The Bank Recovery and Resolution Order 2016

*Provision*	*Modification*
Sections 6A (cases where mandatory write-down, conversion, etc applies) to 6D (mandatory reduction instruments: supplementary matters)	Ignore sections 6A to 6D.
Section 8 (specific condition: private sector purchaser, bridge bank or asset management vehicle)	Ignore section 8.
Section 8ZA (specific conditions: asset management vehicle)	In subsection (1) treat the reference to a bank as a reference to a UK branch.In subsection (2), treat the first reference to the bank as a reference to the UK branch, and the second reference to the bank as a reference to the third-country institution.In subsection (3)(b) treat the first reference to the bank as a reference to the third-country institution.If the third-country institution is FCA-regulated, ignore subsection (4) (a) unless the third-country institution has as a member of its immediate group a PRA-authorised person.In subsection (6), ignore the reference to section 8.
Section 9 (specific conditions: temporary public ownership)	Ignore section 9.
Section 11 (private sector purchaser)	In subsection (1), treat the reference to the bank as a reference to the UK branch.Ignore subsection (2)(a).
Section 11A (private sector purchaser: marketing)	In subsections (1), (2)(c) and (5), treat the reference to the bank as a reference to the third-country institution.In subsection (1), ignore paragraph (a).In subsections (2)(d) and (3)(a), ignore the reference to securities.
Section 12 (bridge bank)	In subsection (1), treat the reference to the bank as a reference to the UK branch.In subsection (1A)(c) , treat the reference to the bank or its business as a reference to the business of the UK branch.Ignore subsection (2)(a).
Section 12ZA (asset management vehicle)	In subsection (1)(a), treat the reference to the bank as a reference to the UK branch.In subsection (1)(b)—(a) ignore the reference to shares,(b) treat the reference to property, rights or liabilities of the bank as a reference to property, rights or liabilities of the third-country institution which form part of the business of the UK branch.In subsection (2)(c) treat the first reference to banks as including a reference to third-country institutions.
Sections 12A (bail-in option) , 12AA (bail-in: sequence of write down and conversion of capital instruments and liabilities) and 13 (temporary public ownership)	Ignore sections 12A, 12AA and 13.
Sections 15 (share transfer instrument) to 29 (reverse share transfer orders)	Ignore sections 15 to 29.
Sections 30 (resolution company: share transfers) and 31 (resolution company: reverse transfer)	Ignore sections 30 and 31.
Section 33 (property transfer instrument)	In subsections (1) and (2), treat references to property, rights or liabilities of a specified bank as references to property, rights or liabilities of the third-country institution which form part of the business of a specified UK branch, or to property, rights or liabilities of a resolution company.Ignore subsection (3).
Section 36A (directors and senior managers)	In subsections (1) and (2), ignore each reference to a director.In subsections (1) and (4) treat each reference to a specified bank as a reference to a specified UK branch.In subsection (2) treat the reference to a specified bank as a reference to the third-country institution.In subsection (5), treat the first reference to a bank as a reference to a UK branch or a third-country institution, and ignore the words “(whether or not it is a bank)”.
Section 39A (banks which are clearing houses)	Ignore section 39A.
Section 41 (procedure)	In subsection (1)—(a) treat the first reference to a bank as a reference to a UK branch,(b) in paragraph (a), treat the reference to the bank as a reference to the third-country institution,(c) if the third-country institution is FCA-regulated, ignore paragraph (c).In subsection (2) treat the references to the bank as references to the third-country institution.In subsection (4), treat the first reference to a bank as a reference to a UK branch or a third-country institution, and ignore the words “even if it is not a bank”.
Section 41A (transfer of property subsequent to resolution instrument)	Ignore section 41A.
Section 42 (supplemental instruments)	In subsections (1) and (6), ignore the reference to section 41A(2).In subsection (4), ignore the reference to section 8.If the third-country institution is FCA-regulated, ignore subsection (5)(a) unless the third-country institution has as a member of its immediate group a PRA-authorised person.
Section 42A (private sector purchaser: reverse property transfer)	In subsection (1), treat the reference to property, rights or liabilities of a bank as a reference to property, rights or liabilities of a third-country institution which form part of the business of a UK branch.In subsection (5), ignore the reference to section 8.If the third-country institution is FCA-regulated, ignore subsection (6)(a) unless the third-country institution has as a member of its immediate group a PRA-authorised person.
Section 43 (onward transfer)	In subsection (6), ignore the reference to section 8.If the third-country institution is FCA-regulated, ignore subsection (7)(a) unless the third-country institution has as a member of its immediate group a PRA-authorised person.
Section 44 (resolution company: reverse property transfer)	In subsection (5), ignore the reference to section 8.If the third-country institution is FCA-regulated, ignore subsection (6)(a) unless the third-country institution has as a member of its immediate group a PRA-authorised person.
Section 44A (bail-in: reverse property transfer)	Ignore section 44A.
Section 44BA (property transfer instruments and bail-in: supplementary matters)	Ignore section 44BA.
Section 44C (report on special bail-in provision)	In subsection (4), treat each reference to “on a liquidation” as a reference to “in insolvency proceedings”.In subsection (4)(a), treat the reference to “the liabilities of the bank” as a reference to “the relevant liabilities of the third-country institution” (and for this purpose, “relevant liability” has the meaning given in section 48B(17)).In subsection (4), after paragraph (b), insert “ and for the purposes of this subsection “insolvency proceedings” means such insolvency proceedings (whether or not under the law of a third country) as the Bank of England, after consultation with the Treasury, considers relevant. ”
Sections 44D (bridge bank: supplemental property transfer powers) to 46 (temporary public ownership: reverse property transfer)	Ignore sections 44D to 46.
Section 47 (restriction of partial transfers)	In subsection (1), treat the reference to a bank as a reference to a third-country institution.In subsection (1A) , treat the first reference to a bank as a reference to a third-country institution, and ignore the words “(even if it is not a bank)”.
Section 48A (creation of liabilities)	In subsection (1) ignore the reference to sections 44A(3)(b), 44D(3)(b), 44E(3)(b), 45(3)(b) and 46(3)(b).
Section 48C (meaning of “protected deposit”)	In subsection (4), treat the reference to section 48B(8)(a) as a reference to section 48B(10)(a).
Section 48D (general interpretation of section 48B)	In the definition of client assets, treat the reference to the bank as a reference to the third-country institution.
Section 48E (report on special bail-in provision)	Ignore section 48E.
Section 48F (power to amend definition of “excluded liabilities”)	In subsection (1) treat the reference to section 48B(8) as including a reference to section 48B(10).
Section 48H (business reorganisation plan)	Ignore section 48H.
Sections 48L (powers in relation to securities) to 48O (directions in or under resolution instruments)	Ignore sections 48L to 48O.
Section 48Q (continuity)	Treat references to a resolution instrument as references to a property transfer instrument within section 44B(2) that makes special bail-in provision under section 48B(1).
Section 48R (execution and registration of instruments, etc.)	Treat references to a resolution instrument as references to a property transfer instrument within section 44B(2) that makes special bail-in provision under section 48B(1).
Section 48S (resolution instruments: general matters)	Treat references to a resolution instrument as references to a property transfer instrument within section 44B(2) that makes special bail-in provision under section 48B(1).
Sections 48T (procedure) to 48WA (bail-in option: recovery of expenses)	Ignore sections 48T to 48WA.
Section 48Z (termination rights etc)	In subsection (1), in paragraph (a) of the definition of “crisis management measure”, treat the reference to the bank as including a reference to a UK branch.In subsection (6)(a), treat the first reference to the third-country institution as including a reference to the UK branch.
