Banking Act 2009
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Changes over time for: Banking Act 2009
Version Superseded: 01/10/2015
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An Act to make provision about banking.
[12th February 2009]
Be it enacted by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—
Part 1U.K.Special Resolution Regime
Modifications etc. (not altering text)
C1Pt. 1 restricted (7.1.2010) by Banking Act 2009 (Exclusion of Insurers) Order 2010 (S.I. 2010/35), arts. 1, 2
C2Pt. 1: power to amend conferred (1.3.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), ss. 17(3)(f), 148(5); S.I. 2014/377, art. 2(1)(b), Sch. Pt. 2
[F1Chapter 1U.K. Introduction]
Textual Amendments
F1Pt. 1 Ch. 1 formed from ss. 1-3 (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 3
1OverviewU.K.
(1)The purpose of the special resolution regime for banks is to address the situation where all or part of the business of a bank has encountered, or is likely to encounter, financial difficulties.
(2)The special resolution regime consists of—
(a)the [F2five] stabilisation options,
(b)the bank insolvency procedure (provided by Part 2), and
(c)the bank administration procedure (provided by Part 3).
[F3(3)The [F4five] "stabilisation options" are—
(a)transfer to a private sector purchaser (section 11),
(b)transfer to a bridge bank (section 12),
[F5(ba)transfer to an asset management vehicle (section 12ZA),]
(c)the bail-in option (section 12A), and
(d)transfer to temporary public ownership (section 13).]
(4)Each of the [F6five] stabilisation options is achieved through the exercise of one or more of the "stabilisation powers", which are—
[F7(za)the resolution instrument powers (sections 12A(2) and 48U to 48W),]
(a)the share transfer powers (sections 15, 16, 26 to 31 and 85), and
(b)the property transfer powers (sections 33[F8, 41A] and 42 to 46).
[F9(c)the third country instrument powers (sections 89H to 89J).]
(5)Each of the following has a role in the operation of the special resolution regime—
(a)the Bank of England,
(b)the Treasury,
[F10(c)the Prudential Regulation Authority, and
(d)the Financial Conduct Authority.]
(6)The Table describes the provisions of this Part.
Sections 1 to 3 Introduction
[F11Sections 3A and 3B] [F11Pre-resolution powers]
Sections 4 to 6 Objectives and code
[F11Sections 6A to 6D] [F11Mandatory write-down, conversion etc of capital instruments]
[F11Section 6E] [F11Valuation before mandatory write-down or stabilisation action]
Sections 7 to 10 Exercise of powers: general
Sections 11 to 13 The stabilisation options
Sections 14 to 32 Transfer of securities
Sections 33 to [F1248A] Transfer of property
[F11Sections 48B to 48W] [F11Bail-in option]
[F11Sections 48X and 48Y] [F11Replacement of provisional valuation]
[F11Section 48Z] [F11Termination rights etc]
Sections 49 to 62 Compensation
[F11Section 62A] [F11Independent valuer]
[F11Sections 62B to 62E] [F11Resolution administrator]
Sections 63 to 75 Incidental functions
Sections 76 to [F1381A] Treasury
[F14Sections 81B to 83] [F14Groups]
[F11Sections 83ZA to 83Z2] [F11Information and enforcement]
[F15Section 83A] [F15Banks not regulated by the PRA]
Sections 84 to 89 Building societies, &c.
[F16Section 89A] [F16Investment firms]
[F17Sections 89B to 89G] [F18Recognised central counterparties]
[F11Sections 89H to 89J] [F11Third-country resolution actions]
F2Word in s. 1(2)(a) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 4(2)
F3S. 1(3) substituted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 12(3); S.I. 2014/3160, art. 2(1)(b)
F4Word in s. 1(3) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 4(3)(a)
F5S. 1(3)(ba) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 4(3)(b)
F7S. 1(4)(za) inserted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 12(4)(b); S.I. 2014/3160, art. 2(1)(b)
F8Word in s. 1(4)(b) inserted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 12(4)(c); S.I. 2014/3160, art. 2(1)(b)
F9S. 1(4)(c) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 4(4)(b)
F10S. 1(5)(c)(d) substituted for s. 1(5)(c) (1.4.2013) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 17 para. 2(2) (with Sch. 20); S.I. 2013/423, art. 3, Sch.
F11Words in s. 1(6) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 4(5)
F12Word in s. 1(6) substituted (8.4.2010) by Financial Services Act 2010 (c. 28), s. 26(1)(l), Sch. 2 para. 40
F13Word in s. 1(6) substituted (1.1.2015) by Financial Services Act 2012 (c. 21), ss. 99(3), 122(3) (with Sch. 20); S.I. 2014/3323, art. 2
F14Words in s 1(6) substituted (1.8.2014) by Financial Services Act 2012 (c. 21), ss. 100(2), 122(3) (with Sch. 20); S.I. 2014/1847, art. 2
F15Words in s. 1(6) inserted (1.4.2013) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 17 para. 2(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.
F16Words in s 1(6) inserted (1.8.2014) by Financial Services Act 2012 (c. 21), ss. 101(2), 122(3) (with Sch. 20); S.I. 2014/1847, art. 2
F18Words in Act substituted (1.4.2013) by The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) Regulations 2013 (S.I. 2013/504), regs. 1(2), 25(2) (with regs. 52-58)
I1S. 1 in force at 21.2.2009 by S.I. 2009/296, art. 3, Sch. para. 1
2Interpretation: "bank"U.K.
(1)In this Part "bank" means a UK institution which has permission under [F19Part 4A] of the Financial Services and Markets Act 2000 to carry on the regulated activity of accepting deposits (within the meaning of section 22 of that Act, taken with Schedule 2 and any order under section 22).
(2)But "bank" does not include—
(a)a building society (within the meaning of section 119 of the Building Societies Act 1986),
(b)a credit union within the meaning of section 31 of the Credit Unions Act 1979 [F20or a credit union within the meaning of Article 2(2) of the Credit Unions (Northern Ireland) Order 1985], or
(c)any other class of institution excluded by an order made by the Treasury.
(3)In subsection (1) "UK institution" means an institution which is incorporated in, or formed under the law of any part of, the United Kingdom.
(4)Where a stabilisation power is exercised in respect of a bank, it does not cease to be a bank for the purposes of this Part if it later loses the permission referred to in subsection (1).
(5)An order under subsection (2)(c)—
(a)shall be made by statutory instrument, and
(b)may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.
(6)Section 84 applies this Part to building societies with modifications.
(7)Section 89 allows the application of this Part to credit unions.
[F21(8)Section 89A applies this Part to investment firms with modifications.]
[F22(9)Section 89B applies this Part to [F18recognised central counterparties] with modifications.]
F19Words in s. 2 substituted (1.4.2013) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 17 para. 3 (with Sch. 20); S.I. 2013/423, art. 3, Sch.
F20Words in s. 2(2)(b) inserted (31.3.2012) by The Financial Services and Markets Act 2000 (Permissions, Transitional Provisions and Consequential Amendments) (Northern Ireland Credit Unions) Order 2011 (S.I. 2011/2832), arts. 2(c), 12(2)
F21S. 2(8) inserted (1.8.2014) by Financial Services Act 2012 (c. 21), ss. 101(3), 122(3) (with Sch. 20); S.I. 2014/1847, art. 2
I2S. 2 in force at 17.2.2009 for specified purposes by S.I. 2009/296, arts. 2, 3, Sch. para. 1
I3S. 2 in force at 21.2.2009 in so far as not already in force by S.I. 2009/296, arts. 2, 3, Sch. para. 1
3Interpretation: other expressionsU.K.
[F23(1)] In this Part—
[F24"Additional Tier 1 instruments" means capital instruments that meet the conditions laid down in Article 52(1) of the capital requirements regulation (or which qualify as Additional Tier 1 instruments by virtue of Chapter 2 of Title I of Part Ten of that regulation),]
[F24"the capital requirements regulation" means Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26th June 2013 on prudential requirements for credit institutions and investment firms,]
[F25"client assets" means assets which an institution has undertaken to hold for a client (whether or not on trust, and whether or not the undertaking has been complied with),]
[F24"Common Equity Tier 1 instruments" means capital instruments that meet the conditions laid down in Article 28(1) to (4), 29(1) to (5) or 31(1) of the capital requirements regulation (or which qualify as Common Equity Tier 1 instruments by virtue of Chapter 2 of Title I of Part Ten of that regulation),]
[F24"critical functions", subject to subsection (2), means activities, services or operations the discontinuance of which is likely in one or more EEA states—
to lead to the disruption of services that are essential to the economy, or
to disrupt financial stability,
due to the size, market share, external and internal connectedness, complexity or cross-border activities of a bank or a group which includes a bank (with particular regard to the substitutability of those activities, services or operations),;]
[F24"eligible liabilities", of an undertaking, means liabilities and capital instruments that—
do not qualify as Common Equity Tier 1 instruments, Additional Tier 1 instruments or Tier 2 instruments, of the bank, and
are not excluded liabilities listed in section 48B(8),]
[F24"extraordinary public financial support" has the meaning given in Article 2.1(28) of the recovery and resolution directive;]
[F26"the PRA" means the Prudential Regulation Authority,
"the FCA" means the Financial Conduct Authority, and]
"financial assistance" has the meaning given by section 257.
[F24"own funds" means own funds as defined in Article 4.1(118) of the capital requirements regulation (read with Title I of Part Ten of that regulation),]
[F24"own funds requirements" means the requirements laid down in Articles 92 to 98 of the capital requirements regulation (read with Title I of Part Ten of that regulation),]
[F24"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,]
[F24"relevant capital instruments" means Additional Tier 1 instruments and Tier 2 instruments,]
[F24"Tier 2 instruments" means capital instruments or subordinated loans that meet the conditions laid down in Article 63 of the capital requirements regulation (or which qualify as Tier 2 instruments by virtue of Chapter 2 of Title I of Part Ten of that regulation),]
[F27(2)For the purposes of the definition of "critical functions" in subsection (1)—
(a)a delegated act adopted by virtue of Article 2(2) of the recovery and resolution directive applies as it applies for the purposes of the definition of "critical functions" in Article 2(2) of that directive, and
(b)"group" means a parent undertaking within the meaning given by Article 4.1(15)(a) of the capital requirements regulation and its subsidiaries within the meaning given by Article 4.1(16) of that regulation.]
F23S. 3(1): s. 3 renumbered as s. 3(1) (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 5(2)
F25Words in s. 3 inserted (1.1.2015) by Financial Services Act 2012 (c. 21), ss. 96(2), 122(3) (with Sch. 20); S.I. 2014/3323, art. 2
F27S. 3(2) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 5(3)
[F28Chapter 2U.K.Pre-resolution powers of the Bank of England
F28Pt. 1 Ch. 2 inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 6
3A.Removal of impediments to the exercise of stabilisation powers etcU.K.
(1)In this section "relevant person" means—
(a)an institution authorised for the purpose of the Financial Services and Markets Act 2000 by the PRA or FCA,
(b)a parent of such an institution which—
(i)is a financial holding company or a mixed financial holding company; and
(ii)is established in, or formed under the law of any part of, the United Kingdom, or
(c)a subsidiary of such an institution or of such a parent which—
(i)is a financial institution authorised by the PRA or FCA, and
(ii)is established in, or formed under the law of any part of, the United Kingdom.
(2)The Bank of England may give directions to a relevant person requiring that person to take measures which, in the opinion of the Bank of England, are required to address impediments to—
(a)the effective exercise of the stabilisation powers, or
(b)the winding up of that person (whether by use of the bank insolvency procedure provided for under Part 2 of this Act or otherwise).
(3)The power conferred by subsection (2) includes a power to direct a relevant person—
(a)to amend a group financial support agreement;
(b)where there is no such agreement, to review the need to enter into one;
(c)to enter into an agreement for the provision of services relating to the provision of critical functions;
(d)to limit that person's maximum individual and aggregate exposures (with "exposure" for this purpose having the meaning given in the capital requirements regulation);
(e)to produce information which is relevant to the exercise of the stabilisation powers, and to provide that information to the Bank of England;
(f)to dispose of specified assets;
(g)to cease carrying out specified activities, or observe restrictions in relation to the carrying out of specified activities;
(h)to cease the development of new or existing business operations, or observe restrictions in relation to the development of such operations;
(i)in order to ensure that it is possible for the performance of critical functions to be legally or operationally separated from the performance of other functions—
(i)to change its legal or operational structure, or
(ii)so far as it is able to do so, to change the legal or operational structure of a subsidiary;
(j)to establish a financial holding company which is not a subsidiary of an institution, another financial holding company or a mixed financial holding company.
(4)The Bank of England may give directions to a relevant person requiring that person—
(a)to maintain a minimum requirement for own funds and eligible liabilities expressed as a percentage of the total own funds and liabilities of the relevant person, and
(b)for the purposes of paragraph (a), to—
(i)maintain particular kinds of eligible liabilities, or
(ii)issue particular kinds of eligible liabilities or take other specified steps.
(5)Under subsection (4), the Bank may, in particular, direct a relevant person to endeavour to re-negotiate any eligible liability or relevant capital instruments issued by that person, for the purpose of ensuring that any decision by the Bank to write down or convert the liability or instrument concerned would have effect under the law which governs that liability or instrument.
(6)The Bank may give directions to a relevant MAHC requiring it to establish a separate financial holding company as a parent of an institution for the purpose of—
(a)facilitating the exercise of the stabilisation powers, or
(b)ensuring that the exercise of a stabilisation power does not have an adverse effect on the non-financial part of the group of the relevant MAHC.
(7)Directions under this section—
(a)must be in writing, and
(b)may be given with general effect or with respect to a particular relevant person or class of relevant persons.
"financial holding company" has the meaning given by Article 4.1(20) of the capital requirements regulation;
"financial institution" has the meaning given by Article 4.1(26) of the capital requirements regulation;
"group" has the meaning given in section 3(2)(b);
"group financial support agreement" has the meaning given by section 192JB(4) of the Financial Services and Markets Act 2000;
"institution" (except in the phrase "financial institution") means a bank or investment firm;
"mixed financial holding company" has the meaning given by Article 4.1(21) of the capital requirements regulation;
"parent" means a parent undertaking within the meaning given by section 1162 of the Companies Act 2006;
"relevant MAHC" means a mixed activity holding company (within the meaning given by Article 4.1(22) of the capital requirements regulation) which has at least one subsidiary which—
is an institution, and
is not a subsidiary of a financial holding company which is also a subsidiary of the mixed activity holding company; and
"subsidiary" means a subsidiary undertaking within the meaning given by section 1162 of the Companies Act 2006.
3B.Safeguards relating to directions under section 3AU.K.
(1)A direction given to a relevant person under section 3A must be accompanied by a notice which—
(a)states when the direction takes effect (see subsections (2) and (3)),
(b)gives the Bank of England's reasons for giving the direction, and,
(c)specifies a reasonable period within which the relevant person may make representations to the Bank about the direction.
(2)The direction may, if the Bank of England reasonably considers it necessary, take effect—
(a)immediately it is given to the relevant person, or
(b)on a later date specified in the direction.
(3)In any other case the direction takes effect when—
(a)it has been confirmed by a notice under subsection (5), and
(b)the period during which the direction may be referred to the Upper Tribunal (under subsection (6)) has expired and, if the matter was so referred, the reference and any appeal against the Tribunal's determination, has been finally disposed of.
(4)Where representations are made by the relevant person within the period specified under subsection (1)(c), the Bank must, within a reasonable period, consider those representations and decide—
(a)whether to confirm or revoke the direction, and
(b)if the direction is revoked, whether to give a different direction.
(5)The Bank must—
(a)if no representations are made within that specified period, give the relevant person written notice that the direction is confirmed, and
(b)if representations are made, give the relevant person written notice of its decision under subsection (4).
(6)If the relevant person is aggrieved by the confirmation of the direction, that person may refer the matter to the Upper Tribunal.
(7)A notice under subsection (5)(a) or (b) confirming the direction must—
(a)inform the relevant person of the right to refer the matter to the Upper Tribunal, and
(b)indicate the procedure on such a reference.
(8)A notice given under subsection (5)(b) of a decision by the Bank to give a different direction must comply with subsection (1).
(9)The Bank must prepare one or more statements of its policy with respect to the giving of directions under section 3A.
(10)No power conferred by section 3A may be exercised before the statement of policy in relation to the exercise of that power has been published.]
[F29Chapter 3 U.K. Special resolution action]
F29Pt. 1 Ch. 3 formed from ss. 4-83 (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 7
Objectives and codeU.K.
4Special resolution objectivesU.K.
(1)This section sets out the special resolution objectives.
(2)The relevant authorities shall have regard to the special resolution objectives in using, or considering the use of—
(a)the stabilisation powers,
(b)the bank insolvency procedure, or
(c)the bank administration procedure.
(3)For the purpose of this section the relevant authorities are—
(a)the Treasury,
[F30(b)the PRA,
(ba)the FCA, and]
(c)the Bank of England.
[F31(3A)Objective 1 is to ensure the continuity of banking services in the United Kingdom and of critical functions.
