section 11(2). Subsection (1) was amended by S.I. 2013/3115.

[^f00027]: Section 214B was inserted by the Banking Act 2009 (c. 1), section 171(1). It was substituted for the section as originally enacted, together with sections 214C and 214D, by the Financial Services Act 2010 (c. 28), section 16(1).

[^f00028]: 2009, c. 1. Section 2 was amended by S.I.2011/2832. There are other amendments to section 2 but none are relevant to these Regulations.

[^f00029]: 1986. c 53 .