Section 57 (valuation principles)	In subsection (4) treat the reference to the bank as a reference to the third-country institution.
Section 60 (third party compensation)	In subsection (3)—(a) in paragraph (a) treat the second reference to a bank as including a reference to a third-country institution;(b) in paragraph (c) treat the reference to insolvency as including any proceedings under the law of the third country in which the third-country institution is incorporated which are equivalent to the proceedings listed in paragraph (c).
Section 60B (principle of no less favourable treatment)	In subsection (1), treat the references to a bank as including references to a third-country institution.In subsection (2)(a) treat the reference to the bank as a reference to the UK branch.Ignore subsection (2)(b).In subsection (3), treat the references to a bank as references to a third-country institution.In subsection (4) treat the reference to insolvency as including any proceedings under the law of the third country in which the third-country institution is incorporated which are equivalent to the proceedings listed in subsection (4).
Section 62A (independent valuer: sections 6E and 48X)	In subsection (1A) , treat the reference to the bank as including a reference to the third-country institution.
Sections 62B (resolution administrator) to 62E (resolution administrator: money)	Ignore sections 62B to 62E.
Section 63 (general continuity obligations: property transfers)	In subsection (1)(a)—(a) treat the second reference to a bank as a reference to a third-country institution;(b) treat the reference to “whose business” as a reference to the business of whose UK branch;(c) ignore the references to sections 41A(2) and 44D(2).In subsection (1)(d) treat the reference to the bank as a reference to the UK branch.In subsection (1A) treat the reference to insolvency as including any proceedings under the law of the third country in which the third-country institution is incorporated which are equivalent to proceedings listed in subsection (1A).In subsection (4A)—(a) treat each reference to the bank as a reference to the third-country institution;(b) treat the reference to “whose business” as a reference to “the business of whose UK branch”.
Section 64 (special continuity obligations: property transfers)	Treat the references to contracts or other arrangements, in each place where they appear, as limited to contracts or other arrangements which were entered into by the third-country institution in relation to the business of its UK branch.
Section 65 (continuity obligations: onward property transfers)	In subsection (1), ignore paragraph (a)(ii) .In subsection (3), ignore paragraph (b).In subsection (4), ignore paragraph (c), and in paragraph (d) treat the reference to “(a) to (c)” as a reference to “(a) or (b)”.
Sections 66 (share transfers) to 68 (continuity obligations: onward share transfers)	Ignore sections 66 to 68.
Section 70A (suspension of obligations)	For subsection (1), substitute—1The Bank of England may suspend obligations to make a payment, or delivery, under a contract where—aone of the parties to the contract is a third-country institution,bthe contract was entered into by the third-country institution in relation to the business of its UK branch, andcthe Bank is making a property transfer instrument in relation to the business of the UK branch..In subsection (3)(c) treat the reference to the bank under resolution as a reference to the third-country institution.In subsection (5), ignore the references to share transfer instruments, resolution instruments and third-country instruments.
Section 70B (restriction of security interests)	In subsection (1)—(a) treat the first reference to the bank as a reference to the UK branch and the second as a reference to the third-country institution;(b) treat the reference to assets of the bank as a reference to any property or rights of the third-country institution which form part of the business of the UK branch.In subsection (3), treat the reference to any asset of the bank under resolution as a reference to any property or rights of the third-country institution which form part of the business of the UK branch.In subsection (4), ignore the references to share transfer instruments, resolution instruments and third-country instruments.
Section 70C (suspension of termination rights)	For subsection (2), substitute—2A contract is a “qualifying contract” for the purpose of this section if—aone of the parties to the contract is a third-country institution, and the contract was entered into by the third-country institution in relation to the business of its UK branch,bthe Bank is making a property transfer instrument in relation to the business of the UK branch, andcall the obligations under the contract to make a payment, make delivery or provide collateral continue to be performed..Ignore subsection (3).In subsection (5), ignore the references to share transfer instruments, resolution instruments and third-country instruments.In subsection (6), ignore the words after paragraph (b).In subsection (7)—(a) treat the reference to the bank under resolution as a reference to the third-country institution;(b) ignore paragraph (b).In subsection (9)—(a) treat the reference to the bank under resolution as a reference to the third-country institution;(b) ignore the words “or the subsidiary undertaking”.
Section 71 (pensions)	Ignore section 71.
Section 76 (international obligation notice: general)	In subsections (1) and (3) treat the reference to exercising the power to make a resolution administrator appointment instrument or a mandatory reduction instrument or a stabilisation power as a reference to making a property transfer instrument.In subsections (1) and (4) treat the reference to a bank as a reference to a UK branch.Ignore subsection (5).
Section 77 (international obligation notice: resolution company)	In subsection (1), treat the reference to a bank's business as a reference to the business of a UK branch.
Section 78 (public funds: general)	In subsections (1) and (4) treat the reference to exercising the power to make a mandatory reduction instrument or a stabilisation power as a reference to making a property transfer instrument.In subsections (1) and (5), treat the reference to a bank as a reference to a UK branch.
Section 78A (pre-conditions for financial assistance)	Ignore section 78A.
Section 79 (public funds: resolution company)	In subsection (1), treat the reference to a bank's business as a reference to the business of a UK branch.
Section 79A (private sector purchaser: report)	In subsection (1), treat the reference to a bank's business as a reference to the business of a UK branch.In subsection (2) ignore the reference to share transfer instruments.
Section 80 (resolution company: report)	In subsection (1), treat the reference to a bank's business as a reference to the business of a UK branch.
Sections 80A (transfer for bail-in purposes) and 81 (temporary public ownership)	Ignore sections 80A and 81.
Section 81A (accounting information to be included in reports under section 80)	In subsection (1), ignore the references to sections 80A(2)(b) and 81.Ignore the references to the bank.
Sections 81AA to 81CA (groups)	Ignore sections 81AA to 81CA.
Section 81D (interpretation: “banking group company”)	In subsection (1)(a)—(a) ignore the reference to a bank and EU institution,(b) treat the reference to section 81B(9) as a reference to section 89JA(2)(c).
Sections 82 (temporary public ownership) and 83 (supplemental)	Ignore sections 82 and 83.
Section 83ZA (information)	For subsection (1), substitute—1This section only applies to information and documents reasonably required in connection with the making by the Bank of England of a property transfer instrument in relation to the UK branch of a third-country institution..In subsections (2) and (4) treat references to a bank or banking group company as references to a third-country institution.In subsections (7) and (10) treat references to a bank as references to a third-country institution.
Section 83ZB (reports by skilled persons)	In subsection (2) treat the references to a bank as a reference to a third-country institution.
Section 83ZC (appointment by persons to carry out general investigations)	In subsection (2)(a) treat the reference to the business of a bank as a reference to the business conducted by a UK branch.Ignore subsections (2)(c), (3) and (4).
Section 83ZE (investigations etc. in support of foreign resolution authorities)	Ignore section 83ZE.
Section 83ZL (entry of premises under warrant)	In subsection (3), treat each reference to a bank as a reference to a third-country institution.
Section 83ZR (regulatory sanctions)	In subsection (1)(d), where the third-country institution is an investment firm, treat the references to banks as references to investment firms.