(4)Objective 2 is to protect and enhance the stability of the financial system of the United Kingdom, including in particular by—
(a)preventing contagion (including contagion to market infrastructures such as investment exchanges, clearing houses and central counterparties authorised in accordance with Article 14, or recognised in accordance with Article 25, of Regulation (EU) 648/2012 of the European Parliament and the Council of 4th July 2012 on OTC derivatives, central counterparties and trade repositories), and
(b)maintaining market discipline.
(5)Objective 3 is to protect and enhance public confidence in the stability of the financial system of the United Kingdom.
(6)Objective 4 is to protect public funds, including by minimising reliance on extraordinary public financial support.
(7)Objective 5 is to protect—
(a)investors to the extent that they have investments covered by an investor compensation scheme under Directive 97/9/EC of the European Parliament and of the Council, and
(b)depositors to the extent that they have deposits covered by the Financial Services Compensation Scheme or a deposit guarantee scheme under Directive 94/19/EC or Directive 2014/49/EU of the European Parliament and of the Council.
(8)Objective 6, which applies in any case in which client assets may be affected, is to protect those assets.
(9)Objective 7 is to avoid interfering with property rights in contravention of a Convention right (within the meaning of the Human Rights Act 1998).]
(10)The order in which the objectives are listed in this section is not significant; they are to be balanced as appropriate in each case.
F30S. 4(3)(b)(ba) substituted for s. 4(3)(b) (1.4.2013) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 17 para. 5 (with Sch. 20); S.I. 2013/423, art. 3, Sch.
F31S. 4(3A)-(9) substituted for s. 4(4)-(9) (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 8(2)
5Code of practiceU.K.
[F32(1)The Treasury shall issue a code of practice about—
(a)the discharge of the duty imposed by section 6B (mandatory write-down, conversion etc of capital instruments), and
(b)the use of—
(i)the stabilisation powers,
(ii)the bank insolvency procedure, and
(iii)the bank administration procedure.]
(2)The code may, in particular, provide guidance on—
(a)how the special resolution objectives are to be understood and achieved,
(b)the choice between different options,
(c)the information to be provided in the course of a consultation under this Part,
(d)the giving of advice by one relevant authority to another about whether, when and how the stabilisation powers are to be used,
(e)how to determine whether Condition 2 in section 7 is met,
(f)how to determine whether [F33tests for the use of the stabilisation powers in sections 8 and 8ZA are] satisfied,
(g)sections 63 and 66, and
(h)compensation.
(3)Sections 12[F34, 12ZA] and 13 require the inclusion in the code of certain matters about bridge banks[F35, asset management vehicles] and temporary public ownership.
(4)The relevant authorities shall have regard to the code.
F32S. 5(1) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 9(2)
F33Words in s. 5(2)(f) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 9(3)
F34Words in s. 5(3) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 9(4)(a)
F35Words in s. 5(3) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 9(4)(b)
6Code of practice: procedureU.K.
F37(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3)The Treasury may revise and re-issue the code of practice.
[F39(4)Before re-issuing the code of practice the Treasury must consult—
(a)the PRA,
(b)the FCA,
(c)the Bank of England, and
(d)the scheme manager of the Financial Services Compensation Scheme (established under Part 15 of the Financial Services and Markets Act 2000).
(5)As soon as is reasonably practicable after re-issuing the code of practice the Treasury shall lay a copy before Parliament.]
F37S. 6(1) omitted (1.4.2013) by virtue of Financial Services Act 2012 (c. 21), s. 122(3), Sch. 17 para. 7(2) (with Sch. 20); S.I. 2013/423, art. 3, Sch.
F39S. 6(4)(5) substituted for s. 6(4) (1.4.2013) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 17 para. 7(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.
[F40Mandatory write-down, conversion etc of capital instrumentsU.K.
F40Ss. 6A-6D and cross-heading inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 10
6A.Cases where mandatory write-down, conversion, etc appliesU.K.
(1)Section 6B applies in relation to a bank in the cases set out in subsections (2) to (6).
(2)Case 1 is where—
(a)the conditions imposed by sections 7 to 9 on the exercise of a stabilisation power in respect of the bank are met,
(b)the Bank of England or the Treasury (as the case may be) has decided to exercise the power, and
(c)section 12AA (mandatory write-down etc in bail-in cases) does not apply.
(a)the PRA is satisfied that Condition 1 in section 7 is met in respect of the bank, and
(b)the Bank of England is satisfied that—
(i)(ignoring section 6B) Condition 2 in section 7 is met, and
(ii)that Condition will continue to be met unless the action required by section 6B is taken in respect of the bank.
(a)the bank is viable,
(b)it is a subsidiary,
(c)relevant capital instruments issued by it are recognised for the purpose of meeting own funds requirements on an individual basis and on a consolidated basis, and
(d)the appropriate authority of the EEA state in which the consolidating supervisor is situated and the Bank of England make a joint determination in accordance with Article 59.3(c) of the recovery and resolution directive that the group of which the bank is a member will not be viable unless the action required by section 6B is taken in relation to those instruments.
(a)the bank is a parent undertaking,
(b)relevant capital instruments issued by the bank are recognised for the purposes of meeting own funds requirements on an individual basis at the level of the parent undertaking or on a consolidated basis, and
(c)the Bank of England makes a determination that the group will not be viable unless the action required by section 6B is taken in relation to those instruments.
(a)extraordinary public financial support is required by the bank other than in circumstances where subsection (5E) of section 7 applies by virtue of paragraph (c) of that subsection, and
(b)the Bank of England is satisfied, on the basis of the valuation carried out in accordance with section 6E, that, in order for the bank to fulfil its own funds requirements, relevant capital instruments of the bank need to be written down or converted into Common Equity Tier 1 instruments (or both).
(7)For the purposes of Case 3, the bank is viable unless—
(a)the PRA is satisfied that the bank is failing or likely to fail (within the meaning of section 7(5C)), and
(b)having regard to timing and other relevant circumstances, the Bank of England is satisfied that it is not reasonably likely that (ignoring section 6B and the stabilisation powers) action will be taken by or in respect of the bank that will result in the bank no longer being a bank which is failing or likely to fail.
(8)For the purposes of Cases 3 and 4 a group is not viable if (and only if)—
(a)the consolidating supervisor is satisfied that a requirement under the capital requirements regulation that applies, on a consolidated basis, to a bank which is a member of the group is infringed (or will in the near future be infringed) in a way that justifies action by the consolidating supervisor, and
(b)having regard to timing and other relevant circumstances (but ignoring section 6B and the stabilisation powers), it is not reasonably likely that action will be taken by or in respect of the bank that will prevent the requirement being infringed.
"appropriate authority" means the authority authorised, under the law of the EEA state mentioned in paragraph (d) of subsection (4), to enter into the joint determination mentioned in that paragraph,
"consolidated basis" has the meaning given by Article 2.1(7) of the recovery and resolution directive,
"consolidating supervisor" means a consolidating supervisor as defined in Article 4.1(41) of the capital requirements regulation,
"group" has the meaning given in section 3(2)(b),
"parent undertaking" has the meaning given by Article 4.1(15)(a) of the capital requirements regulation, and
"subsidiary" has the meaning given by Article 4.1(16) of the capital requirements regulation.
6B.Mandatory write-down, conversion, etc of capital instrumentsU.K.
(1)In a case where this section applies, the Bank of England must without delay make—
(a)an instrument in relation to the bank containing the mandatory reduction provision, or
(b)two or more instruments which (taken together) contain that provision.
An instrument made under this subsection is a "mandatory reduction instrument".
(2)"The mandatory reduction provision" is provision which produces the following results—
(a)existing Common Equity Tier 1 instruments of the bank are cancelled, transferred or diluted in accordance with the principle that losses should be borne first by the holders of such instruments,
(b)the principal amount of Additional Tier 1 instruments of the bank is reduced or such instruments are converted (directly or indirectly) into Common Equity Tier 1 instruments (or both)—
(i)to the extent required to achieve the special resolution objectives set out in section 4, or
(ii)to the extent of the capacity of the relevant capital instruments,
whichever is lower; and
(c)the principal amount of Tier 2 instruments is reduced or Tier 2 instruments are converted (directly or indirectly) into Common Equity Tier 1 instruments (or both)—
(i)to the extent required to achieve the special resolution objectives set out in section 4 (so far as not achieved under paragraph (b)), or
whichever is lower.
(3)For the purposes of subsection (2), a mandatory reduction instrument may contain—
(a)provision cancelling existing Common Equity Tier 1 instruments of the bank,
(b)provision transferring (directly or indirectly), to holders of Additional Tier 1 instruments or Tier 2 instruments of the bank, Common Equity Tier 1 instruments of the bank,
(c)provision converting relevant capital instruments of the bank (directly or indirectly) into Common Equity Tier 1 instruments of the bank or a parent undertaking of the bank,
(d)provision cancelling a liability owed by the bank,
(e)provision modifying, or changing the form of, a liability owed by the bank,
(f)provision that a contract under which the bank has a liability is to have effect as if a specified right had been exercised under it.
(4)The following rules apply to the interpretation of subsection (3)—
A. The reference to cancelling a liability owed by the bank includes a reference to cancelling a contract under which the bank has a liability.
B. The reference to modifying a liability owed by the bank includes a reference to modifying the terms (or the effect of the terms) of a contract under which the bank has a liability.
C. The reference to changing the form of a liability owed by the bank includes, for example—
converting an instrument under which the bank owed a liability from one form or class to another,
replacing such an instrument with another instrument of a different form or class, or
creating a new security (of any form or class) in connection with the modification of such an instrument.
(5)Provision made by virtue of subsection (3) may include—
(a)provision for securities issued by a specified bank to be transferred to a resolution administrator (see section 62B) or another person;
(b)where a previous mandatory reduction instrument ("the original instrument) has contained provision under paragraph (a), provision for the transfer of—
(i)securities which were transferred by the original instrument, or
(ii)securities which were issued by the bank after the original instrument was made.
(6)Provision made in accordance with subsection (5) may relate to—
(a)specified securities, or
(b)securities of a specified description.
(7)Where the Bank of England has exercised the power in subsection (5)(a) to transfer securities to a resolution administrator, the Bank must exercise its functions under this Part with a view to ensuring that any securities held by that person in the capacity of resolution administrator are so held only for so long as is, in the Bank of England's opinion, appropriate having regard to the special resolution objectives.
(8)Where Case 1 in section 6A applies, the Bank must comply with subsection (1) before or at the same time as exercising the stabilisation power.
(9)Where Case 3 in section 6A applies, the principal amount of a relevant capital instrument issued by the bank must not be reduced under this section to a greater extent, or converted on worse terms, than equally ranked capital instruments at the level of any parent undertaking of the bank which are reduced, or converted, pursuant to Article 59 of the recovery and resolution directive or in the course of applying the bail-in tool provided for by that directive.
(10)In this section "parent undertaking" has the meaning given by Article 4.1(15)(a) of the capital requirements regulation.
6C.Mandatory reduction instruments: implementation of requirements of section 6BU.K.
(1)Where the principal amount of a relevant capital instrument is reduced under section 6B—
(a)the reduction must be permanent, subject to any provision made by virtue of section 48Y(1)(a);
(b)no liability to the holder of the relevant capital instrument remains under, or in connection with, so much of the amount of the instrument as constitutes the reduction, except for—
(i)any liability already accrued in a case where the principal amount of the instrument is not reduced or converted (or both) to the full extent of its capacity, and
(ii)any liability for damages that may arise as a result of any challenge to the legality of the exercise of the power of reduction;
(c)no compensation is to be paid to any holder of the relevant capital instrument other than in accordance with subsection (4).
(2)Nothing in subsection (1)(b) prevents the provision of Common Equity Tier 1 instruments to a holder of relevant capital instruments in accordance with subsection (4).
(3)In order to effect a conversion of relevant capital instruments under section 6B, the Bank of England may require the bank, or a UK parent undertaking, to issue Common Equity Tier 1 instruments to the holders of the relevant capital instruments.
(4)The relevant capital instruments may only be so converted if—
(a)the Common Equity Tier 1 instruments are issued by the bank, or by a parent undertaking of the bank with the agreement of the resolution authority in respect of that parent undertaking,
(b)the Common Equity Tier 1 instruments are issued prior to the issue of any shares by the bank, or by a parent undertaking of the bank, for the purposes of provision of own funds by the State or a government entity,
(c)the Common Equity Tier 1 instruments are awarded and transferred without delay following the exercise of the conversion power, and
(d)the conversion rate that determines the number of Common Equity Tier 1 instruments that are provided in respect of each relevant capital instrument complies with—
(i)the principles set out in Article 50 of the recovery and resolution directive, and
(ii)any guidelines issued by the European Banking Authority under Article 50(4) of the resolution and recovery directive, other than any guidelines which the Bank of England has notified the Authority it does not intend to comply with.
(5)For the purposes of the provision of Common Equity Tier 1 instruments in accordance with subsections (2), (3) and (4), the Bank of England may require the bank or a UK parent undertaking of the bank to maintain at all times the necessary prior authorisation to issue the relevant number of Common Equity Tier 1 instruments.
(6)Before making a mandatory reduction instrument, the Bank must consult—
(b)the FCA, and
(c)the Treasury.
"parent undertaking" has the meaning given by Article 4.1(15)(a) of the capital requirements regulation,
"resolution authority" has the meaning given by Article 2.1(18) of the recovery and resolution directive,
"UK parent undertaking" means a parent undertaking that is incorporated in, or formed under the law of, any part of the United Kingdom.
6D.Mandatory reduction instruments: supplementary mattersU.K.
(1)The following provisions apply in relation to a mandatory reduction instrument as they apply to a resolution instrument—
(a)section 48L(3) and (5) (powers relating to securities issued by the bank),
(b)section 48O (power to direct directors of the bank),
(c)section 48Q (continuity),
(d)section 48R (execution and registration of instruments etc),
(e)section 48S (general matters), and
(f)section 48T (procedure).
(2)Where the Bank of England makes one or more mandatory reduction instruments in respect of a bank, the Bank must, on request by the Treasury, report to the Chancellor of the Exchequer about—
(a)the exercise of the power to make a mandatory reduction instrument,
(b)the activities of the bank, and
(c)any other matters in relation to the bank that the Treasury may specify.
(3)In relation to the matters in subsection (2)(a) and (b), the report must comply with any requirements that the Treasury may specify.
(4)The Chancellor of the Exchequer must lay a copy of each report under subsection (2) before Parliament.]
[F41Valuation before mandatory write-down of capital or stabilisation actionU.K.
F41S. 6E and cross-heading inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 11
6E.Pre-resolution valuationU.K.
(1)Before the Bank of England makes a mandatory reduction instrument or exercises any stabilisation power in respect of a bank, it must ensure that the assets and liabilities of the bank are valued.
(2)Unless subsection (3) applies, the Bank of England must arrange for the appointment of an independent valuer in accordance with section 62A to carry out a valuation for the purposes of subsection (1).
(3)Where the Bank of England considers that the urgency of the case makes it appropriate to make a mandatory reduction instrument, or exercise a stabilisation power, before a valuation can be carried out by a person appointed in accordance with subsection (2), the Bank may carry out a provisional valuation of the assets and liabilities of the bank for the purposes of subsection (1).
(4)The purpose of a valuation carried out pursuant to subsection (1) is to—
(a)inform the decision as to—
(i)whether the conditions for the making of a mandatory reduction instrument or the exercise of a stabilisation power is satisfied,
(ii)which stabilisation option should be employed,
(iii)the extent to which any shares, capital instruments or eligible liabilities should be cancelled, diluted, transferred, written down or converted through the use of a mandatory reduction instrument or a resolution instrument,
(iv)what assets, liabilities or securities (if any) are to be transferred by a property transfer instrument or a share transfer instrument, and
(v)the value of any consideration to be paid to the bank or the owners of the securities for any assets, liabilities or securities so transferred, and
(b)ensure that the full extent of any losses on the assets of that bank is appreciated at the time the Bank of England makes a mandatory reduction instrument or exercises a stabilisation power.
(5)In carrying out a valuation required under subsection (1), the person carrying out the valuation must—
(a)make prudent assumptions as to possible rates of default and the severity of losses suffered by the bank,
(b)disregard potential financial assistance which may be provided by the Bank of England or the Treasury after the Bank has made any mandatory reduction instrument or exercised any stabilisation power (except for ordinary market assistance offered by the Bank on its usual terms),
(c)take account of the fact that—
(i)the Bank of England and the Treasury may recover expenses incurred in connection with the exercise of a stabilisation power under section 58(2)(b),
(ii)the Bank of England and the Treasury may charge interest or fees in respect of any loans or guarantees provided to the bank after the Bank has made any mandatory reduction instrument or exercised any stabilisation power in respect of it.
(6)The valuation carried out under this section must follow the methodology specified in regulatory technical standards adopted by the European Commission under article 36.16 of the recovery and resolution directive.
(7)A valuation under subsection (1) must be accompanied by—
(a)a balance sheet of the bank as at the date of the valuation,
(b)a report on the financial position of the bank,
(c)an analysis and an estimate of the accounting value of the assets of the bank,
(d)a list of the outstanding liabilities of the bank (including any off-balance sheet liabilities), with the creditors subdivided into classes according to the priority their claims would receive in insolvency proceedings, and
(e)an estimate of the amount that each class of creditors and shareholders might be expected to receive if the bank went into insolvent liquidation.
(8)Where appropriate, the information in subsection (7)(c) may be supplemented by an analysis and estimate of the value of the assets and liabilities of the bank on a market value basis in order to inform the decision referred to in paragraph (a)(iv) or (v) of subsection (4).
(9)Where a provisional valuation is carried out under subsection (3), the Bank need only comply with subsection (7) as far as it is reasonable to do so in the circumstances.
(10)A provisional valuation carried out under subsection (1) must make provision in respect of additional losses by the bank in accordance with regulatory technical standards adopted by the European Commission under Article 36.16 of the recovery and resolution directive.]
Exercise of powers: generalU.K.
7General conditionsU.K.
[F42(1)A stabilisation power may be exercised in respect of a bank only if—
(a)the PRA is satisfied that Condition 1 is met, and
(b)the Bank of England is satisfied that Conditions 2, 3 and 4 are met.
(2)Condition 1 is that the bank is failing or likely to fail.
(3)Condition 2 is that, having regard to timing and other relevant circumstances, it is not reasonably likely that (ignoring the stabilisation powers) action will be taken by or in respect of the bank that will result in Condition 1 ceasing to be met.
(4)Condition 3 is that the exercise of the power is necessary having regard to the public interest in the advancement of one or more of the special resolution objectives.
(5)Condition 4 is that one or more of the special resolution objectives would not be met to the same extent by the winding up of the bank (whether under Part 2 or otherwise).
(5A)The PRA must treat Condition 1 as met if satisfied that it would be met but for financial assistance provided by—
(a)the Treasury, or
(b)the Bank of England,
disregarding ordinary market assistance offered by the Bank on its usual terms.
(5B)The Bank of England must treat Condition 2 as met if satisfied that it would be met but for financial assistance of the kind mentioned in subsection (5A).
(5C)For the purposes of Condition 1, a bank is failing or likely to fail if—
(a)it is failing, or is likely to fail, to satisfy the threshold conditions in circumstances where that failure would justify the variation or cancellation by the PRA under section 55J of the Financial Services and Markets Act 2000 of the bank's permission under Part 4A of that Act to carry on one or more regulated activities,
(b)the value of the assets of the bank determined in accordance with the valuation carried out for the purposes of section 6E(1) is less than the amount of its liabilities as so determined,
(c)the bank is unable to pay its debts or other liabilities as they fall due,
(d)one or more of paragraphs (a) to (c) will, in the near future, apply to the bank, or
(e)extraordinary public financial support is required in respect of the bank and subsection (5E) does not apply to that support.
(5D)"The threshold conditions" means the threshold conditions, as defined by subsection (1) of section 55B of the Financial Services and Markets Act 2000, for which the PRA is treated as responsible under subsection (2) of that section.
(5E)This subsection applies where, in order to remedy a serious disturbance in the economy of the United Kingdom and preserve financial stability, the extraordinary public financial support takes any of the following forms—
(a)a State guarantee to back liquidity facilities provided by central banks,
(b)a State guarantee of newly issued liabilities,
(c)an injection of own funds, or purchase of capital instruments, at prices and on terms that do not confer an advantage upon the bank, where none of the circumstances referred to in subsection (5C)(a), (b), (c) or (d) are present at the time the public support is granted and none of Cases 1 to 4 in section 6A apply.
(5F)Before determining that Condition 1 is met, the PRA must consult the Bank of England.
(5G)Before determining whether or not Condition 2 is met, the Bank of England must consult—
(5H)Before determining that Conditions 3 and 4 are met, the Bank must consult—
(c)the Treasury.]
(6)The special resolution objectives are not relevant to Conditions 1 and 2.
(7)The conditions for applying for and making a bank insolvency order are set out in sections 96 and 97.
(8)The conditions for applying for and making a bank administration order are set out in sections 143 and 144.
F42S. 7(1)-(5H) substituted for s. 7(1)-(5) (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 12
I10S. 7 in force at 21.2.2009 by S.I. 2009/296, art. 3, Sch. para. 1
[F437A.Effect on other group members, financial stability in EUetcU.K.
(1)Where the Bank of England is considering the imposition of a requirement under section 3A(2), (4)(b)(ii), (5) or (6), the Bank must consult the PRA and the FCA, and have regard to the potential impact of the requirement on—
(a)the institution in question,
(b)the market for financial services within the EEA, and
(c)the financial stability of the European Union or of the EEA states.
(2)Where the Bank of England is considering the exercise of a stabilisation power in respect of a bank which is a member of a group, the Bank must have regard to—
(a)the need to minimise the effect of the exercise of the power on other undertakings in the same group,
(b)the need to minimise any adverse effects on the financial stability of the European Union or of the EEA states (particularly those EEA states in which any member of that group is operating), and
(c)the potential effect of the exercise of the power on the financial stability of third countries (particularly those third countries in which any member of that group is operating).
(3)In this section "group" has the meaning given by section 474 of the Companies Act 2006.]
F43S. 7A inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 13
[F448Specific Condition: private sector purchaser, bridge bank or asset management vehicleU.K.
(1)In a financial assistance case, the Bank may exercise a stabilisation power in respect of the bank concerned in accordance with section 11(2), 12(2) or 12ZA(3) only with the approval of the Treasury.
(2)"Financial assistance case" means a case where the Treasury notify the Bank of England that they have provided financial assistance in respect of a bank for the purpose of resolving or reducing a serious threat to the stability of the financial systems of the United Kingdom.
(3)The condition in this section is in addition to the conditions in sections 7 and 8ZA.]
F44S. 8 substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 14
[F458ZA.Specific conditions: asset management vehicleU.K.
(1)The Bank of England may exercise a stabilisation power in respect of a bank in accordance with section 12ZA(3) only if satisfied that Conditions A and B are met.
(2)Condition A is that the power is exercised in connection with the exercise of one or more stabilisation powers in respect of the bank, or a company which is a banking group company in relation to the bank, otherwise than for the purposes of the third stabilisation option.
(3)Condition B is that the Bank of England is satisfied that—
(a)the situation of the market for the assets which it is proposed to transfer by the exercise of the stabilisation power is of such a nature that the liquidation of those assets under normal insolvency proceedings could have an adverse effect on one or more financial markets,
(b)the transfer is necessary to ensure the proper functioning of the bank or bridge bank from which the transfer is to be made, or
(c)the transfer is necessary to maximise the proceeds available for distribution.
(4)Before determining whether Conditions A and B are met, and if so how to react, the Bank of England must consult—
(5)"Normal insolvency proceedings" has the meaning given in Article 2.1(47) of the recovery and resolution directive (and, in particular, includes the bank insolvency procedure and the bank administration procedure).
(6)The conditions in this section are in addition to the conditions in sections 7 and 8.]
F45S. 8ZA inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 15
F468ASpecific condition: bail-inU.K.
F46S. 8A omitted (1.1.2015) by virtue of The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 16
9Specific conditions: temporary public ownershipU.K.
(1)The Treasury may exercise a stabilisation power in respect of a bank in accordance with section 13(2) only if satisfied that one of the following conditions is met.
(2)Condition A is that the exercise of the power is necessary to resolve or reduce a serious threat to the stability of the financial systems of the United Kingdom.
(3)Condition B is that exercise of the power is necessary to protect the public interest, where the Treasury have provided financial assistance in respect of the bank for the purpose of resolving or reducing a serious threat to the stability of the financial systems of the United Kingdom [F47or the Bank of England has provided extraordinary public financial support in respect of the bank].
(4)Before determining whether a condition is met the Treasury must consult—
[F48(a)the PRA,
(aa)the FCA, and]
(b)the Bank of England.
(5)The conditions in this section are in addition to the conditions in section 7.
F47Words in s. 9(3) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 17
F48S. 9(4)(a)(aa) substituted for s. 9(4)(a) (1.4.2013) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 17 para. 10 (with Sch. 20); S.I. 2013/423, art. 3, Sch.
10Banking Liaison PanelU.K.
(1)The Treasury shall make arrangements for a panel to advise the Treasury about the effect of the special resolution regime on—
(a)banks,
(b)persons with whom banks do business, and
(c)the financial markets.
(2)In particular, the panel may advise the Treasury about—
(a)the exercise of powers to make statutory instruments under or by virtue of this Part, Part 2 or Part 3 (excluding the stabilisation powers, compensation scheme orders, resolution fund orders, third party compensation orders and orders under section 75(2)(b) and (c)),
(b)the code of practice under section 5, and
(c)anything else referred to the panel by the Treasury.
(3)The Treasury shall ensure that the panel includes—
(a)a member appointed by the Treasury,
(b)a member appointed by the Bank of England,
[F49(c)a member appointed by the PRA,
(ca)a member appointed by the FCA,]
(d)a member appointed by the scheme manager of the Financial Services Compensation Scheme,
(e)one or more persons who in the Treasury's opinion represent the interests of banks,
(f)one or more persons who in the Treasury's opinion have expertise in law relating to the financial systems of the United Kingdom, and
(g)one or more persons who in the Treasury's opinion have expertise in insolvency law and practice.
F49S. 10(3)(c)(ca) substituted for s. 10(3)(c) (1.4.2013) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 17 para. 11 (with Sch. 20); S.I. 2013/423, art. 3, Sch.
I12S. 10 in force at 17.2.2009 for specified purposes by S.I. 2009/296, arts. 2, 3, Sch. para. 1
I13S. 10 in force at 21.2.2009 in so far as not already in force by S.I. 2009/296, arts. 2, 3, Sch. para. 1
The stabilisation optionsU.K.
11Private sector purchaserU.K.
(1)The first stabilisation option is to sell all or part of the business of the bank to a commercial purchaser.
(2)For that purpose the Bank of England may make—
(a)one or more share transfer instruments;
(b)one or more property transfer instruments.
I14S. 11 in force at 21.2.2009 by S.I. 2009/296, art. 3, Sch. para. 1
12Bridge bankU.K.
(1)The second stabilisation option is to transfer all or part of the business of the bank to a company which [F50meets the requirements of subsection (1A)] (a "bridge bank").
[F51(1A)Those requirements are that the company—
(a)is wholly or partially owned by the Bank of England,
(b)is controlled by the Bank, and
(c)is created for the purposes of receiving a transfer by virtue of this section with a view to maintaining access to critical functions and (in due course) selling the bank or its business.
(2)For the purpose of subsection (1) the Bank of England may make—
(b)one or more property transfer instruments.]
(3)The code of practice under section 5 must include provision about the management and control of bridge banks including, in particular, provision about—
(a)setting objectives,
(b)the content of the articles of association,
(c)the content of reports under section 80(1),
(d)different arrangements for management and control at different stages, and
(e)eventual disposal.
[F52(3A)Where—
(a)all or substantially all of the bridge bank's assets, rights and liabilities have been transferred to a third party, or
(b)following a transfer to the bridge bank under this section, no further transfer to the bridge bank is made under this section during the relevant post-transfer period,
the Bank of England must, without delay, take all necessary steps to wind up the bridge bank.
(3B)But subsection (3A)(b) does not apply if the bridge bank—
(a)has merged with another entity,
(b)has ceased to meet the requirements of subsection (1A)(a) or (b), or
(c)has already been wound up.
(3C)"The relevant post-transfer period" means the period of two years beginning with the day of the transfer mentioned in subsection (3A)(a), subject to any extension under subsection (3D).
(3D)The Bank of England may extend (or further extend) the relevant post-transfer period by one year if it is satisfied that the extension—
(a)would support one or more of the outcomes mentioned in subsection (3A)(a) or (3B)(a), (b) or (c), or
(b)is necessary to ensure the continuity of essential banking or financial services.]
(4)Where property, rights or liabilities are first transferred by property transfer instrument to a bridge bank and later transferred (whether or not by the exercise of a power under this Part) to another company which [F53meets the requirements of subsection (1A)], that other company is an "onward bridge bank".
(5)An onward bridge bank—
(a)is a bridge bank for the purposes of—
[F54(i)subsections (3) to (3B),
(ia)section 8ZA(3)(b),
(ib)section 12ZA(1)(b) and (2)(c),]
(ii)section 77,
(iii)section 79, and
(iv)section 80(5), but
(b)is not a bridge bank for the purposes of—
(i)section 30(1),
(ii)section 43(1), or
(iii)section 80(1).
F50Words in s. 12(1) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 18(2)
F51S. 12(1A)(2) substituted for s. 12(2) (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 18(3)
F52S. 12(3A)-(3D) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 18(4)
F54S. 12(5)(a)(i)-(ib) substituted for s. 12(5)(a)(i) (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 18(6)
[F5512ZA.Asset management vehicleU.K.
(1)The third stabilisation option is to transfer all or part of the business of—
(a)the bank, or
(b)a bridge bank to which shares or property, rights or liabilities of the bank have been transferred under section 12,
to an asset management vehicle.
(2)An "asset management vehicle" is an undertaking which—
(a)is wholly or partially owned (directly or indirectly) by the Bank of England or the Treasury,
(b)is controlled by the Bank of England, and
(c)is created for the purpose of receiving some or all of the assets, rights and liabilities of one or more banks or of one or more bridge banks (or both).
(3)For the purpose of subsection (1) the Bank of England may make one or more property transfer instruments.
(4)An asset management vehicle must manage the assets transferred to it with a view to maximising their value through eventual sale or orderly wind down.
(5)The code of practice under section 5 must include provision about the management and control of asset management vehicles including, in particular, provision about—
(6)Where property, rights or liabilities are transferred to an asset management vehicle pursuant to the third stabilisation option, the Bank of England may make one or more supplemental property transfer instruments transferring any of that property, or those rights or liabilities, to one or more other asset management vehicles.]
F55S. 12ZA inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 19
[F5612ABail-in optionU.K.
(1)The [F57fourth] stabilisation option is exercised by the use of the power in subsection (2).
[F58(2)The Bank of England may make one or more resolution instruments.
(2A)A resolution instrument may contain provision or proposals of any kind mentioned in subsections (3) to (6).
(2B)The power in subsection (2) must be exercised in accordance with section 12AA.
(2C)When the Bank of England exercise that power, at least one resolution instrument must include provision under section 48H(1) (business reorganisation plan).]
(3)A resolution instrument may—
(a)make special bail-in provision with respect to a specified bank;
(b)make other provision for the purposes of, or in connection with, any special bail-in provision made by that or another instrument.
(a)provide for securities issued by a specified bank to be transferred to a [F59resolution administrator (see section 62B)] or another person;
(b)make other provision for the purposes of, or in connection with, the transfer of securities issued by a specified bank (whether or not the transfer has been or is to be effected by that instrument, by another resolution instrument or otherwise).
(5)A resolution instrument may set out proposals with regard to the future ownership of a specified bank or of the business of a specified bank, and any other proposals (for example, proposals about making special bail-in provision) that the Bank of England may think appropriate.
(6)A resolution instrument may make any other provision the Bank of England may think it appropriate to make in exercise of specific powers under this Part.
(8)Where the Bank of England has exercised the power in subsection (4) to transfer securities to a [F60resolution administrator], the Bank of England must exercise its functions under this Part (see, in particular, section 48V) with a view to ensuring that any securities held by a person in the capacity of a [F60resolution administrator] are so held only for so long as is, in the Bank of England's opinion, appropriate having regard to the special resolution objectives.
(9)References in this Part to "special bail-in provision" are to provision made in reliance on section 48B.]
F56Ss. 12A, 12B inserted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 2; S.I. 2014/3160, art. 2(1)(b)
F57Word in s. 12A(1) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 20(2)
F58Ss. 12A(2)-(2C) substituted for s. 12A(2) (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 20(3)
F59Words in s. 12A(4)(a) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 20(4)
F60Words in s. 12A(8) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 20(5)
[F6112AA.Bail-in: sequence of write-down and conversion of capital instruments and liabilitiesU.K.
(1)When the Bank of England exercises the fourth stabilisation option, it must use the powers conferred by sections 12A, 48B to 48W and 48Z and this section in a way which ensures that—
(b)the principal amount of Additional Tier 1 instruments is reduced or converted (directly or indirectly) into Common Equity Tier 1 instruments (or both), to the extent of the capacity of the Additional Tier 1 instruments,
(c)the principal amount of Tier 2 instruments is reduced or converted (directly or indirectly) into Common Equity Tier 1 instruments (or both), to the extent of the capacity of the Tier 2 instruments,
(d)where the total of any reduction or conversion pursuant to paragraphs (b) and (c) is less than the shortfall amount, the principal amount of subordinated debt that is not within either of those paragraphs is—
(i)reduced or converted (directly or indirectly) into shares or other securities, or both reduced and so converted, in accordance with the hierarchy of claims in normal insolvency proceedings, by the difference or to the extent of the capacity of those instruments, whichever is lower, and
(ii)losses are born by the holders of shares of the bank that are not within paragraph (a), (b) or (c) in accordance with the hierarchy of claims in normal insolvency proceedings,
(e)where the total of any reduction or conversion pursuant to paragraphs (b), (c) and (d), and any reduction or conversion pursuant to subsection (6), is less than the shortfall amount, the principal amount of, or outstanding amount payable in respect of, the remaining eligible liabilities is reduced or converted (directly or indirectly) into shares or other securities, or both reduced and so converted, in accordance with the hierarchy of claims in normal insolvency proceedings, by the difference or to the extent of their capacity, whichever is lower.