PART 4 — Amendments of the Financial Services and Markets Act 2000

Introduction to amendments of the Financial Services and Markets Act 2000

30

The Financial Services and Markets Act 2000 is amended in accordance with this Part.

General meeting

31

After section 55PA (assets requirements imposed on insurance undertakings or reinsurance undertakings) , insert—

(55PB) (1) This section applies where— (a) either regulator has imposed a general meeting requirement on an authorised person who is a bank, building society or investment firm, (b) the authorised person has not complied with the general meeting requirement, and (c) the appropriate regulator considers that the authorised person has infringed, or is likely in the near future to infringe— (i) a relevant requirement within the meaning of section 204A; or (ii) one or more of Articles 3 to 7, 14 to 17 or 24 to 26 of Regulation (EU) No 600/2014 of 15th May 2014 of the European Parliament and of the Council on Markets in Financial Instruments . (2) A general meeting requirement is a requirement under section 55L or 55M that the authorised person call a general meeting of its shareholders or members. (3) The appropriate regulator may call a general meeting of the shareholders or members of the authorised person. (4) The appropriate regulator may propose business for consideration and decision at the general meeting. (5) The meeting must be called in the same manner, as far as practicable, as that in which meetings are required to be called by the board of directors (or the equivalent management body) of the authorised person. (6) For the purposes of this section— - “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; - “investment firm” has the meaning given in section 258A of the Banking Act 2009 ; - “the appropriate regulator” means the regulator who imposed the general meeting requirement.