"normal insolvency proceedings" has the meaning given by Article 2.1(47) of the resolution and recovery directive (and, in particular, includes the bank insolvency procedure and the bank administration procedure),
"the shortfall amount" means the sum of the amounts referred to in Article 47.3(b) and (c) of the resolution and recovery directive.
(3)Subsections (1) to (4) of section 6C apply for the purpose of this section as if references in those subsections to section 6B were references to subsection (1)(a) to (c) of this section.
(4)When complying with subsection (1)(d) and (e), the Bank of England must allocate the losses represented by the shortfall amount equally between eligible liabilities of the same rank by reducing the principal amount of, or outstanding amount payable in respect of, those eligible liabilities to the same extent in proportion to their value, except where a different allocation of losses amongst liabilities of the same rank is allowed by virtue of section 48B(10) and (11).
(5)Subsection (4) does not prevent excluded liabilities (as defined by section 48B(7A)) from receiving more favourable treatment than eligible liabilities which are of the same rank in normal insolvency proceedings.
(6)The Bank may take the action required by subsection (1)(e) only if it converts or reduces the principal amount of any instruments referred to in subsection (1)(d) which contain—
(a)terms that provide for the principal amount of the instrument to be reduced on the occurrence of any event that refers to the financial situation, solvency or levels of own funds of the bank, or
(b)terms that provide for the conversion of the instruments to shares on the occurrence of any such event,
in accordance with those terms.
(7)Where the principal amount of an instrument has been reduced, but not to zero, in accordance with terms of the kind referred to in subsection (6)(a) before the application of the bail-in option, the Bank must take the action required by subsection (1) in relation to the residual amount of that principal.
(8)When taking the action required by subsection (1), the Bank must not convert or reduce one class of liabilities while a class of liabilities that is subordinated to that class remains substantially unconverted or the principal amount of those liabilities is not reduced to nil.
(9)For the purpose of subsection (8), excluded liabilities within the meaning of section 48B(7A) are to be ignored.
(10)For the purposes of this section "existing" Common Equity Tier 1 instruments includes Common Equity Tier 1 instruments issued or conferred in the following circumstances—
(a)pursuant to conversion of debt instruments to Common Equity Tier 1 instruments in accordance with contractual terms of the original debt instruments on the occurrence of an event that preceded, or occurred at the same time as, the assessment by the Bank of England that the bank met the conditions in section 7;
(b)pursuant to any previous conversion of relevant capital instruments to Common Equity Tier 1 instruments in accordance with section 6B.]
F61S. 12AA inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 21
F6212BBail-in administratorsU.K.
F62S. 12B omitted (1.1.2015) by virtue of The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 22
13Temporary public ownershipU.K.
(1)The [F63fifth] stabilisation option is to take the bank into temporary public ownership.
(2)For that purpose the Treasury may make one or more share transfer orders in which the transferee is—
(a)a nominee of the Treasury, or
(b)a company wholly owned by the Treasury.
(3)The code of practice under section 5 must include provision about the management of banks taken into temporary public ownership under this section.
F63Word in s. 13(1) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 23
Transfer of securitiesU.K.
14Interpretation: "securities"U.K.
(1)In this Part "securities" includes anything falling within any of the following classes.
(2)Class 1: shares and stock.
(3)Class 2: debentures, including—
(a)debenture stock,
(b)loan stock,
(c)bonds,
(d)certificates of deposit, and
(e)any other instrument creating or acknowledging a debt.
(4)Class 3: warrants or other instruments that entitle the holder to acquire anything in Class 1 or 2.
(5)Class 4: rights which—
(a)are granted by a deposit-taker, and
(b)form part of the deposit-taker's own funds for the purposes of [F64Title 1 of Part 2 of Regulation (EU) No. 575/2013 of the European Parliament and of the Council.]
F64Words in s. 14(5)(b) substituted (1.1.2014) by The Capital Requirements Regulations 2013 (S.I. 2013/3115), reg. 1(2), Sch. 2 para. 45(2)
15Share transfer instrumentU.K.
(1)A share transfer instrument is an instrument which—
(a)provides for securities issued by a specified bank to be transferred;
(b)makes other provision for the purposes of, or in connection with, the transfer of securities issued by a specified bank (whether or not the transfer has been or is to be effected by that instrument, by another share transfer instrument or otherwise).
(2)A share transfer instrument may relate to—
16Share transfer orderU.K.
(1)A share transfer order is an order which—
(b)makes other provision for the purposes of, or in connection with, the transfer of securities issued by a specified bank (whether or not the transfer has been or is to be effected by that order, by another share transfer order or otherwise).
(2)A share transfer order may relate to—
17EffectU.K.
(1)In this section "transfer" means a transfer provided for by a share transfer instrument or order[F65, by a mandatory reduction instrument] [F66or by a resolution instrument].
(2)A transfer takes effect by virtue of the instrument or order (and in accordance with its provisions as to timing or other ancillary matters).
(3)A transfer takes effect despite any restriction arising by virtue of contract or legislation or in any other way.
(4)In subsection (3) "restriction" includes—
(a)any restriction, inability or incapacity affecting what can and cannot be assigned or transferred (whether generally or by a particular person), and
(b)a requirement for consent (by any name).
(5)A share transfer instrument or order[F67, a mandatory reduction instrument] [F68or a resolution instrument] may provide for a transfer to take effect free from any trust, liability or other encumbrance (and may include provision about their extinguishment).
(6)A share transfer instrument or order[F69, a mandatory reduction instrument] [F70or a resolution instrument] may extinguish rights to acquire securities falling within Class 1 or 2 in section 14.
F65Words in s. 17(1) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 24(2)
F66Words in s. 17(1) inserted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 14(a); S.I. 2014/3160, art. 2(1)(b)
F68Words in s. 17(5) inserted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 14(b); S.I. 2014/3160, art. 2(1)(b)
F70Words in s. 17(6) inserted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 14(c); S.I. 2014/3160, art. 2(1)(b)
18ContinuityU.K.
(1)A share transfer instrument or order may provide for a transferee to be treated for any purpose connected with the transfer as the same person as the transferor.
(2)A share transfer instrument or order may provide for agreements made or other things done by or in relation to a transferor to be treated as made or done by or in relation to the transferee.
(3)A share transfer instrument or order may provide for anything (including legal proceedings) that relates to anything transferred and is in the process of being done by or in relation to the transferor immediately before the transfer date, to be continued by or in relation to the transferee.
(4)A share transfer instrument or order may modify references (express or implied) in an instrument or document to a transferor.
(5)A share transfer instrument or order may require or permit—
(a)a transferor to provide a transferee with information and assistance;
(b)a transferee to provide a transferor with information and assistance.
[F71(5A)This section applies to a mandatory reduction instrument as it applies to a share transfer instrument; and in relation to a mandatory reduction instrument references in this section to a "transfer" are to a transfer of securities (whether made by that or another mandatory reduction instrument) and "transferor" and "transferee" are to be read accordingly.]
[F72(6)This section applies to a resolution instrument as it applies to a share transfer instrument; and in relation to a resolution instrument references in this section to a "transfer" are to a transfer of securities (whether made by that or another resolution instrument) and "transferor" and "transferee" are to be read accordingly.]
F71S. 18(5A) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 25
F72S. 18(6) inserted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 15; S.I. 2014/3160, art. 2(1)(b)
19Conversion and delistingU.K.
(1)A share transfer instrument or order may provide for securities to be converted from one form or class to another.
(2)A share transfer instrument or order may provide for the listing of securities, under section 74 of the Financial Services and Markets Act 2000, to be discontinued [F73or suspended].
[F74(3)Where the listing of securities is suspended in accordance with a share transfer instrument or order, those securities are to be treated for the purposes of section 96 of, and paragraph 23(6) of Schedule 1ZA to, the Financial Services and Markets Act 2000 as still being listed.]
F74S. 19(3) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 26(3)
20Directors [F75and senior managers] U.K.
(1)A share transfer instrument may enable the Bank of England—
(a)to remove a director [F76or senior manager] of a specified bank;
(b)to vary the service contract of a director [F76or senior manager] of a specified bank;
(c)to terminate the service contract of a director [F76or senior manager] of a specified bank;
(d)to appoint a director [F76or senior manager] of a specified bank.
[F77(1A)Subsection (1) also applies to a director [F78or senior manager] of any undertaking which is a banking group company in respect of a specified bank.]
(2)A share transfer order may enable the Treasury—
(3)Appointments under subsection (1)(d) are to be on terms and conditions agreed with the Bank of England.
(4)Appointments under subsection (2)(d) are to be on terms and conditions agreed with the Treasury.
[F80(5)In this section "senior manager" means a person who—
(a)exercises executive functions within a specified bank or banking group company, and
(b)is responsible, and directly accountable to the directors, for the day to day management of that bank or banking group company.]
F75Words in s. 20 heading inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 27(4)
F77S. 20(1A) inserted (1.8.2014) by Financial Services Act 2012 (c. 21), ss. 100(3), 122(3) (with Sch. 20); S.I. 2014/1847, art. 2
F78Words in s. 20(1A) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 27(2)
21Ancillary instruments: production, registration, &c.U.K.
(1)A share transfer instrument or order may permit or require the execution, issue or delivery of an instrument.
(2)A share transfer instrument or order may provide for a transfer to have effect irrespective of—
(a)whether an instrument has been produced, delivered, transferred or otherwise dealt with;
(b)registration.
(3)A share transfer instrument or order may provide for the effect of an instrument executed, issued or delivered in accordance with the instrument or order.
(4)A share transfer instrument or order may modify or annul the effect of an instrument.
(5)A share transfer instrument or order may—
(a)entitle a transferee to be registered in respect of transferred securities;
(b)require a person to effect registration.
F8122Termination rights, &c.U.K.
F81S. 22 omitted (1.1.2015) by virtue of The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 28
23Incidental provisionU.K.
(1)A share transfer instrument or order may include incidental, consequential or transitional provision.
(2)In relying on subsection (1) a share transfer instrument or order—
(a)may make provision generally or only for specified purposes, cases or circumstances, and
(b)may make different provision for different purposes, cases or circumstances.
24Procedure: instrumentsU.K.
(1)As soon as is reasonably practicable after making a share transfer instrument in respect of a bank the Bank of England shall send a copy to—
(a)the bank,
[F82(c)the PRA,
(ca)the FCA, and]
(d)any other person specified in the code of practice under section 5.
(2)As soon as is reasonably practicable after making a share transfer instrument the Bank of England shall publish a copy—
(a)on the Bank's internet website, F83...
(b)in two newspapers, chosen by the Bank of England to maximise the likelihood of the instrument coming to the attention of persons likely to be affected[F84, and
(c)if securities issued by the bank have been admitted to trading on a regulated market (within the meaning of section 103(1) of the Financial Services and Markets Act 2000), by means of a regulatory information service (within the meaning of section 313D of that Act),
and arrange for the publication of a copy on the internet website of the bank in respect of which the instrument was made.]
(3)Where the Treasury receive a copy of a share transfer instrument under subsection (1) they shall lay a copy before Parliament.
F83Word in s. 24(2) omitted (1.1.2015) by virtue of The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 29
F84Words in s. 24(2) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 29
25Procedure: ordersU.K.
(1)A share transfer order—
(b)shall be subject to annulment in pursuance of a resolution of either House of Parliament.
(2)As soon as is reasonably practicable after making a share transfer order in respect of a bank the Treasury shall send a copy to—
(3)As soon as is reasonably practicable after making a share transfer order the Treasury shall publish a copy—
(a)on the Treasury's internet website, F86...
(b)in two newspapers, chosen by the Treasury to maximise the likelihood of the instrument coming to the attention of persons likely to be affected[F87, and
and arrange for the publication of a copy on the internet website of the bank in respect of which the order was made.]
26Supplemental instrumentsU.K.
(1)This section applies where the Bank of England has made a share transfer instrument in accordance with section 11(2) [F88or 12(2)] ("the original instrument").
(2)The Bank of England may make one or more supplemental share transfer instruments.
(3)A supplemental share transfer instrument is a share transfer instrument which—
(a)provides for the transfer of securities which were issued by the bank before the original instrument and have not been transferred by the original instrument or another supplemental share transfer instrument;
(a)makes provision of a kind that a share transfer instrument may make under section 15(1)(b) (whether or not in connection with a transfer under the original instrument).
(4)Sections 7 and 8 do not apply to a supplemental share transfer instrument (but it is to be treated in the same way as any other share transfer instrument for all other purposes, including for the purposes of the application of a power under this Part).
(5)Before making a supplemental share transfer instrument the Bank of England must consult—
(b)the Treasury.
(6)The possibility of making a supplemental share transfer instrument in reliance on subsection (2) is without prejudice to the possibility of making of a new instrument in accordance with section 11(2) [F90or 12(2)] (and not in reliance on subsection (2) above).
F89S. 26(5)(a)(aa) substituted for s. 26(5)(a) (1.4.2013) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 17 para. 14 (with Sch. 20); S.I. 2013/423, art. 3, Sch.
[F9126APrivate sector purchaser: reverse share transferU.K.
(1)This section applies where the Bank of England has made a share transfer instrument in accordance with section 11(2) ("the original instrument") providing for the transfer of securities issued by a bank to a person ("the original transferee").
(2)The Bank of England may make one or more private sector reverse share transfer instruments in respect of securities issued by the bank and held by the original transferee.
(3)A private sector reverse share transfer instrument is a share transfer instrument which—
(a)provides for transfer to the transferor under the original instrument;
(b)makes other provision for the purposes of, or in connection with, the transfer of securities which are, could be or could have been transferred under paragraph (a).
(4)The Bank of England must not make a private sector reverse share transfer instrument without the written consent of the original transferee.
(5)Sections 7, 8 and 50 do not apply to a private sector reverse share transfer instrument (but it is to be treated in the same way as any other share transfer instrument for all other purposes including for the purposes of the application of a power under this Part).
(6)Before making a private sector reverse share transfer instrument the Bank of England must consult—
(7)Section 26 applies where the Bank of England has made a private sector reverse share transfer instrument.]
F91S. 26A inserted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 97(2), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.
27Supplemental ordersU.K.
(1)This section applies where the Treasury have made a share transfer order, in respect of securities issued by a bank, in accordance with section 13(2) ("the original order").
(2)The Treasury may make one or more supplemental share transfer orders.
(3)A supplemental share transfer order is a share transfer order which—
(a)provides for the transfer of securities which were issued by the bank before the original order and have not been transferred by the original order or another supplemental share transfer order;
(b)makes provision of a kind that a share transfer order may make under section 16(1)(b), whether in connection with a transfer under the original order or in connection with a transfer under that or another supplemental order.
(4)Sections 7 and 9 do not apply to a supplemental share transfer order (but it is to be treated in the same way as any other share transfer order for all other purposes, including for the purposes of the application of a power under this Part).
(5)Before making a supplemental share transfer order the Treasury must consult—
(6)The possibility of making a supplemental share transfer order in reliance on subsection (2) is without prejudice to the possibility of making of a new order in accordance with section 13(2) (and not in reliance on subsection (2) above).
28Onward transferU.K.
(2)The Treasury may make one or more onward share transfer orders.
(3)An onward share transfer order is a share transfer order which—
(a)provides for the transfer of—
(i)securities which were issued by the bank before the original order and have been transferred by the original order or a supplemental share transfer order, or
(ii)securities which were issued by the bank after the original order;
(b)makes other provision for the purposes of, or in connection with, the transfer of securities issued by the bank (whether the transfer has been or is to be effected by that order, by another share transfer order or otherwise).
(4)An onward share transfer order may not transfer securities to the transferor under the original order.
(5)Sections 7 and 9 do not apply to an onward share transfer order (but it is to be treated in the same way as any other share transfer order for all other purposes, including for the purposes of the application of a power under this Part).
(6)Before making an onward share transfer order the Treasury must consult—
(7)Section 27 applies where the Treasury have made an onward share transfer order.
29Reverse share transferU.K.
(1)This section applies where the Treasury have made a share transfer order in accordance with section 13(2) ("the original order") providing for the transfer of securities issued by a bank to a person ("the original transferee").
(2)The Treasury may make one or more reverse share transfer orders in respect of securities issued by the bank and held by the original transferee (whether or not they were transferred by the original order).
(3)If the Treasury makes an onward share transfer order in respect of securities transferred by the original order, the Treasury may make one or more reverse share transfer orders in respect of [F94securities issued by the bank and held by a transferee under the onward share transfer order ("the onward transferee").]
(4)A reverse share transfer order is a share transfer order which—
(a)provides for transfer to the transferor under the original order (where subsection (2) applies);
(b)provides for transfer to the original transferee (where subsection (3) applies);
(c)makes other provision for the purposes of, or in connection with, the transfer of securities which are, could be or could have been transferred under paragraph (a) or (b).
[F95(4A)The Treasury must not make a reverse share transfer order under subsection (3) unless—
(a)the onward transferee is—
(i)a company wholly owned by the Bank of England,
(ii)a company wholly owned by the Treasury, or
(iii)a nominee of the Treasury, or
(b)the reverse share transfer order is made with the written consent of the onward transferee.]
(5)Sections 7, 9 and 51 do not apply to a reverse share transfer order (but it is to be treated in the same way as any other share transfer order for all other purposes including for the purposes of the application of a power under this Part).