Removal of directors and senior executives and appointment of temporary manager

32

In Part 5 (performance of regulated activities), after section 71A insert—

(71B) (1) If the appropriate regulator is satisfied that the conditions in section 71D(1) and (2) are met in relation to a relevant firm, the appropriate regulator may require the firm to remove— (a) any person who is a director of the firm; (b) any person who is a senior executive of the firm. (2) If the appropriate regulator imposes a requirement under subsection (1), the regulator may also require the relevant firm— (a) to replace a director or senior executive who has been removed, and (b) to take any step needed to give effect to the replacement, including, where necessary, calling a general meeting of the firm's shareholders or members. (71C) (1) If the appropriate regulator is satisfied— (a) in the case of a relevant firm, that the conditions in section 71D(1), (2) and (4) are met in relation to that firm, or (b) in the case of a parent undertaking which is not a relevant firm, that the conditions in section 71D(1) and (4) are met in relation to that parent undertaking, the appropriate regulator may appoint a person to act (or one or more persons to act jointly) as a temporary manager of that firm or that parent undertaking. (2) Where the appropriate regulator makes an appointment under subsection (1) in relation to a parent undertaking which is not a relevant firm, the regulator may also require the undertaking to remove— (a) all of its directors; (b) all of its senior executives. (3) A temporary manager may be appointed under subsection (1)— (a) to replace the directors of a relevant firm or a parent undertaking where they have been removed in compliance with a requirement imposed under section 71B or subsection (2), or (b) to work with the directors of a relevant firm or a parent undertaking. (4) A temporary manager has the functions specified in the instrument of appointment (see section 71F). (5) The functions which may be specified include (amongst other things)— (a) ascertaining the financial position of the relevant firm or the parent undertaking; (b) managing the business or part of the business of the relevant firm or the parent undertaking in order to preserve or restore the financial position of the firm or the parent undertaking; (c) taking measures to restore the prudent management of the relevant firm or the parent undertaking; (d) any function of the directors. (6) The temporary manager may, with the consent of the appropriate regulator— (a) require the directors to call a general meeting of the shareholders or members of the relevant firm or the parent undertaking, or (b) in the case where all of the directors have been removed in compliance with a requirement imposed under section 71B or subsection (2), call a general meeting of the shareholders or members of the relevant firm or the parent undertaking. (7) The temporary manager may propose business for consideration at the general meeting. (8) If the temporary manager is being appointed to work with the directors, the appropriate regulator— (a) may require the directors not to exercise specified functions during the period of appointment; (b) may require the directors to consult the temporary manager, or obtain the consent of the temporary manager, before taking specified decisions or specified action. “Specified” means specified in the requirement. (71D) (1) The condition in this subsection is met in relation to a relevant firm or a parent undertaking if— (a) there is a deterioration in the financial situation of the relevant firm or the parent undertaking which is a significant deterioration, or (b) there is a serious infringement by the relevant firm or the parent undertaking of— (i) a relevant requirement, or (ii) its memorandum or articles of association or other constituent instrument. (2) The condition in this subsection is met in relation to a relevant firm if it is not reasonably likely that the deterioration would be reversed or the infringement would be brought to an end by any measure of a kind described in Article 27(1) of the recovery and resolution directive which could be taken by the appropriate regulator under the provisions listed in subsection (3). (3) The provisions mentioned in subsection (2) are— (a) section 55J (variation or cancellation on initiative of regulator), (b) section 55L (imposition of requirements by FCA), (c) section 55M (imposition of requirements by PRA), (d) section 55PB (requirements relating to general meetings), (e) section 56 (prohibition orders), (f) section 63 (withdrawal of approval), (g) section 63ZA (variation of senior manager's approval at request of authorised person) , (h) section 63ZB (variation of senior manager's approval on initiative of regulator), (i) section 63A (power to impose penalties) , (j) section 66 (disciplinary powers) , (k) Part 12A (powers exercisable in relation to parent undertakings) , or (l) Part 14 (disciplinary measures). (4) The condition in this subsection is met if the following action would not be sufficient to reverse the deterioration or bring the infringement to an end— (a) in the case of a relevant firm, the imposition of one or more requirements under section 71B (removal and replacement of directors and senior executives); or (b) in the case of a parent undertaking which is not a relevant firm, the exercise of any of the appropriate regulator's powers under Part 12A. (5) For the purposes of this section— (a) “relevant requirement” has the meaning given in section 204A; (b) a deterioration in the financial situation of the relevant firm or the parent undertaking is significant if— (i) in the case of a relevant firm, or a parent undertaking which is an authorised person, it no longer satisfies, or is likely to fail to satisfy, the threshold conditions relating to its financial resources which apply to it under Schedule 6; (ii) in the case of a parent undertaking which is not an authorised person, the deterioration threatens the viability of the parent undertaking. (71E) (1) Before appointing a person to act as a temporary manager, the appropriate regulator must be satisfied that the person— (a) has the qualifications, ability and knowledge to carry out the functions to be given to the temporary manager, and (b) would not be subject to any conflict of interest as a result of the appointment. (2) A person may not be appointed to act as a temporary manager for a period longer than one year, but is eligible for re-appointment (or further re-appointment) if subsection 71C(1) continues to apply in relation to the relevant firm or parent undertaking. (3) The appropriate regulator may vary the terms of the appointment of a temporary manager, or remove the temporary manager, at any time. (4) A temporary manager is not liable for damages in respect of anything done in good faith for the purposes of or in connection with the functions of the appointment (subject to section 8 of the Human Rights Act 1998). (71F) (1) The power in section 71C(1) is to be exercised by an instrument of appointment. (2) The instrument of appointment must— (a) specify the functions of the temporary manager, (b) specify the date on which the appointment of the temporary manager has effect, (c) specify the period for which the temporary manager is appointed, and (d) make provision for the resignation and replacement of the person who is appointed as the temporary manager. (3) The instrument of appointment may— (a) require the temporary manager to consult the appropriate regulator or other specified person before exercising specified functions, (b) specify particular matters on which the appropriate regulator or other specified person must be consulted, and (c) provide that the temporary manager is not to exercise specified functions without the consent of the appropriate regulator or other specified person. (4) The instrument of appointment may require the temporary manager to make reports to the appropriate regulator, at specified times or intervals, on— (a) the financial position of the relevant firm or the parent undertaking, (b) the actions taken by the temporary manager during the course of the temporary manager's appointment, (c) any other specified matters. (5) In subsections (3) and (4), “specified” means specified in the instrument of appointment. (6) The instrument of appointment may provide for the payment of remuneration and allowances to a temporary manager. (7) Provision under subsection (6) may provide that the amounts are— (a) to be paid by the appropriate regulator, or (b) to be determined by the appropriate regulator and paid by the relevant firm or the parent undertaking. (8) If a temporary manager— (a) is appointed to replace the directors of the relevant firm or the parent undertaking, or (b) is appointed to work with the directors of the relevant firm or the parent undertaking and has the power to represent that firm or parent undertaking, the appropriate regulator must publish the instrument of appointment on its website. (71G) (1) A relevant firm which is aggrieved by— (a) the imposition of a requirement on that firm under section 