(6)Before making a reverse share transfer order the Treasury must consult—
(7)Section 27 applies where the Treasury have made a reverse share transfer order.
F94Words in s. 29(3) substituted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 97(3)(a), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.
F95S. 29(4A) inserted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 97(3)(b), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.
[F9729A.Interpretation: "resolution company"U.K.
In this Act "resolution company" means a bridge bank or an asset management vehicle.]
F97S. 29A inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 32
30 [F98Resolution company:] share transfersU.K.
[F99(1)This section applies where the Bank of England has made—
(a)a property transfer instrument in respect of a resolution company in accordance with section 12(2) or 12ZA(3), or
(b)a share transfer instrument in respect of a resolution company in accordance with section 12(2).]
(2)The Bank of England may make one or more [F100resolution company] share transfer instruments.
(3)A [F100resolution company] share transfer instrument is a share transfer instrument which—
(a)provides for securities issued by the [F100resolution company] to be transferred;
(b)makes other provision for the purposes of, or in connection with, the transfer of securities issued by the [F100resolution company] (whether the transfer has been or is to be effected by that instrument, by another share transfer instrument or otherwise).
(4)Sections 7 and 8 do not apply to a [F100resolution company] share transfer instrument (but it is to be treated in the same way as any other share transfer instrument for all other purposes, including for the purposes of the application of a power under this Part).
(5)Before making a [F100resolution company] share transfer instrument the Bank of England must consult—
[F101(a)the PRA,
(6)Section 26 applies where the Bank of England has made a [F100resolution company] share transfer instrument.
F98Words in s. 30 heading substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 33(4)
F99S. 30(1) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 33(2)
F100Words in s. 30(2)-(6) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 33(3)
F101S. 30(5)(a)(aa) substituted for s. 30(5)(a) (1.4.2013) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 17 para. 18 (with Sch. 20); S.I. 2013/423, art. 3, Sch.
31 [F102Resolution company:] reverse share transferU.K.
(1)This section applies where the Bank of England has made a [F103resolution company] share transfer instrument in accordance with section 30(2) ("the original instrument") F104...
(2)The Bank of England may make one or more [F103resolution company] reverse share transfer instruments in respect of securities issued by the [F103resolution company] and held by a [F105transferee under the original instrument].
(3)A [F103resolution company] reverse share transfer instrument is a share transfer instrument which—
[F106(3A)The Bank of England must not make a [F103resolution company] reverse share transfer instrument unless—
(a)the transferee under the original instrument is—
(b)the [F103resolution company] reverse share transfer instrument is made with the written consent of the transferee under the original instrument.]
(4)Sections 7, 8 and 51 do not apply to a [F103resolution company] reverse share transfer instrument (but it is to be treated in the same way as any other share transfer instrument for all other purposes including for the purposes of the application of a power under this Part).
(5)Before making a [F103resolution company] reverse share transfer instrument the Bank of England must consult—
(6)Section 26 applies where the Bank of England has made a [F103resolution company] reverse share transfer instrument.
F102Words in s. 31 heading substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 34(3)
F103Words in s. 31 substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 34(2)
F104Words in s. 31(1) omitted (1.4.2013) by virtue of Financial Services Act 2012 (c. 21), ss. 97(4)(a), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.
F105Words in s. 31(2) substituted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 97(4)(b), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.
F106S. 31(3A) inserted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 97(4)(c), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.
32Interpretation: generalU.K.
In this group of sections—
"service contract" has the meaning given by section 227 of the Companies Act 2006, and
"transfer date" means the date or time on or at which a share transfer instrument or order (or the relevant part of it) takes effect.
Transfer of propertyU.K.
33Property transfer instrumentU.K.
(1)A property transfer instrument is an instrument which—
(a)provides for property, rights or liabilities of a specified bank to be transferred;
(b)makes other provision for the purposes of, or in connection with, the transfer of property, rights or liabilities of a specified bank (whether the transfer has been or is to be effected by that instrument, by another property transfer instrument or otherwise).
(2)A property transfer instrument may relate to—
(a)all property, rights and liabilities of the specified bank,
(b)all its property, rights and liabilities subject to specified exceptions,
(c)specified property, rights or liabilities, or
(d)property, rights or liabilities of a specified description.
[F108(3)In this section references to a bank include a resolution company (whether or not it is a bank).]
F108S. 33(3) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 35
(1)In this section "transfer" means a transfer provided for by a property transfer instrument.
(2)A transfer takes effect by virtue of the instrument (and in accordance with its provisions as to timing or other ancillary matters).
(5)A property transfer instrument may provide for a transfer to be conditional upon a specified event or situation—
(a)occurring or arising, or
(b)not occurring or arising.
(6)A property transfer instrument may include provision dealing with the consequences of breach of a condition imposed under subsection (5); and the consequences may include—
(a)automatic vesting in the original transferor;
(b)an obligation to effect a transfer back to the original transferor, with specified consequences for failure to comply (which may include provision conferring a discretion on a court or tribunal);
(c)provision making a transfer or anything done in connection with a transfer void or voidable.
(7)Where a property transfer instrument makes provision in respect of property held on trust (however arising) it may also make provision about—
(a)the terms on which the property is to be held after the instrument takes effect F109..., and
(b)how any powers, provisions and liabilities in respect of the property are to be exercisable or have effect after the instrument takes effect.
[F110(8)Provision under subsection (7)(a) may remove or alter the terms of the trust on which the property is held only to the extent that the Bank of England thinks it necessary or expedient for the purpose of transferring—
(a)the legal or beneficial interest of the transferor in the property;
(b)any powers, rights or obligations of the transferor in respect of the property.
(9)In subsection (8) references to the transferor are references to the transferor under the property transfer instrument.]
F109Words in s. 34(7)(a) omitted (1.1.2015) by virtue of Financial Services Act 2012 (c. 21), ss. 98(2), 122(3) (with Sch. 20); S.I. 2014/3323, art. 2
F110S. 34(8)(9) inserted (1.1.2015) by Financial Services Act 2012 (c. 21), ss. 98(3), 122(3) (with Sch. 20); S.I. 2014/3323, art. 2
35Transferable propertyU.K.
(1)A property transfer instrument may transfer any property, rights or liabilities including, in particular—
(a)property, rights and liabilities acquired or arising between the making of the instrument and the transfer date,
(b)rights and liabilities arising on or after the transfer date in respect of matters occurring before that date,
(c)property outside the United Kingdom,
(d)rights and liabilities under the law of a country or territory outside the United Kingdom, and
(e)rights and liabilities under an enactment (including legislation of the European Union).
(2)Section 32 applies for the interpretation of this section (with the necessary modification).
(1)A property transfer instrument may provide—
(a)for a transfer to be, or to be treated as, a succession;
(b)for a transferee to be treated for any purpose connected with the transfer as the same person as the transferor.
(2)A property transfer instrument may provide for agreements made or other things done by or in relation to a transferor to be treated as made or done by or in relation to the transferee.
(3)A property transfer instrument may provide for anything (including legal proceedings) that relates to anything transferred and is in the process of being done by or in relation to the transferor immediately before the transfer date, to be continued by or in relation to the transferee.
(4)A property transfer instrument which transfers or enables the transfer of a contract of employment may include provision about continuity of employment.
(5)A property transfer instrument may modify references (express or implied) in an instrument or document to a transferor.
(6)In so far as rights and liabilities in respect of anything transferred are enforceable after transfer, a property transfer instrument may provide for apportionment between transferor and transferee to a specified extent and in specified ways.
(7)A property transfer instrument may enable the transferor and transferee by agreement to modify a provision of the instrument; but a modification—
(a)must achieve a result that could have been achieved by the instrument, and
(b)may not transfer (or arrange for the transfer of) property, rights or liabilities.
(8)A property transfer instrument may require or permit—
[F11136ADirectors [F112and senior managers] U.K.
(1)A property transfer instrument may enable the Bank of England—
(a)to remove a director [F113or senior manager] of a specified bank;
(b)to vary the service contract of a director [F113or senior manager] of a specified bank;
(c)to terminate the service contract of a director [F113or senior manager] of a specified bank;
(d)to appoint a director [F113or senior manager] of a specified bank.
(2)Subsection (1) also applies to a director [F114or senior manager] of any undertaking which is a banking group company in respect of a specified bank.
[F115(4)In this section "senior manager" means a person who—
(b)is responsible, and directly accountable to the directors, for the day to day management of that bank or banking group company.
(5)In this section references to a bank include a resolution company (whether or not it is a bank).]]
F111S. 36A inserted (1.8.2014) by Financial Services Act 2012 (c. 21), ss. 100(4), 122(3) (with Sch. 20); S.I. 2014/1847, art. 2
F112Words in s. 36A heading inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 36(4)
F113Words in s. 36A(1) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 36(2)
F115S. 36A(4)(5) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 36(3)
37LicencesU.K.
(1)A licence in respect of anything transferred by property transfer instrument shall continue to have effect despite the transfer.
(2)A property transfer instrument may disapply subsection (1) to a specified extent.
(3)Where a licence imposes rights or obligations, a property transfer instrument may apportion responsibility for exercise or compliance between transferor and transferee.
(4)In this section "licence" includes permission and approval and any other permissive document in respect of anything transferred.
F11638Termination rights, &c.U.K.
F116S. 38 omitted (1.1.2015) by virtue of The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 37
39Foreign propertyU.K.
(1)This section applies where a property transfer instrument transfers foreign property.
(2)In subsection (1) "foreign property" means—
(a)property outside the United Kingdom, and
(b)rights and liabilities under foreign law.
(3)The transferor and the transferee must each take any necessary steps to ensure that the transfer is effective as a matter of foreign law (if it is not wholly effective by virtue of the property transfer instrument).
(4)Until the transfer is effective as a matter of foreign law, the transferor must—
(a)hold the property or right for the benefit of the transferee (together with any additional property or right accruing by virtue of the original property or right), or
(b)discharge the liability on behalf of the transferee.
[F117(4A)If the Bank of England determines that, in spite of any action taken by the transferee or the transferor, it is not possible for the transfer of certain property to be effective under the law of the jurisdiction where the property is located or (where the property consists of rights or liabilities) the law under which it arises—
(a)subsection (4) ceases to apply, and
(b)the provisions of the property transfer instrument relating to that property are void.
(4B)The Bank must give notice of any determination under subsection (4A) to the transferor and the transferee.]
[F118(5)The transferor must meet any expenses of the transferee in complying with this section.]
(6)An obligation imposed by this section is enforceable as if created by contract between the transferor and transferee.
(7)The transferor must comply with any directions of the Bank of England in respect of the obligations under subsections (3) and (4); and—
(a)a direction may disapply subsections (3) and (4) to a specified extent, and
(b)obligations imposed by direction are enforceable as if created by contract between the transferor and the Bank of England.
(8)In this section "foreign law" means the law of a country or territory outside the United Kingdom.
F117S. 39(4A)(4B) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 38(a)
F118S. 39(5) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 38(b)
[F11939ABanks which are [F120recognised central counterparties]U.K.
Sections 89C to 89E ([F120recognised central counterparty] rules, membership and recognition) apply in relation to a bank which would be a [F18recognised central counterparty] but for section 89G(2) (exclusion of banks etc from definition of [F18recognised central counterparty]) as they apply in relation to a [F18recognised central counterparty].]
F120Words in s. 39A substituted (1.4.2013) by The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) Regulations 2013 (S.I. 2013/504), regs. 1(2), 25(3) (with regs. 52-58)
[F12139B.Property transfer instrument: delistingU.K.
(1)A property transfer instrument may provide for the listing of securities, under section 74 of the Financial Services and Markets Act 2000, to be discontinued or suspended.
(2)Where the listing of securities is suspended in accordance with a property transfer instrument, those securities are to be treated for the purposes of section 96 of, and paragraph 23(6) of Schedule 1ZA to, the Financial Services and Markets Act 2000 as still being listed.]
F121S. 39B inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 39
(1)A property transfer instrument may include incidental, consequential or transitional provision.
(2)In relying on subsection (1) an instrument—
41ProcedureU.K.
(1)As soon as is reasonably practicable after making a property transfer instrument in respect of a bank the Bank of England shall send a copy to—
[F122(c)the PRA,
(2)As soon as is reasonably practicable after making a property transfer instrument the Bank of England shall publish a copy—
(a)on the Bank's internet website, F123...
(b)in two newspapers, chosen by the Bank of England to maximise the likelihood of the instrument coming to the attention of persons likely to be affected[F124, and
(3)Where the Treasury receive a copy of a property transfer instrument under subsection (1) they shall lay a copy before Parliament.
[F125(4)In this section references to a "bank" include a resolution company even if it is not a bank.]
F122S. 41(1)(c)(ca) substituted for s. 41(1)(c) (1.4.2013) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 17 para. 20 (with Sch. 20); S.I. 2013/423, art. 3, Sch.
F123Word in s. 41(2) omitted (1.1.2015) by virtue of The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 40(2)
F124Words in s. 41(2) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 40(2)
F125S. 41(4) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 40(3)
[F12641ATransfer of property subsequent to resolution instrumentU.K.
(1)This section applies where the Bank of England has made a resolution instrument.
(2)The Bank of England may make one or more property transfer instruments in respect of property, rights or liabilities of the bank.
(3)[F127Section 7 does] not apply to a property transfer instrument under subsection (2).
(4)Before making a property transfer instrument under subsection (2) the Bank of England must consult—
F126S. 41A inserted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 5(1); S.I. 2014/3160, art. 2(1)(b)
F127Words in s. 41A(3) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 41
(1)This section applies where the Bank of England has made a property transfer instrument in accordance with section 11(2) or [F12812(2)[F129, 12ZA(3)] or 41A(2)] ("the original instrument").
(2)The Bank of England may make one or more supplemental property transfer instruments.
(3)A supplemental property transfer instrument is a property transfer instrument which—
(a)provides for property, rights or liabilities to be transferred from the transferor under the original instrument (whether accruing or arising before or after the original instrument);
(b)makes other provision of a kind that an original property transfer instrument may make under section 33(1)(b) (whether in connection with a transfer under the original instrument or in connection with a transfer under that or another supplemental instrument).
(4)Sections 7[F130, 8 and [F1318ZA]] do not apply to a supplemental property transfer instrument (but it is to be treated in the same way as any other property transfer instrument for all other purposes, including for the purposes of the application of a power under this Part).
(5)Before making a supplemental property transfer instrument the Bank of England must consult—
(6)The possibility of making a supplemental property transfer instrument in reliance on subsection (2) is without prejudice to the possibility of making of a new instrument in accordance with section 11(2)[F133, 12(2)[F134, 12ZA(3)] or 41A(2)] (and not in reliance on subsection (2) above).
F128Words in s. 42(1) substituted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 5(2)(a); S.I. 2014/3160, art. 2(1)(b)
F130Words in s. 42(4) substituted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 5(2)(b); S.I. 2014/3160, art. 2(1)(b)
F131Word in s. 42(4) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 42(3)
F133Words in s. 42(6) substituted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 5(2)(c); S.I. 2014/3160, art. 2(1)(b)
[F13542APrivate sector purchaser: reverse property transferU.K.
(1)This section applies where the Bank of England has made a property transfer instrument in accordance with section 11(2) ("the original instrument") providing for the transfer of property, rights or liabilities of a bank to a person ("the original transferee").
(2)The Bank of England may make one or more private sector reverse property transfer instruments in respect of property, rights or liabilities of the original transferee.
(3)A private sector reverse property transfer instrument is a property transfer instrument which—
(b)makes other provision for the purposes of, or in connection with, the transfer of property, rights or liabilities that are, could be or could have been transferred under paragraph (a) (whether the transfer has been or is to be effected by that instrument or otherwise).
(4)The Bank of England must not make a private sector reverse property transfer instrument without the written consent of the original transferee.
(5)Sections 7, 8 and 50 do not apply to a private sector reverse property transfer instrument (but it is to be treated in the same way as any other property transfer instrument for all other purposes including for the purposes of the application of a power under this Part).
(6)Before making a private sector reverse property transfer instrument the Bank of England must consult—
(7)Section 42 applies where the Bank of England has made a private sector reverse property transfer instrument.]
F135S. 42A inserted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 97(5), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.
(1)This section applies where the Bank of England has made a property transfer instrument in respect of a [F136resolution company] in accordance with section 12(2) [F137or 12ZA(3)] ("the original instrument").
(2)The Bank of England may make one or more onward property transfer instruments.
(3)An onward property transfer instrument is a property transfer instrument which—
(a)provides for property, rights or liabilities of the [F138resolution company] to be transferred (whether accruing or arising before or after the original instrument);
(b)makes other provision for the purposes of, or in connection with, the transfer of property, rights or liabilities of the [F138resolution company] (whether the transfer has been or is to be effected by that instrument, by another property transfer instrument or otherwise).
(4)An onward property transfer instrument may relate to property, rights or liabilities of the [F139resolution company] whether or not they were transferred under the original instrument.
(5)An onward property transfer instrument may not transfer property, rights or liabilities to the transferor under the original instrument.
(6)Sections 7, 8[F140, 8ZA] and 52 do not apply to an onward property transfer instrument (but for other purposes it is to be treated in the same way as any other property transfer instrument, including for the purposes of the application of a power under this Part).
(7)Before making an onward property transfer instrument the Bank of England must consult—
(8)Section 42 applies where the Bank of England has made an onward property transfer instrument.
F136Words in s. 43(1) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 43(2)(a)
F137Words in s. 43(1) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 43(2)(b)
F138Words in s. 43(3) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 43(3)
F140Word in s. 43(6) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 43(5)
44 [F142[F143Resolution company]: reverse] property transferU.K.
(1)This section applies where the Bank of England has made a property transfer instrument in accordance with section 12(2) [F144or 12ZA(3)] ("the original instrument") providing for the transfer of property, rights or liabilities to a [F145resolution company].
(2)The Bank of England may make one or more [F145resolution company] reverse property transfer instruments in respect of property, rights or liabilities of the [F145resolution company].
(3)If the Bank of England makes an onward property transfer instrument under section 43 the Bank may make one or more [F145resolution company] reverse property transfer instruments in respect of property, rights or liabilities [F146of a transferee under the onward property transfer instrument ("the onward transferee").]
(4)[F147A [F145resolution company] reverse] property transfer instrument is a property transfer instrument which—
(a)provides for transfer to the transferor under the original instrument (where subsection (2) applies);
(b)provides for transfer to the [F145resolution company] (where subsection (3) applies);
(c)makes other provision for the purposes of, or in connection with, the transfer of property, rights or liabilities that are, could be or could have been transferred under paragraph (a) or (b) (whether the transfer has been or is to be effected by that instrument or otherwise).
[F148(4A)The Bank of England must not make a [F145resolution company] reverse property transfer instrument unless—
(iii)a company wholly owned by a nominee of the Treasury, or
(b)[F149the [F145resolution company] reverse] property transfer instrument is made with the written consent of the onward transferee.]
(5)Sections 7, 8[F150, 8ZA] and 52 do not apply to [F151a [F145resolution company] reverse] property transfer instrument (but it is to be treated in the same way as any other property transfer instrument for all other purposes including for the purposes of the application of a power under this Part).
(6)Before making [F152a [F145resolution company] reverse] property transfer instrument the Bank of England must consult—
(7)Section 42 applies where the Bank of England has made [F154a [F145resolution company] reverse] property transfer instrument.
F142Words in s. 44 heading substituted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 16(h); S.I. 2014/3160, art. 2(1)(b)
F146Words in s. 44(3) substituted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 97(6)(a), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.
F147Words in s. 44(4) substituted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 16(c); S.I. 2014/3160, art. 2(1)(b)
F148S. 44(4A) inserted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 97(6)(b), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.
F149Words in s. 44(4A)(b) substituted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 16(d)(ii); S.I. 2014/3160, art. 2(1)(b)
F151Words in s. 44(5) substituted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 16(e); S.I. 2014/3160, art. 2(1)(b)
F152Words in s. 44(6) substituted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 16(f); S.I. 2014/3160, art. 2(1)(b)
F154Words in s. 44(7) substituted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 16(g); S.I. 2014/3160, art. 2(1)(b)
[F15544ABail in: reverse property transferU.K.
(1)This section applies where the Bank of England has made a property transfer instrument in accordance with section 41A(2) ("the original instrument").
(2)The Bank of England may make one or more bail-in reverse property transfer instruments in respect of property, rights or liabilities of the transferee under the original instrument.
(3)A bail-in reverse property transfer instrument is a property transfer instrument which—
(a)provides for a transfer to the transferor under the original instrument;
(b)makes other provision for the purposes of, or in connection with, the transfer of property, rights or liabilities which are, or could be or could have been, transferred under paragraph (a) (whether the transfer has been or is to be effected by that instrument or otherwise).
(4)The Bank of England may make a bail-in reverse property transfer instrument only with the written consent of the transferee under the original instrument.
(5)[F156Section 7 does] not apply to a bail-in reverse property transfer instrument (but it is to be treated in the same way as any other property transfer instrument for all other purposes, including for the purposes of the application of a power under this Part).
(6)Before making a bail-in reverse property transfer instrument the Bank of England must consult—
(7)Section 42 (supplemental instruments) applies where the Bank of England has made a bail-in reverse property transfer instrument.
F155Ss. 44A-44C inserted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 5(3); S.I. 2014/3160, art. 2(1)(b)
44BProperty transfer instruments: special bail-in provisionU.K.
(1)A property transfer instrument under section [F15711(2), 12(2), 12ZA(3)] or 41A(2), or an associated supplemental property transfer instrument, may make special bail-in provision with respect to the bank (see section 48B).
(2)The reference in subsection (1) to an "associated" supplemental property transfer instrument is to a supplemental property transfer instrument in relation to which the original instrument (as defined in section 42(1)) is a property transfer instrument under section [F15811(2), 12(2), 12ZA(3)] or 41A(2).
(3)In the case of a property transfer instrument under section 12(2), [F159or 12ZA(3),] or a supplemental property transfer instrument in relation to which the original instrument is a property transfer instrument under section 12(2), [F159or 12ZA(3),] the power under subsection (1) to make the provision described in section 48B(1)(b) (see also rule 3(a) and (b) of section 48B(5)) includes power to make provision replacing a liability (of any form) of the bank mentioned in subsection (1) with a security (of any form or class) [F160of the bank or] of the bridge bank mentioned in section 12(1) [F161or the asset management vehicle mentioned in section 12ZA(1) (as the case may be)].
(4)Where securities of the bridge bank ("B") are, as a result of subsection (3), held by a person other than the Bank of England, that does not prevent B from being regarded for the purposes of this Part (see particularly section [F16212(1A) and 12ZA(2)]) as being wholly owned by the Bank of England, as long as the Bank of England [F163is entitled to exercise, or control the exercise of, voting rights in respect of] all the ordinary shares issued by B.
F157Words in s. 44B(1) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 46(2)
F159Words in s. 44B(3) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 46(4)(a)
F160Words in s. 44B(3) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 46(4)(b)
F161Words in s. 44B(3) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 46(4)(c)
F162Words in s. 44B(4) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 46(5)(a)
F163Words in s. 44B(4) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 46(5)(b)
44CReport on special bail-in provisionU.K.
(1)This section applies where the Bank of England makes a property transfer instrument containing provision made in reliance on section 44B.
(2)The Bank of England must report to the Chancellor of the Exchequer stating the reasons why that provision was made in the case of the liabilities concerned.
(3)If the provision departs from the insolvency treatment principles, the report must state the reasons why it does so.
(4)The insolvency treatment principles are that where an instrument includes special bail-in provision—
(a)the provision made by the instrument must be consistent with treating all the liabilities of the bank in accordance with the priority they would enjoy on a liquidation, and
(b)any creditors who would have equal priority on a liquidation are to bear losses on an equal footing with each other.
(5)A report must comply with any other requirements as to content that may be specified by the Treasury.
(6)A report must be made as soon as reasonably practicable after the making of the property transfer instrument to which it relates.
45Temporary public ownership: property transferU.K.
(2)The Treasury may make one or more property transfer orders.
(3)A property transfer order is an order which—
(a)provides for property, rights or liabilities of the bank to be transferred (whether accruing or arising before or after the original order);
(b)makes other provision for the purposes of, or in connection with, the transfer of property, rights or liabilities of the bank (whether the transfer has been or is to be effected by the order or otherwise).
(4)Sections 7, 8 and 9 do not apply to a property transfer order.
(5)A property transfer order is to be treated—
(a)in the same way as a share transfer order for the procedural purposes of section 25, but
(b)as a property transfer instrument for all other purposes (including for the purposes of the application of powers under this Part).
[F164(5A)In the application of section 34(8) by virtue of subsection (5)(b) above, the reference to the Bank of England is to be treated as a reference to the Treasury.]
(6)In the application of section 39 by virtue of subsection (5)(b) above, the power to give directions under section 39(7) vests in the Treasury (instead of the Bank of England).
(7)Section 42 applies where the Treasury has made a property transfer order.
(8)Before making a property transfer order the Treasury must consult—
F164S. 45(5A) inserted (1.1.2015) by Financial Services Act 2012 (c. 21), ss. 98(4), 122(3) (with Sch. 20); S.I. 2014/3323, art. 2
46Temporary public ownership: reverse property transferU.K.
(1)This section applies where the Treasury have made a property transfer order in accordance with section 45(2) ("the original order") F166....
(2)The Treasury may make one or more reverse property transfer orders in respect of property, rights or liabilities of the transferee under the original order.
(3)A reverse property transfer order is a property transfer order which—
(a)provides for transfer to the transferor under the original order;
(b)makes other provision for the purposes of, or in connection with, the transfer of property, rights or liabilities which are, could be or could have been transferred.
[F167(3A)The Treasury must not make a reverse property transfer order unless—
(a)the transferee under the original order is—
(b)the reverse property transfer order is made with the written consent of the transferee under the original order.]
(4)Sections 7, 8 and 9 do not apply to a reverse property transfer order.
(5)A reverse property transfer order is to be treated—
(b)as a property transfer instrument for all other purposes (including for the purposes of the application of a power under this Part).
(7)Before making a reverse property transfer order the Treasury must consult—
(8)Section 42 applies where the Treasury have made a reverse property transfer order.
47Restriction of partial transfersU.K.
(1)In this Part "partial property transfer" means a property transfer instrument which provides for the transfer of some, but not all, of the property, rights and liabilities of a bank.
[F170(1A)In subsection (1) the reference to a "bank" includes a resolution company (even if it is not a bank).]
(2)The Treasury may by order—
(a)restrict the making of partial property transfers;
(b)impose conditions on the making of partial property transfers;
(c)require partial property transfers to include specified provision or provision to a specified effect;
(d)provide for a partial property transfer to be void or voidable, or for other consequences (including automatic transfer of other property, rights or liabilities) to arise, if or in so far as the partial property transfer is made or purported to be made in contravention of a provision of the order (or of another order under this section).
[F171(3)Provision under subsection (2) may, in particular, refer to—
(a)particular classes of deposit;
(b)particular classes of client assets.]
(4)An order may apply to transfers generally or only to transfers—
(a)of a specified kind, or
(b)made or applying in specified circumstances.
(5)An order—
F170S. 47(1A) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 47
F171S. 47(3) substituted (1.1.2015) by Financial Services Act 2012 (c. 21), ss. 96(5), 122(3) (with Sch. 20); S.I. 2014/3323, art. 2
48Power to protect certain interestsU.K.
(a)"security interests" means arrangements under which one person acquires, by way of security, an actual or contingent interest in the property of another,
(b)"title transfer collateral arrangements" are arrangements under which Person 1 transfers assets to Person 2 on terms providing for Person 2 to transfer assets if specified obligations are discharged,
(c)"set-off" arrangements are arrangements under which two or more debts, claims or obligations can be set off against each other,
(d)"netting arrangements" are arrangements under which a number of claims or obligations can be converted into a net claim or obligation and include, in particular, "close-out" netting arrangements, under which actual or theoretical debts are calculated during the course of a contract for the purpose of enabling them to be set off against each other or to be converted into a net debt, and
(e)"protected arrangements" means security interests, title transfer collateral arrangements, set-off arrangements and netting arrangements.
(a)restrict the making of partial property transfers in cases that involve, or where they might affect, protected arrangements;
(b)impose conditions on the making of partial property transfers in cases that involve, or where they might affect, protected arrangements;
(c)require partial property transfers to include specified provision, or provision to a specified effect, in respect of or for purposes connected with protected arrangements;
(3)An order may apply to protected arrangements generally or only to arrangements—
(4)An order may include provision for determining which arrangements are to be, or not to be, treated as protected arrangements; in particular, an order may provide for arrangements to be classified not according to their description by the parties but according to one or more indications of how they are treated, or are intended to be treated, in commercial practice.
(5)In this section "arrangements" includes arrangements which—
(a)are formed wholly or partly by one or more contracts or trusts;
(b)arise under or are wholly or partly governed by the law of a country or territory outside the United Kingdom;
(c)wholly or partly arise automatically as a matter of law;
(d)involve any number of parties;
(e)operate partly by reference to other arrangements between other parties.
[F17248ACreation of liabilitiesU.K.
(1)The provision that may be made by a property transfer instrument or order in reliance on section 33(1)(b), 42(3)(b), [F17342A(3)(b),] 43(3)(b), 44(4)(c)[F174, 44A(3)(b)], 45(3)(b) or 46(3)(b) includes provision for the creation of liabilities.
(2)The provision may be framed by reference to an agreement which has been or is to be entered into, or anything else which has been or is to be done, by any person (including a person other than the person making the instrument or order).]
F172S. 48A inserted (8.4.2010) by Financial Services Act 2010 (c. 28), ss. 21(2), 26(1)(f)
F173Words in s. 48A(1) inserted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 97(8), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.
F174Word in s. 48A(1) inserted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 5(4); S.I. 2014/3160, art. 2(1)(b)
[F175Bail-in optionU.K.
F175Ss. 48B-48W and cross-heading inserted (1.3.2014 for the insertion of s. 48P for specified purposes, 31.12.2014 in so far as not already in force) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 4; S.I. 2014/377, art. 2(1)(b), Sch. Pt. 2; S.I. 2014/3160, art. 2(1)(b)
48BSpecial bail-in provisionU.K.
(1)"Special bail-in provision", in relation to a bank, means any of the following (or any combination of the following)—
(a)provision cancelling a liability owed by the bank;
(b)provision modifying, or changing the form of, a liability owed by the bank;
(c)provision that a contract under which the bank has a liability is to have effect as if a specified right had been exercised under it.
(2)"Special bail-in provision", in relation to a bank, also includes any associated provision (see subsection (3)) that the Bank of England may think it appropriate to make in consequence of any provision under subsection (1) that—
(a)is made in the same resolution instrument, or
(b)has been made in another resolution instrument in respect of the bank.
(3)"Associated provision" means provision cancelling or modifying a contract under which a banking group company has a liability.
(4)A power to make special bail-in provision—
(a)may be exercised only for the purpose of, or in connection with, reducing, deferring or cancelling a liability of the bank;
(b)may not be exercised so as to affect any excluded liability.
(5)The following rules apply to the interpretation of subsection (1).
1The reference to cancelling a liability owed by the bank includes a reference to cancelling a contract under which the bank has a liability.
2The reference to modifying a liability owed by the bank includes a reference to modifying the terms (or the effect of the terms) of a contract under which the bank has a liability.
3The reference to changing the form of a liability owed by the bank, includes, for example—
(a)converting an instrument under which the bank owes a liability from one form or class to another,
(b)replacing such an instrument with another instrument of a different form or class, F176...
(c)creating a new security (of any form or class) in connection with the modification of such an instrument[F177, or
(d) converting those liabilities into securities issued by a bridge bank or a UK parent undertaking (within the meaning of section 6C(7)).]
(6)Examples of special bail-in provision include—
(a)provision that transactions or events of any specified kind have or do not have (directly or indirectly) specified consequences or are to be treated in a specified manner for specified purposes;
(b)provision discharging persons from further performance of obligations under a contract and dealing with the consequences of persons being so discharged.
(7)The form and class of the instrument ("the resulting instrument") into which an instrument is converted, or with which it is replaced, do not matter for the purposes of paragraphs (a) and (b) of rule 3 in subsection (5); for instance, the resulting instrument may (if it is a security) fall within Class 1 or any other Class in section 14.
[F178(7A)Liabilities of the bank are "excluded liabilities" if they are—
(a)liabilities listed in subsection (8), or
(b)liabilities which the Bank of England has excluded under subsection (10) from the application of special bail-in provision.]
(8)The following liabilities of the bank [F179are the excluded liabilities referred to in subsection (7A)(a)] —
(a)liabilities representing protected deposits;
(b)any liability, so far as it is secured;
(c)liabilities that the bank has by virtue of holding client assets;
(d)liabilities with an original maturity of less than 7 days owed by the bank to a credit institution or investment firm;
(e)liabilities [F180with a remaining maturity of less than 7 days] arising from participation in designated settlement systems and owed to such systems or to operators of, or participants in, such systems;
F181(f). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(g)liabilities owed to an employee or former employee in relation to salary or other remuneration, except [F182—
(i)variable remuneration that is not regulated by a collective bargaining agreement, and
(ii)variable remuneration of material risk takers as referred to in Article 92(2) of Directive 2013/36/EU of the European Parliament and of the Council of 26th June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms;]
[F183(h)liabilities owed to a pension scheme, except for liabilities owed in connection with variable remuneration of the kind mentioned in paragraph (g)(i) or (ii),]
(i)liabilities owed to creditors arising from the provision to the bank of goods or services (other than financial services) that are critical to the daily functioning of the bank's operations.
[F184(j)liabilities owed by the bank to the scheme manager of the Financial Services Compensation Scheme (established under Part 15 of the Financial Services and Markets Act 2000) in relation to levies imposed by the scheme manager for the purpose of meeting expenses in relation to payments required to be made by Directive 2014/49/EU of the European Parliament and of the Council of 16th April 2014 on deposit guarantee schemes.]
(9)The following special rules apply in cases involving banking group companies—
(a)a liability [F185is not within subsection (8)(d)] if the credit institution or investment firm to which the liability is owed is a banking group company in relation to the bank (see section 81D);
(b)in subsection (8)(i) the reference to creditors does not include companies which are banking group companies in relation to the bank.