71B, or (b) the appointment, or the terms of the appointment, of a person to act as a temporary manager of that firm under section 71C(1), may refer the matter to the Tribunal. (2) A parent undertaking which is aggrieved by— (a) the imposition of a requirement on that parent undertaking under section 71C(2), or (b) the appointment, or the terms of the appointment, of a person to act as a temporary manager of that parent undertaking under section 71C(1), may refer the matter to the Tribunal. (3) A director (or a former director) of a relevant firm or a parent undertaking who is aggrieved by the imposition of a requirement on that director under section 71C(8) may refer the matter to the Tribunal. (4) A director or senior executive (or a former director or senior executive) of a relevant firm or a parent undertaking who is aggrieved by the imposition of a requirement on that firm or parent undertaking under section 71B or 71C(2) may refer the matter to the Tribunal. (71H) (1) A requirement under section 71B or 71C(2) or (8) or the appointment of a temporary manager under section 71C(1) may be expressed to take effect immediately or on a specified date only if the appropriate regulator, having regard to the grounds for imposing the requirement or making the appointment, reasonably considers that it is necessary for the requirement or the appointment to take effect immediately or on that date. (2) If either regulator proposes to impose a requirement on a relevant firm under section 71B or a parent undertaking under section 71C(2), or imposes such a requirement with immediate effect, it must give written notice— (a) to that firm or parent undertaking, and (b) to each of the directors or senior executives to whom the requirement relates (“the interested parties”). (3) If either regulator— (a) proposes to appoint a person to act as a temporary manager under section 71C or to vary the terms on which such a person is appointed, or (b) makes such an appointment or variation with immediate effect, the regulator must give written notice to the relevant firm or the parent undertaking concerned. (4) If either regulator proposes to impose a requirement on the directors under section 71C(8), or imposes such a requirement with immediate effect, the regulator must give written notice to each director. (5) A notice given under subsection (2) must— (a) give details of the requirement, (b) identify each of the directors or senior executives to whom the requirement relates, (c) give the regulator's reasons for imposing the requirement— (i) in the case of a notice given to the relevant firm or the parent undertaking, in relation to each interested party; (ii) in the case of a notice given to an interested party, in relation to that interested party, (d) inform the relevant firm or the parent undertaking and the interested parties that each of them may make representations to the regulator within such period as may be specified in the notice (whether or not the matter has been referred to the Tribunal), (e) state when the requirement takes effect, and (f) inform the relevant firm or the parent undertaking and each of the interested parties of their right to refer the matter to the Tribunal. (6) A notice given under subsection (3) must— (a) state when the appointment or variation takes effect, and be accompanied by the instrument, or revised instrument, of appointment, (b) give the regulator's reasons for making the appointment or variation, (c) inform the relevant firm or the parent undertaking that it may make representations to the regulator within such period as may be specified in the notice (whether or not the matter has been referred to the Tribunal), and (d) inform the relevant firm or the parent undertaking of its right to refer the matter to the Tribunal. (7) A notice given under subsection (4) must— (a) give details of the requirement, (b) give the regulator's reasons for imposing the requirement, (c) state when the requirement takes effect, (d) inform the director that the director may make representations to the regulator within such period as may be specified in the notice (whether or not the matter has been referred to the Tribunal), and (e) inform the director of the director's right to refer the matter to the Tribunal. (8) The regulator may extend the period allowed by the notice given under subsection (2), (3) or (4) for making representations. (9) If, having considered any representations made by a person to whom notice (the “original notice”) has been given under subsection (2), (3) or (4), the regulator decides— (a) to impose the requirement, make the appointment or vary the terms of an appointment in accordance with the original notice, or (b) not to rescind the imposition of any such requirement or the making of any such appointment or variation which has already taken effect, the regulator must give written notice to each person to whom the original notice was given. (10) A notice under subsection (9) must inform the person to whom it is given of the right of that person to refer the matter to the Tribunal and give an indication of the procedure on such a reference. (11) If, having considered any representations made by a person to whom notice (the “original notice”) has been given under subsection (2), (3) or (4), the regulator decides— (a) to impose a requirement, make an appointment or a vary the terms of an appointment in a way that is different from the requirement, appointment or variation described in the original notice, (b) not to impose the requirement, make the appointment or vary the terms of an appointment in accordance with the original notice, or (c) to rescind the imposition of any such requirement, or the making of any such appointment or variation that has already taken effect, the regulator must give written notice to each person to whom the original notice was given. (12) A notice under subsection (11)(a) about the imposition of a requirement under section 71B or 71C(2) must comply with subsection (5). (13) A notice under subsection (11)(a) about the appointment of a person as a temporary manager or the variation of the terms of the appointment of a person as a temporary manager must comply with subsection (6). (14) A notice under subsection (11)(a) about the imposition of a requirement under section 71C(8) must comply with subsection (7). (15) In this section, any reference to “appointment” includes “re-appointment”. (71I) (1) For the purposes of sections 71B to 71H “relevant firm” means— (a) a bank as defined in section 2 of the Banking Act 2009, (b) a building society as defined in section 119 of the Building Societies Act 1986, or (c) an investment firm as defined in section 258A of the Banking Act 2009 . (2) For the purposes of sections 71C to 71H, “parent undertaking” means an institution, financial holding company or mixed financial holding company which— (a) is incorporated in, or formed under the law of, any part of the United Kingdom, (b) is an EEA parent, and (c) either— (i) has a subsidiary which is an institution, or (ii) holds a participation (within the meaning given by Article 4.1(35) of the capital requirements regulation) in an institution. (3) For the purposes of subsection (2), an institution, financial holding company or mixed financial holding company is an EEA parent if it is not itself the subsidiary of an institution, financial holding company or mixed financial holding company set up in any EEA state. (4) In subsections (2) and (3)— - “institution” means a credit institution or an investment firm as defined in Article 2.1(2) and 2.1(3) of the recovery and resolution directive; - “financial holding company” and “mixed financial holding company” have the meanings given in Article 4.1(20) and 4.1(21) of the capital requirements regulation. (5) For the purposes of sections 71B to 71H— - “appropriate regulator” means— 1. in relation to a PRA-authorised person, the PRA, 2. in relation to any other authorised person, the FCA, 3. in relation to a parent undertaking that is not an authorised person— 1. the PRA, where the PRA is the consolidating supervisor in relation to that undertaking; 2. the FCA, where the FCA is the consolidating supervisor in relation to that undertaking; - “consolidating supervisor” means the competent authority responsible for the exercise of supervision on the basis of the consolidated situation (within the meaning of Article 4.1(47) of the capital requirements regulation) of an institution which is an EEA parent; - “director” includes, in relation to an undertaking which has no board of directors, a member of the equivalent management body responsible for the management of the undertaking concerned; - “the recovery and resolution directive” means Directive 2014/59/EU of the European Parliament and of the Council of 15th May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms ; - “senior executive”, in relation to a relevant firm or a parent undertaking, means a person who— 1. exercises executive functions within that firm or that undertaking; and 2. is responsible, and directly accountable to the directors, for the day to day management of that firm or that undertaking.