[F186(10)The Bank of England may, in a resolution instrument, exclude any eligible liability or class of eligible liabilities from the application of any special bail-in provision in relation to the bank if, and only if, the Bank of England—
(a)thinks the exclusion is justified on one or more of the grounds set out in subsection (12), and
(b)notifies the European Commission of its intention to exclude the liabilities before making the instrument that gives effect to the exclusion.
(11)The power conferred by subsection (10) may be exercised to exclude only part of an eligible liability, or part of each of the eligible liabilities of a particular class; and where it is so exercised that part is treated as an eligible liability excluded under that subsection and the remainder is treated as an eligible liability which has not been so excluded.
(12)The grounds are—
(a)that it is not reasonably possible to give effect to special bail-in provision in relation to the liability or class within a reasonable time;
(b)that the exclusion is necessary and proportionate to achieve the continuity of critical functions and core business lines in a manner that maintains the ability of the bank to continue key operations, services and transactions;
(c)that the exclusion is necessary and proportionate to avoid giving rise to widespread contagion, in particular as regards protected deposits held by natural persons or micro-enterprises, small enterprises or medium-sized enterprises, which would severely disrupt the functioning of financial markets, including financial market infrastructures, in a manner that could cause a serious disturbance to the economy of an EEA state;
(d)that the making of special bail-in provision in relation to the liability would cause a reduction in value such that the losses borne by other creditors would be higher than if the liability were excluded.
(13)When deciding whether to exclude liabilities under subsection (10) or (11), the Bank of England must give due consideration to—
(a)the principle that all the liabilities of the bank ought to be treated in accordance with the priority they would enjoy on a liquidation,
(b)the principle that any creditors who would have equal priority on a liquidation ought to bear losses on an equal footing with each other,
(c)the level of loss absorbing capacity that would remain in the bank if the liability or liabilities of a class were wholly or partly excluded, and
(d)the need to maintain adequate resources to deal with the implications for public funds of anything done, in future, in connection with the exercise of one or more of the stabilisation powers.
(14)For the purposes of subsection (12)—
"protected deposit" has the meaning given by section 48C, and
"micro-enterprise", "small-enterprise" and "medium-sized enterprise" have the meaning given by Article 2.1(107) of the recovery and resolution directive.]
F176Word in s. 48B(5) omitted (1.1.2015) by virtue of The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 48(3)
F177Words in s. 48B(5) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 48(3)
F178S. 48B(7A) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 48(2)
F180Words in s. 48B(8)(e) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 48(4)(b)
F181S. 48B(8)(f) omitted (1.1.2015) by virtue of The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 48(4)(c)
F182Words in s. 48B(8)(g) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 48(4)(d)
F183S. 48B(8)(h) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 48(4)(e)
F184S. 48B(8)(j) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 48(4)(f)
F185Words in s. 48B(9)(a) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 48(5)
F186Ss. 48B(10)-(14) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 48(6)
48CMeaning of "protected deposit"U.K.
[F187(1)A deposit is "protected" so far as it is covered by a deposit guarantee scheme under Directive 94/19/EC of the European Parliament and of the Council of 30th May 1994 on deposit guarantee schemes or Directive 2014/49/EU of the European Parliament and of the Council of 16th April 2014 on deposit guarantee schemes.]
(4)In [F188subsection (1)] and section 48B(8)(a), "deposit" has the meaning given by article 5(2) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544), but ignoring the exclusions in article 6.
F187S. 48C(1) substituted for s. 48C(1)-(3) (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 49(2)
F188Words in s. 48C(4) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 49(3)
48DGeneral interpretation of section 48BU.K.
(1)In section 48B—
"client assets" means assets which the bank has undertaken to hold on trust for, or on behalf of, a client;
"contract" includes any instrument;
"credit institution" means any credit institution as defined in Article 4.1(1) of Regulation (EU) No 575/2013 of the European Parliament and of the Council, other than an entity mentioned in Article 2.5(2) to (23) of Directive 2013/36/EU of the European Parliament and of the Council;
"designated settlement system" means a system designated in accordance with Directive 98/26/EC of the European Parliament and of the Council (as amended by Directives 2009/44/EC and 2010/78/EU);
"employee" includes the holder of an office;
"investment firm" means an investment firm as defined in Article 4.1(2) of Regulation (EU) No 575/2013 of the European Parliament and of the Council that is subject to the initial capital requirement specified in Article 28(2) of Directive 2013/36/EU of the European Parliament and of the Council;
"pension scheme" includes any arrangement for the payment of pensions, allowances and gratuities;
"secured" means secured against property or rights, or otherwise covered by collateral arrangements.
(2)In subsection (1)—
"assets" has the same meaning as in section 232(4) (ignoring for these purposes section 232(5A)(b));
"collateral arrangements" includes arrangements which are title transfer collateral arrangements for the purposes of section 48.
F189(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F189S. 48D(3) omitted (1.1.2015) by virtue of The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 50
48EReport on special bail-in provisionU.K.
(1)This section applies where the Bank of England makes a resolution instrument containing special bail-in provision (see section 48B).
(2)The Bank of England must report to the Chancellor of the Exchequer stating the reasons why that provision has been made in the case of the liabilities concerned.
(6)A report must be made as soon as reasonably practicable after the making of the resolution instrument to which it relates.
(7)The Chancellor of the Exchequer must lay a copy of each report under subsection (2) before Parliament.
48FPower to amend definition of "excluded liabilities"U.K.
(1)The Treasury may by order amend section 48B(8) by—
(a)adding to the list of excluded liabilities;
(b)amending or omitting any paragraph of that subsection, other than paragraphs (a) to (c).
(2)The Treasury may by order amend section 48C or 48D.
(3)The powers conferred by subsections (1) and (2) include power to make consequential and transitional provision.
(4)An order under this section—
(a)is to be made by statutory instrument, and
(5)The Treasury must consult before laying a draft order under this section before Parliament.
48GPriority between creditorsU.K.
(1)The Treasury may, for the purpose of ensuring that the treatment of liabilities in any instrument that contains special bail-in provision is aligned to an appropriate degree with the treatment of liabilities on an insolvency, by order specify matters or principles to which the Bank of England is to be required to have regard in making any such instrument.
(2)An order may, for example, specify the insolvency treatment principles (as defined in section 48E(4)) or alternative principles.
(3)An order may specify the meaning of "insolvency" for one or more purposes of the order.
(4)An order may amend sections 44C(4) and 48E(4).
48HBusiness reorganisation plansU.K.
(1)A resolution instrument may require a [F190resolution administrator], or one or more directors of the bank, to—
(a)draw up a business reorganisation plan with respect to the bank, and
(b)submit it to the Bank of England within the period allowed by (or under) the instrument.
(2)"Business reorganisation plan" means a plan that includes—
(a)an assessment of the factors that caused Condition 1 in section 7 to be met in the case of the bank,
(b)a description of the measures to be adopted with a view to restoring the viability of the bank, and
(c)a timetable for the implementation of those measures.
(3)Where a person has submitted a business reorganisation plan to the Bank of England under subsection (1) (or has re-submitted a plan under subsection (4)), the Bank of England—
(a)must approve the plan if satisfied that the plan is appropriately designed for meeting the objective mentioned in subsection (2)(b);
(b)must otherwise require the person to amend the plan in a specified manner.
(4)Where the Bank of England has required a person to amend a business re-organisation plan, the person must re-submit the amended plan within the period allowed by (or under) the resolution instrument.
(5)Before deciding what action to take under subsection (3) the Bank of England must (for each submission or re-submission of a plan) consult—
(a)the PRA, and
(b)the FCA.
(6)A business reorganisation plan may include recommendations by the person submitting the plan as to the exercise by the Bank of England of any of its powers under this Part in relation to the bank.
(7)Where a resolution instrument contains provision under subsection (1), the instrument may—
(a)specify further matters (in addition to those mentioned in subsection (2)) that must be dealt with in the business reorganisation plan;
(b)make provision about the timing of actions to be taken in connection with the making and approval of the plan;
(c)enable any provision that the Bank of England has power under paragraph (a) or (b) to make in the instrument to be made instead in an agreement between the Bank of England and the person required to draw up the business reorganisation plan.
(8)For the purposes of subsection (2)(b) the viability of a bank is to be assessed by reference to whether the bank satisfies, and (if so) for how long it may be expected to continue to satisfy, the threshold conditions (as defined in section 55B of the Financial Services and Markets Act 2000).
F190Words in s. 48H(1) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 51
F19148IBail-in administrator: further functionsU.K.
F191Ss. 48I-48K omitted (1.1.2015) by virtue of The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 52
F19148JBail-in administrator: supplementaryU.K.
F19148KBail-in administrator: moneyU.K.
48LPowers in relation to securitiesU.K.
(a)cancel or modify any securities to which this subsection applies;
(b)convert any such securities from one form or class into another.
(2)Subsection (1) applies to securities issued by the bank that fall within Class 1 in section 14.
(a)make provision with respect to rights attaching to securities issued by the bank;
(b)provide for the listing of securities issued by the bank to be discontinued [F192or suspended].
[F193(c)provide for the listing or admission to trading on a regulated market of securities in class 1 (and related class 3 securities) created in accordance with that or any other resolution instrument;
(d)provide for the listing or admission to trading on a regulated market of existing securities in class 2 modified by that or any other resolution instrument (and, in that connection, for the disapplication of section 85(1) and (2) of the Financial Services and Markets Act 2000 (prohibition on listing etc of transferable securities without approved prospectus).]
(4)The reference in subsection (1)(b) to converting securities from one form or class into another includes creating a new security in connection with the modification of an existing security.
[F194(4A)In subsection (2) any reference to a class of securities is to be construed in accordance with section 14.]
(5)The provision that may be made under subsection (3)(a) includes, for example—
(a)provision that specified rights attaching to securities are to be treated as having been exercised;
(b)provision that the Bank of England, or a [F195resolution administrator], is to be treated as authorised to exercise specified rights attaching to securities;
(c)provision that specified rights attaching to securities may not be exercised for a period specified in the instrument.
[F196(6)In subsection (3)—
(a)the reference to "listing" is to listing under section 74 of the Financial Services and Markets Act 2000, and
(b)"regulated market" has the meaning given in section 103(1) of the Financial Services and Markets Act 2000.]
[F197(6A)Where the listing of securities is suspended in accordance with a resolution instrument, those securities are to be treated for the purposes of section 96 of, and paragraph 23(6) of Schedule 1ZA to, the Financial Services and Markets Act 2000 as still being listed.]
(7)The provision that may be made under this section in relation to any securities is in addition to any provision that the Bank of England may have power to make in relation to them under section 48B.
F192Words in s. 48L(3)(b) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 53(2)(a)
F193S. 48L(3)(c)(d) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 53(2)(b)
F194S. 48L(4A) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 53(3)
F195Words in s. 48L(5)(b) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 53(4)
F196S. 48L(6) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 53(5)
F19848MTermination rights, etcU.K.
F198S. 48M omitted (1.1.2015) by virtue of The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 54
48NDirectors [F199and senior managers] U.K.
(1)A resolution instrument may enable the Bank of England—
F199Words in s. 48N heading inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 55(4)
F200Words in s. 48N(1) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 55(2)
F202S. 48N(4) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 55(3)
48ODirections in or under resolution instrumentU.K.
(a)require one or more directors of the bank to comply with any general or specific directions that may be set out in the instrument;
(b)enable the Bank of England to give written directions (whether general or specific) to one or more directors of the bank.
(2)A director—
(a)is not to be regarded as failing to comply with any duty owed to any person (for example, a shareholder, creditor or employee of the bank) by virtue of any action or inaction in compliance with a direction given under subsection (1)(a) or (b);
(b)is to be immune from liability in damages in respect of action or inaction in accordance with a direction.
(3)A director must comply with a direction within the period of time specified in the direction, or if no period of time is specified, as soon as reasonably practicable.
(4)A direction under subsection (1)(a) or (b) is enforceable on an application made by the Bank of England, by injunction or, in Scotland, by an order for specific performance under section 45 of the Court of Session Act 1988.
[F203(5)See also section 83ZR for further provision about enforcement of a direction under this section.]
F203S. 48O(5) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 56
48POrders for safeguarding certain financial arrangementsU.K.
(1)In this section "protected arrangements" means security interests, title transfer collateral arrangements, set-off arrangements and netting arrangements.
"netting arrangements" means arrangements under which a number of claims or obligations can be converted into a net claim or obligation, and includes, in particular, "close-out" netting arrangements, under which actual or theoretical debts are calculated during the course of a contract for the purpose of enabling them to be set off against each other or to be converted into a net debt;
"security interests" means arrangements under which one person acquires, by way of security, an actual or contingent interest in the property of another;
"set-off arrangements" means arrangements under which two or more debts, claims or obligations can be set off against each other;
"title transfer collateral arrangements" means arrangements under which Person 1 transfers assets to Person 2 on terms providing for Person 2 to transfer assets if specified obligations are discharged.
(a)restrict the exercise of any power within the scope of this paragraph in cases that involve, or where the exercise of the power might affect, protected arrangements;
(b)impose conditions on the exercise of any power within the scope of this paragraph in cases that involve, or where the exercise of the power might affect, protected arrangements;
(c)require any instrument that makes special bail-in provision to include specified provision, or provision to a specified effect, in respect of or for purposes connected with protected arrangements;
(d)provide for an instrument to be void or voidable, or for other consequences to arise, if or in so far as the instrument is made or purported to be made in contravention of a provision of the order (or of another order under this section);
(e)specify principles to which the Bank of England is to be required to have regard in exercising specified powers—
(i)that involve protected arrangements, or
(ii)where the exercise of the powers might affect protected arrangements.
(4)References to exercising a power within the scope of paragraph (a) or (b) of subsection (3) are to making an instrument containing provision made in reliance on section 12A(3)(a) or 44B (special bail-in provision).
(e)operate partly by reference to other arrangements between parties.
48QContinuityU.K.
(1)A resolution instrument may provide for anything (including legal proceedings) that relates to anything affected by the instrument and is in the process of being done immediately before the instrument takes effect to be continued from the time the instrument takes effect.
(2)A resolution instrument may modify references (express or implied) in an instrument or document.
(3)A resolution instrument may require or permit any person to provide information and assistance to the Bank of England or another person, for the purposes of or in connection with provision made or to be made in that or another resolution instrument.
48RExecution and registration of instruments etcU.K.
(1)A resolution instrument may permit or require the execution, issue or delivery of an instrument.
(2)A resolution instrument may provide for any provision in the instrument to have effect irrespective of—
(3)A resolution instrument may provide for the effect of an instrument executed, issued or delivered in accordance with the resolution instrument.
(a)entitle a person to be registered in respect of a security;
48SResolution instruments: general mattersU.K.
(1)Provision made in a resolution instrument takes effect despite any restriction arising by virtue of contract or legislation or in any other way.
(2)A resolution instrument may include incidental, consequential or transitional provision.
(3)In relying on subsection (2) a resolution instrument—
48TProcedureU.K.
(1)As soon as is reasonably practicable after making a resolution instrument in respect of a bank the Bank of England must send a copy to—
(c)the PRA,
(d)the FCA, and
(e)any other person specified in the code of practice under section 5.
(2)As soon as is reasonably practicable after making a resolution instrument the Bank of England must publish a copy—
(c)if securities issued by the bank have been admitted to trading on a regulated market (within the meaning of section 103(1) of the Financial Services and Markets Act 2000), by means of a regulatory information service (within the meaning of section 313D of that Act)),
(3)Where the Treasury receive a copy of a resolution instrument under subsection (1) they must lay a copy before Parliament.
F204Word in s. 48T(2) omitted (1.1.2015) by virtue of The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 57
F205Words in s. 48T(2) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 57
48USupplemental resolution instrumentsU.K.
(1)This section applies where the Bank of England has made a resolution instrument ("the original instrument") with respect to a bank.
(2)The Bank of England may make, with respect to the bank, one or more resolution instruments designated by the Bank of England as supplemental resolution instruments.
(3)[F206Section 7 does] not apply to a supplemental resolution instrument (but it is to be treated in the same way as a resolution instrument for all other purposes, including for the purposes of the application of a power under this Part).
(4)Before making a supplemental resolution instrument the Bank of England must consult—
(5)The possibility of making a supplemental resolution instrument in reliance on subsection (2) is without prejudice to the possibility of making a new instrument in accordance with section 12A(2) (and not in reliance on subsection (2) above).
F206Words in s. 48U(3) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 58
48VOnward transferU.K.
(1)This section applies where the Bank of England has made a resolution instrument ("the original instrument") providing for securities issued by a specified bank to be transferred to any person.
(2)The Bank of England may make one or more onward transfer resolution instruments.
(3)An onward transfer resolution instrument is a resolution instrument which—
(i)securities which were issued by the bank before the original instrument and have been transferred by the original instrument or a supplemental resolution instrument, or
(ii)securities which were issued by the bank after the original instrument;
(b)makes other provision for the purposes of, or in connection with, the transfer of securities issued by the bank (whether the transfer has been or is to be effected by that instrument, by another instrument or otherwise).
(4)An onward transfer resolution instrument may not transfer securities to the transferor under the original instrument.