Assessment and resolution

33

• (1) In section 189 (assessment: procedure), in subsection (6) insert at the beginning “ Unless section 190A applies ”.

• (2) After section 190, insert—

(190A) (1) This section applies if— (a) the appropriate regulator receives a section 178 notice in relation to a credit institution, investment firm or banking group company, (b) as a result of a direction under section 189(1A) or the application of section 189(1ZB) , the appropriate regulator is required to act under this Part in a timely manner in relation to that notice, and (c) the appropriate regulator does not complete the assessment required by section 185 before a relevant transfer instrument has been made by the Bank of England which transfers shares issued by, or voting power in, that credit institution, investment firm or banking group company. (2) The transfer of shares or voting takes effect in accordance with the terms of the relevant transfer instrument, but the right of the person who acquires shares under that instrument (“the acquirer”) to exercise the voting power represented by those shares is suspended. (3) During the suspension, the voting power represented by the shares in question may be exercised by the Bank (and only by the Bank). (4) If the appropriate regulator issues a decision notice under section 189(7) objecting to the acquisition, the Bank may direct the acquirer to sell the shares within a period specified by the Bank in the direction (“the sale period”). (5) In determining the sale period, the Bank must take account of prevailing market conditions. (6) The suspension provided for in subsection (2) ends— (a) if the appropriate regulator gives notice under section 189(4)(a) or (b)(i) that it approves the acquisition, on the date of that notice, or (b) if the Bank gives a direction under subsection (4), on the earlier of the day on which the sale period ends and the day on which the shares are sold. (7) In this section a “relevant transfer instrument” means an instrument made by the Bank acting in the exercise of its functions under sections 6A to 6C of the Banking Act 2009 or under the special resolution regime under Part 1 of that Act, which transfers, or has the effect of transferring, shares issued by, or voting power in, the credit institution, investment firm or banking group company.

• (3) In section 191B (restriction notices), after subsection (3) insert—

(3A) Subsection (3)(a) and (b) does not apply where the voting power represented by the shares in question is suspended under section 190A(2).

• (4) In section 191C (orders for sale of shares), after subsection (6), insert—

(7) The appropriate regulator must obtain the consent of the Bank of England before making an application under this section in relation to shares if the Bank has the power to direct the sale of those shares under section 190A(4). (8) The appropriate regulator may not make an application under this section in relation to shares if the Bank of England has given a direction for the sale of those shares under section 190A(4).

• (5) In section 191F (offences under this Part) —

• (a) in subsection (2) at the end insert “ or section 190A applies ”;

• (b) after subsection (4) insert—

(4A) A person who fails to comply with a direction given by the Bank of England under section 190A(4) is guilty of an offence.

• (c) in subsection (9), after “(4)” insert “ or (4A) ”.

• (6) In section 401—

• (a) in subsection (3A)(g) , after “191F(2) to” insert “ (4) and (5) to ”;

• (b) after subsection (3A) insert—

(3AB) For the purposes of subsections (2)(a) and (3)(a), the Bank of England is the “appropriate regulator” in respect of an offence under section 191F(4A).

Restrictions on disclosure of confidential information

34

In section 348(5) (restrictions on disclosure of confidential information by FCA, PRA etc) , after paragraph (c) insert—

(zd) a person appointed to act as a temporary manager by the FCA or the PRA under section 71C;

Supervisory notices

35

In section 395 (supervisory notices) , in subsection (13), after paragraph (aa) insert—

(ab) 71H(2), (3), (4), (9) or (11)(a);

PART 5 — Amendments of secondary legislation

Banking Act 2009 (Restriction of Partial Property Transfers) Order 2009

36

• (1) The Banking Act 2009 (Restriction of Partial Property Transfers) Order 2009 is amended as follows.

• (2) In article 1(3)—

• (a) in the definition of “banking institution”—

• (i) at the end of sub-paragraph (d), omit “or”;

• (ii) after sub-paragraph (e), insert—

or (f) a third-country institution (within the meaning of section 89JA of the Act (resolution of UK branches of third-country institutions) ).

• (b) in the definition of “continuity powers”, omit “(including that subsection as applied by sections 65(2) and 83(2)(f) of the Act)” and “(including that subsection as applied by sections 68(2) and 83(2)(f) of the Act)”.

• (c) in the definition of “relevant authority”, in sub-paragraph (a)—

• (i) for “or 5” substitute “ , 5 or 6 ”;

• (ii) for “and (4B)” substitute “ , (4B) and (4C) ”;

• (d) after paragraph (4), insert—

(5) References in this Order to sections of the Banking Act 2009 include, as the context requires, references to those provisions as applied with or without modifications by that Act, as that Act has effect on the day on which the Bank Recovery and Resolution Order 2016 comes into force.

• (3) In article 2—

• (a) in paragraph (4)—

• (i) in sub-paragraph (a), omit “(including that section as applied by section 82 of the Act)”;

• (ii) in sub-paragraph (ii), omit “(including those sections as applied and modified by section 83 of the Act)”;

• (b) after paragraph (4B), insert—

(4C) Case 6 is where— (a) the Bank has made a share transfer instrument in accordance with section 12(2) of the Act; and (b) a property transfer instrument has been made by the Bank in accordance with section 44D(2) (bridge bank: supplemental property transfer powers) or section 44E(2) (bridge bank: supplemental reverse property transfer powers) of the Act which is a partial property transfer.

• (4) After article 5 , insert—

(5A) (1) This article applies where the property or rights against which a liability is secured consist of, or include, eligible deposits. (2) Article 5 does not apply if the Bank of England considers that, in order to ensure that eligible deposits are available to depositors, it is necessary— (a) to transfer the eligible deposits without the other property or rights against which the liability is secured, or without the liability which they are securing, or (b) to transfer the other property or rights against which the liability is secured, or the liability, without the eligible deposits. (3) For the purposes of this article, “eligible deposit” means a deposit in respect of which the person, or any of the persons, to whom it is owed would be eligible for compensation under the Financial Services Compensation Scheme.

• (5) In article 8 —

• (a) in paragraph (1)(a), for “or 44A ” substitute “ , 44A or 44E ”;

• (b) in paragraph (4)(a) for “or 44A” substitute “ , 44A or 44E ”.

• (6) In article 12(6), for “or 44A” substitute “ , 44A or 44E ”.

Banking Act 2009 (Exclusion of Investment Firms of a Specified Description) Order 2014

37

In the Banking Act 2009 (Exclusion of Investment Firms of a Specified Description) Order 2014 , for article 2(1) (description of institution not included within the meaning of “investment firm”) substitute—

(1) An institution which is not required under provisions implementing the Capital Requirements Directive to have initial capital of [euro]730,000 is specified for the purposes of section 258A(2)(b) of the Banking Act 2009 .

Banking Act 2009 (Third Party Compensation Arrangements for Partial Property Transfers) Regulations 2009

38

• (1) The Banking Act 2009 (Third Party Compensation for Partial Property Transfers) Regulations 2009 are amended as follows.

• (2) In regulation 1—

• (a) in paragraph (3) , in the definition of “banking institution”—

• (i) at the end of subparagraph (b), omit “or”;

• (ii) after subparagraph (c), insert—

or (d) a third-country institution (within the meaning of section 89JA of the Act (resolution of UK branches of third-country institutions)).

• (b) in paragraph (3), in the definition of “relevant time”—

• (i) in paragraph (c) omit “(including that section as applied by section 82 of the Act)”,

• (ii) after paragraph (e) insert—

(f) in relation to Case 6 (as specified in regulation 2(4C)), the time at which the share transfer instrument made in accordance with section 12(2) of the Act took effect;

• (c) after paragraph (3), insert—

(4) References in this Order to sections of the Banking Act 2009 include, as the context requires, references to those provisions as applied with or without modifications by that Act, as that Act has effect on the day on which the Bank Recovery and Resolution Order 2016 comes into force.

• (3) In regulation 2 —

• (a) in paragraph (4)—

• (i) in sub-paragraph (a) omit “(including that section as applied by section 82 of the Act)”;

• (ii) in sub-paragraph (b) omit “(including that section as modified by section 83 of the Act)”;

• (b) after paragraph (4B), insert—

(4C) Case 6 is where— (a) the Bank has made a share transfer instrument in accordance with section 12(2) of the Act; and (b) a property transfer instrument has been made by the Bank in accordance with section 44D(2) (bridge bank: supplemental property transfer powers) or section 44E(2) (bridge bank: supplemental reverse property transfer powers) of the Act which is a partial property transfer.

• (4) In regulation 6 , in paragraph (b)—

• (a) in sub-paragraph (iii) omit “(including that section as applied by section 82 of the Act)”;

• (b) after sub-paragraph (v), insert—

(vi) in the case of Case 6 (as specified in regulation 2(4C), the share transfer instrument made in accordance with section 12(2).

Banking Act 2009 (Restriction of Special Bail-in Provision, etc) Order 2014

39

• (1) The Banking Act 2009 (Restriction of Special Bail-in Provision, etc) Order 2014 is amended as follows.

• (2) In article 2—

• (a) in paragraph (1), in the definition of “banking institution” after sub-paragraph (c) insert—

(d) a third-country institution (within the meaning of section 89JA of the Act (resolution of UK branches of third-country institutions)).

• (b) in paragraph (2), for “as applied by section 89A of the Act (application to investment firms) ” substitute “ as applied with or without modifications by that Act, as that Act has effect on the day on which the Bank Recovery and Resolution Order 2016 comes into force. ”.

• (3) In article 6, in paragraph (10)—

• (a) at the end of sub-paragraph (a) omit “or”;

• (b) after sub-paragraph (b), insert—

(c) an onward property transfer instrument under section 43(2) of the Act in relation to which the original instrument (as defined in section 43(1)) is a property transfer instrument under section 12(2) of that Act, or (d) a bridge bank supplemental property transfer instrument under section 44D(2) of the Act.

Banking Act 2009 (Mandatory Compensation Arrangements Following Bail-in) Regulations 2014

40

• (1) The Banking Act 2009 (Mandatory Compensation Arrangements Following Bail-in) Regulations 2014 are amended as follows.

• (2) In regulation 2—

• (a) in paragraph (1), in the definition of “banking institution”, after paragraph (d) insert—

(e) a third-country institution (within the meaning of section 89JA of the Act (resolution of UK branches of third-country institutions)).

• (b) in paragraph (2), for “as applied by section 89A of the Act (application to investment firms)” substitute “ as applied with or without modifications by that Act as that Act has effect on the day on which the Bank Recovery and Resolution Order 2016 comes into force. ”.

• (3) In regulation 3—

• (a) in paragraph (3)(a), for “or 12ZA(3)” substitute “ , 12ZA(3) or 44D(2) ”;

• (b) in paragraph (4)(b)—

• (i) for “an associated” substitute “ a ”,

• (ii) for “(within the meaning of section 44B(2))” substitute “ referred to in section 44B(2)(b) or in a property transfer instrument under section 43(2) ”.

Bank Recovery and Resolution (No. 2) Order 2014

41

• (1) The Bank Recovery and Resolution (No. 2) Order 2014 is amended as follows.

• (2) In article 107 (interpretation of Chapter 1),—

• (a) at the end of the definition of “measure for early intervention”, omit “and”;

• (b) at the end of the definition of “relevant institution”, insert—

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

• (3) In article 108, at the end insert “ or the appointment of a temporary manager ”.

• (4) In article 110 (application and interpretation of Chapter 2) after the definition of “non-UK group entity”, insert—

temporary manager” means— (a) in relation to a UK group entity, a temporary manager appointed by the appropriate regulator under section 71C of FSMA; (b) in relation to a non-UK group entity, a temporary administrator appointed by a competent authority under measures implementing Article 29 of the recovery and resolution directive;

• (5) In article 111 (procedure for early intervention in respect of a UK group entity)—

• (a) in paragraph (1), after “early intervention” insert “ or appoint a temporary manager ”;

• (b) in paragraph (3)—

• (i) after “early intervention” insert “ or appoint a temporary manager ”;

• (ii) in subparagraph (b) for “measure” substitute “ proposal ”;

• (c) in paragraphs (4) and (6), after “early intervention” insert “ or to appoint a temporary manager ”.

• (6) In article 112 (procedure for early intervention in respect of a non-UK group entity)—

• (a) in paragraph (1) after “early intervention” insert “ or to appoint a temporary manager ”;

• (b) in paragraph (2) for “measure” substitute “ proposal ”.

• (7) In article 113 (joint decisions about early intervention)—

• (a) after paragraph (1) insert—

(1A) Where two or more competent authorities decide to appoint a temporary manager, the appropriate regulator must endeavour to reach a decision jointly with the relevant competent authorities on whether it is more appropriate to appoint the same temporary manager for all the entities concerned.

• (b) in paragraph (2)(a) after “early intervention” both times it appears, insert “ or to appoint a temporary manager ”.

• (8) In article 114 (references to EBA), for paragraph (7) substitute—

(7) In this article, “referable measure means— (a) a measure for early intervention which is also— (i) a measure of the kind specified in sub-paragraph (a) of Article 27.1 of the recovery and resolution directive relating to information included in a recovery plan or group recovery plan by virtue of points (4), (10), (11) and (19) of Section A of the Annex to that directive (information to be included in recovery plans); or (ii) a measure of the kind specified in sub-paragraph (e) or (g) of Article 27.1 of that directive, or (b) the appointment of a temporary manager.

• (9) In article 115 (requesting the assistance of EBA), after “113(1)” insert “ or (1A) ”.

• (10) In article 116 (application and interpretation of Chapter 3), after “early intervention”” insert “ , “temporary manager” ”.

• (11) In article 117 (procedure for early intervention in respect of a UK group entity)—

• (a) in paragraphs (1), (3) and (5), after “early intervention” insert “ or appoint a temporary manager ”;

• (b) in paragraph (4) and (6), after “early intervention” insert “ or to appoint a temporary manager ”;

• (c) in paragraph (3)(b) for “measure” both times it appears, substitute “ proposal ”.

• (12) In article 118 (joint decisions about early intervention)—

• (a) after paragraph (1) insert—

(1A) Where the appropriate regulator and one or more other competent authorities decide to appoint a temporary manager, the appropriate regulator must endeavour to reach a decision jointly with those authorities on whether it is more appropriate to appoint the same temporary manager for all the entities concerned.

• (b) in paragraph (2) at the end insert “ or to appoint a temporary manager ”.

• (13) In article 120 (requesting the assistance of EBA), after “118(1)” insert “ or (1A) ”.

• (14) In articles 123(4), 126(6), 135(4) and 142(4) (determination of minimum requirement)—

• (a) for “A liability must be excluded” substitute “ An eligible liability must be excluded ”; and

• (b) for “own funds or eligible liabilities” substitute “ own funds and eligible liabilities ”.

• (15) In article 217(2) (shadow directorship)—

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

• (b) after sub-paragraph (b) insert—

(c) a resolution administrator appointed under section 62B of the Banking Act 2009 ; and (d) a temporary manager appointed under section 71C of the Financial Services and Markets Act 2000.

• (16) After article 220, insert—

(220A) (1) The provisions of the Companies Act 2006 concerning the rights of shareholders to call general meetings and to amend the articles of association of the company apply to traded companies to which Part 1 of the Banking Act 2009 applies with the following modifications. (2) “Traded company” has the meaning given in section 360C of the Companies Act 2006. (3) Section 21 (amendment of articles) has effect as if, after subsection (3) there were inserted— (4) A traded company (within the meaning of section 360C) to which Part 1 of the Banking Act 2009 applies may also amend its articles in accordance with section 307B. (4) Section 307A (notice required of general meeting: certain meetings of traded companies), has effect as if, at the beginning of subsection (1), there were inserted “Subject to section 307B,”. (5) Part 13 (resolutions and meetings) has effect as if after section 307A there were inserted— (307B) (1) Where the conditions in subsections (2) and (3) are satisfied, the members of a traded company to which Part 1 of the Banking Act 2009 applies may, by a resolution passed at a general meeting by a majority of two-thirds of those voting in person or by proxy— (a) require the company to call a general meeting to pass a resolution to increase the company's share capital, provided that the meeting is to be called by notice of at least 10 days; (b) amend the company's articles of association to permit a general meeting to be called to consider a proposal to increase the company's share capital by notice of at least 10 days. (2) The condition in this subsection is satisfied if— (a) the company has infringed, or is likely in the near future to infringe— (i) a relevant requirement within the meaning of section 204A of the Financial Services and Markets Act 2000; or (ii) one or more of Articles 3 to 7, 14 to 17 or 24 to 26 of Regulation (EU) No 600/2014 of 15th May 2014 of the European Parliament and of the Council on Markets in Financial Instruments ; or (b) the conditions for appointment of a temporary manager under section 71C(1) of the Financial Services and Markets Act 2000 (temporary manager) are met in relation to the company. (3) The condition in this subsection is satisfied if an increase in the share capital of the company is necessary to prevent the conditions in section 7 of the Banking Act 2009 for the exercise of the stabilisation powers provided for in Part 1 of that Act being met in relation to the company.

PART 6 — Review

Review

42

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

Signed

Stephen Barclay — Robert Syms — Two of the Lords Commissioners of Her Majesty's Treasury — 2016-12-15

Explanatory note

(This note is not part of the Order)

Footnotes