(5)[F207Section 7 does] not apply to an onward transfer resolution instrument (but it is to be treated in the same way as any other resolution instrument for all other purposes, including for the purposes of the application of a power under this Part).
(6)Before making an onward transfer resolution instrument the Bank of England must consult—
(7)Section 48U applies where the Bank of England has made an onward transfer resolution instrument.
F207Words in s. 48V(5) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 59
48WReverse transferU.K.
(1)This section applies where the Bank of England has made an instrument ("the original instrument") that is either—
(a)a resolution instrument providing for the transfer of securities issued by a bank to a person ("the transferee"), or
(b)an onward transfer resolution instrument (see section 48V) providing for the transfer of securities issued by a bank to a person ("the onward transferee").
(2)In a case falling within subsection (1)(a) the Bank of England may make one or more reverse transfer resolution instruments in respect of securities issued by the bank and held by the transferee (whether or not they were transferred by the original instrument).
(3)In a case falling within subsection (1)(b), the Bank of England may make one or more reverse transfer resolution instruments in respect of securities issued by the bank and held by the onward transferee.
(4)A reverse transfer resolution instrument is a resolution instrument which—
(b)makes other provision for the purposes of, or in connection with, the transfer of securities which are, or could be or could have been, transferred under paragraph (a).
(5)Except where subsection (6) applies, the Bank of England may make a reverse transfer resolution instrument under subsection (2) only with the written consent of the transferee.
(6)This subsection applies where the transferee is—
(a)a [F208resolution administrator], or
(b)a person who is not to be authorised to exercise any rights attaching to the securities except on the Bank of England's instructions.
(7)The Bank of England may make a reverse transfer resolution instrument under subsection (3) only with the written consent of the onward transferee.
(8)[F209Section 7 does] not apply to a reverse transfer resolution instrument (but it is to be treated in the same way as any other resolution instrument for all other purposes including for the purposes of an application of a power under this Part).
(9)Before making a reverse transfer resolution instrument the Bank of England must consult—
(10)Section 48U applies where the Bank of England has made a reverse transfer resolution instrument.]
F208Words in s. 48W(6)(a) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 60(2)
F209Words in s. 48W(8) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 60(3)
[F210Replacement of provisional valuationU.K.
F210Ss. 48X, 48Y and cross-heading inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 61
48X.Replacement of Bank's provisional valuationU.K.
(1)Where the Bank of England has carried out a provisional valuation under section 6E(3) before making a mandatory reduction instrument or exercising a stabilisation power, the Bank must arrange for the appointment of an independent valuer in accordance with section 62A to carry out a full valuation in accordance with this section as soon as reasonably practicable.
(2)The purpose of the valuation carried out under subsection (1) is to—
(a)ensure the full extent of any losses on the assets of the bank is recognised in the accounting records of the bank, and
(b)inform a decision by the Bank as to whether—
(i)additional consideration should be paid by a bridge bank or asset management vehicle for any property, rights or liabilities transferred by a property transfer instrument, or securities transferred by a share transfer instrument, or
(ii)the Bank should exercise the power under section 48Y(1) to increase or reinstate any liability which has been reduced or cancelled by a resolution instrument.
(3)A valuation carried out under subsection (1) must comply with subsections (5) and (6) of section 6E, and be accompanied by the information required in subsection (7) of that section.
48Y.Consequences of a replacement valuationU.K.
(1)Where the independent valuation carried out under section 48X(1) produces a higher valuation of the net asset value of the bank than a provisional valuation carried out under section 6E(3), the Bank of England may—
(a)modify any liability of the bank which has been reduced, deferred or cancelled by a mandatory reduction instrument or a resolution instrument so as to increase or reinstate that liability; or
(b)instruct a resolution company to pay additional consideration—
(i)to the bank for any property, rights or liabilities transferred to the resolution company by a property transfer instrument, or
(ii)to the previous holders of securities issued by the bank for any securities transferred to the resolution company by a share transfer instrument.
(2)The power in subsection (1)(a)—
(a)may not be exercised so as to increase the value of the liability beyond the value it would have had if the resolution instrument which reduced, cancelled or deferred it had not been made, and
(b)must be exercised by a mandatory reduction instrument or supplemental resolution instrument (whether or not that instrument contains any other provision authorised by this Part).]
[F211Termination rights etcU.K.
F211S. 48Z and cross-heading inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 62
48Z.Termination rights etcU.K.
"crisis management measure" has the meaning given in Article 2.1(102) of the recovery and resolution directive, and accordingly in relation to the United Kingdom means—
the exercise of a stabilisation power in relation to the bank by the Bank of England or the Treasury,
the appointment of a resolution administrator under section 62B,
the recognition by the Bank of England of third-country resolution action (or part of such action) in accordance with Chapter 5 of this Part, or
the exercise by the Bank of a stabilisation power by virtue of section 89I(3) (exercise of powers in support of third-country resolution action);
"crisis prevention measure" has the meaning given in Article 2.1(101) of the recovery and resolution directive, and accordingly in relation to the United Kingdom means—
the imposition by the PRA or the FCA of a requirement to take relevant measures described in Article 6(6) of the resolution and recovery directive,
the imposition by the Bank of England of a requirement to take measures to remove impediments to resolvability under Article 17 or 18 of the recovery and resolution directive,
the imposition by the FCA or the PRA of a requirement to take action described in Article 27 of the recovery and resolution directive, or
the making of a mandatory reduction instrument by the Bank of England under section 6B;
"default event provision" means a Type 1 or Type 2 default event provision (see subsections (2) and (3));
"group" has the meaning given by section 474 of the Companies Act 2006;
"Part 1 instrument" means—
a mandatory reduction instrument,
a share transfer instrument,
a property transfer instrument, or
a resolution instrument.
"recognised third-country resolution action" means third-country resolution action, or a part of such action, recognised by the Bank of England in an instrument under section 89H(2);
"third-country institution" has the meaning given by Article 2.1(86) of the recovery and resolution directive;
"third-country parent undertaking" has the meaning given by Article 2.1(87) of that directive.
(2)A Type 1 default event provision is a provision of a contract or other agreement that has the effect that if a specified event occurs or situation arises—
(a)the agreement is terminated, modified or replaced,
(b)rights or duties under the agreement are terminated, modified or replaced,
(c)a right accrues to terminate, modify or replace the agreement,
(d)a right accrues to terminate, modify or replace rights or duties under the agreement,
(e)a sum becomes payable or ceases to be payable,
(f)delivery of anything becomes due or ceases to be due,
(g)a right to claim a payment or delivery accrues, changes or lapses,
(h)any other right accrues, changes or lapses, or
(i)an interest is created, changes or lapses.
(3)A Type 2 default event provision is a provision of a contract or other agreement that has the effect that a provision of the contract or agreement—
(a)takes effect only if a specified event occurs or does not occur,
(b)takes effect only if a specified situation arises or does not arise,
(c)has effect only for so long as a specified event does not occur,
(d)has effect only while a specified situation lasts,
(e)applies differently if a specified event occurs,
(f)applies differently if a specified situation arises, or
(g)applies differently while a specified situation lasts.
(4)For the purposes of subsections (2) and (3) it is the effect of a provision that matters, not how it is described (nor, for example, whether it is presented in a positive or a negative form).
(5)Subsection (6) applies where a contract or other agreement—
(a)is entered into by a bank, a third-country institution or a third-country parent undertaking,
(b)is entered into by a subsidiary undertaking of a bank, a third-country institution or a third-country parent undertaking, whose obligations are guaranteed by a company which is a member of the same group as the bank, third-country institution or third-country parent undertaking, or
(c)is entered into by an undertaking which is a member of the same group as a bank, third-country institution, or third country parent undertaking,
and the substantive obligations provided for in the contract or agreement (including payment and delivery obligations and provision of collateral) continue to be performed.
(6)The following are to be disregarded in determining whether a default event provision applies—
(a)a crisis prevention measure, crisis management measure or recognised third-country resolution action taken in relation to the bank, third country institution or a member of the same group as the bank or third country institution, and
(b)the occurrence of any event directly linked to the application of such a measure or action.
(7)A Part 1 instrument or share transfer order may provide for subsection (8) or (9) to apply (but need not apply either) in circumstances where subsection (6) would not apply.
(8)If this subsection applies, the Part 1 instrument or share transfer order is to be disregarded in determining whether a default event provision applies.
(9)If this subsection applies, the Part 1 instrument or share transfer order is to be disregarded in determining whether a default event provision applies except so far as the instrument or order provides otherwise.
(10)In subsections (7), (8) and (9) a reference to the Part 1 instrument or share transfer order is a reference to—
(a)the making of the instrument or order,
(b)anything that is done by the instrument or order or is to be, or may be, done under or by virtue of the instrument or order, and
(c)any action or decision taken or made under this or another enactment in so far as it resulted in, or was connected to, the making of the instrument or order.
(11)Provision under subsection (7) may apply subsection (8) or (9)—
(a)generally or only for specified purposes, cases or circumstances, or
(b)differently for different purposes, cases or circumstances.
(12)A thing is not done by virtue of a Part 1 instrument or share transfer order for the purposes of subsection (10)(b) merely by virtue of being done under a contract or other agreement rights or obligations under which have been affected by the instrument or order.]
CompensationU.K.
49OrdersU.K.
(1)This Part provides [F212four] methods of protecting the financial interests of transferors and others in connection with share transfer instruments and orders[F212, property transfer instruments and orders and resolution instruments].
(2)A "compensation scheme order" is an order —
(a)establishing a scheme for determining whether transferors should be paid compensation, or providing for transferors to be paid compensation, and
(b)establishing a scheme for paying any compensation.
[F213(2A)A "bail-in compensation order" is an order establishing a scheme for determining, in accordance with section 52A, whether any transferors or others should be paid compensation.]
(3)A "resolution fund order" is an order establishing a scheme under which transferors become entitled to the proceeds of the disposal of things transferred—
(a)in specified circumstances, and
(b)to a specified extent.
(4)A "third party compensation order" is provision made in accordance with section 59 for compensation to be paid to persons other than transferors.
F213S. 49(2A) inserted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 6(1)(b); S.I. 2014/3160, art. 2(1)(b)
50Sale to private sector purchaserU.K.
(1)This section applies if the Bank of England makes a share transfer instrument or a property transfer instrument in accordance with section 11(2).
(2)The Treasury shall make a compensation scheme order.
(3)An order made by virtue of subsection (2) may include a third party compensation order.
(4)In the case of a partial property transfer, an order made by virtue of subsection (2) must include a third party compensation order.
51Transfer to temporary public ownershipU.K.
(1)This section applies if the Treasury make a share transfer order in accordance with section 13(2).
(2)The Treasury shall make either—
(a)a compensation scheme order, or
(b)a resolution fund order.
(3)A resolution fund order made by virtue of subsection (2)(b) may include—
(a)a compensation scheme order;
(b)a third party compensation order (which may, in particular, make provision, in respect of specified classes of creditor, for rights in addition to any rights they may have by virtue of the resolution fund order).
(4)A compensation scheme order made by virtue of subsection (2) may include a third party compensation order.
52Transfer to [F214resolution company] U.K.
[F215(1)This section applies if the Bank of England makes—
(a)a share transfer instrument or a property transfer instrument under section 12(2), or
(b)a property transfer instrument under section 12ZA(3).]
(2)The Treasury shall make a resolution fund order.
(3)An order made by virtue of subsection (2) may include—
(b)a third party compensation order (which may, in particular, make provision, in respect of [F216persons of a specified description,] for rights in addition to any rights they may have by virtue of the resolution fund order).
(4)In the case of a partial property transfer, the resolution fund order must include a third party compensation order.
F215S. 52(1) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 63(1)
F216Words in s. 52(3)(b) substituted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 6(2); S.I. 2014/3160, art. 2(1)(b)
[F21752ABail-in optionU.K.
(1)Subsection (2) applies if the Bank of England makes—
(a)a resolution instrument under section 12A(2), or
(b)a property transfer instrument under section 41A(2).
(2)The Treasury must make a bail-in compensation order (see section 49(2A)).
(3)A bail-in compensation order may include provision for—
(a)an independent valuer (in which case sections 54 to 56 are to apply);
(b)valuation principles (in which case section 57(2) to (5) is to apply).]
53Onward and reverse transfers [F218etc] U.K.
(1)This section applies where—
[F219(zza)the Bank of England makes a supplemental share transfer instrument under section 26,]
[F220(za)the Bank of England makes a private sector reverse share transfer instrument under section 26A,]
[F221(zb)the Treasury makes a supplemental share transfer order under section 27,]
(a)the Treasury make an onward share transfer order under section 28,
(b)the Treasury makes a reverse share transfer order under section 29,
(c)the Bank of England makes a [F222resolution company] share transfer instrument under section 30,
(d)the Bank of England makes a [F223resolution company] reverse share transfer instrument under section 31,
[F224(dza)the Bank of England makes a supplemental property transfer instrument under section 42,]
[F225(da)the Bank of England makes a private sector reverse property transfer instrument under section 42A,]
(e)the Bank of England makes an onward property transfer instrument under section 43,
(f)the Bank of England makes a reverse property transfer instrument under section 44,
[F226(fa)the Bank of England makes a reverse property transfer instrument under section 44A(2),]
(g)the Treasury make a property transfer order under section 45, F227...
(h)the Treasury make a reverse property transfer order under section 46.
[F228(i)the Bank of England makes a supplemental resolution instrument under section 48U,
(j)the Bank of England makes an onward transfer resolution instrument under section 48V(2), or
(k)the Bank of England makes a reverse transfer resolution instrument under section 48W(2) or (3).]
(2)The Treasury may make—
(b)a third party compensation order.
F218Word in s. 53 heading inserted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 6(4)(g); S.I. 2014/3160, art. 2(1)(b)
F219S. 53(1)(zza) inserted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 6(4)(a); S.I. 2014/3160, art. 2(1)(b)
F220S. 53(1)(za) inserted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 97(9)(a), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.
F221S. 53(1)(zb) inserted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 6(4)(b); S.I. 2014/3160, art. 2(1)(b)
F222Words in s. 53(1)(c) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 64
F223Words in s. 53(1)(d) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 64
F224S. 53(1)(dza) inserted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 6(4)(c); S.I. 2014/3160, art. 2(1)(b)
F225S. 53(1)(da) inserted (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 97(9)(b), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.
F226S. 53(1)(fa) inserted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 6(4)(d); S.I. 2014/3160, art. 2(1)(b)
F227Word in s. 53(1) omitted (31.12.2014) by virtue of Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 6(4)(e); S.I. 2014/3160, art. 2(1)(b)
F228S. 53(1)(i)-(k) inserted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 6(4)(f); S.I. 2014/3160, art. 2(1)(b)
54Independent valuer[F229: compensation scheme order or bail-in compensation order] U.K.
(1)A compensation scheme order [F230or bail-in compensation order] may provide for the amount of any compensation payable to be determined by a person appointed in accordance with the order (the "independent valuer"); and subsections (2) to (5) apply to an order which includes provision for an independent valuer.
(2)An order must provide for the independent valuer to be appointed by a person appointed by the Treasury ("the appointing person").
(3)An order may either—
(a)require the Treasury to make arrangements to identify a number of possible independent valuers, one of whom is to be selected by the appointing person, or
(b)require the appointing person to make arrangements to select the independent valuer, having regard to any criteria specified in the order.
(4)The independent valuer may be removed only—
(a)on the grounds of incapacity or serious misconduct, and
(b)by a person specified by the Treasury in accordance with the compensation scheme order [F231or bail-in compensation order].
(5)An order must include provision for resignation and replacement of the independent valuer (and subsections (2) and (3) apply to replacement as to the first appointment).
F229Words in s. 54 heading inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 65
F230Words in s. 54(1) inserted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 6(5)(a); S.I. 2014/3160, art. 2(1)(b)
F231Words in s. 54(4)(b) inserted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 6(5)(b); S.I. 2014/3160, art. 2(1)(b)
55Independent valuer: supplementalU.K.
(1)An independent valuer may do anything necessary or desirable for the purposes of or in connection with the performance of the functions of the office.
(2)The Treasury may by order confer specific functions on independent valuers; in particular, the order may—
(a)enable an independent valuer to apply to a court or tribunal for an order requiring the provision of information or the giving of oral or written evidence;
(b)enable or require independent valuers to publish, disclose or withhold information.
(3)Provision under subsection (2) may—
(a)confer a discretion on independent valuers;
(b)confer jurisdiction on a court or tribunal;
(c)make provision about oaths, expenses and other procedural matters relating to the giving of evidence or the provision of information;
(d)create a criminal offence;
(e)make other provision about enforcement.
(4)An independent valuer may appoint staff.
(5)The Treasury may by order make provision about the procedure to be followed by independent valuers.
(6)The Treasury shall by order make provision for—
(a)reconsideration of a decision of an independent valuer, and
(b)appeal to a court or tribunal against a decision of an independent valuer.
(7)Independent valuers (and their staff) are neither servants nor agents of the Crown (and, in particular, are not civil servants).
(8)Records of an independent valuer are public records for the purposes of the Public Records Act 1958.
[F232(10)But subsection (9)(b) does not apply if the order is contained in a statutory instrument that contains an order to which section 62 applies.]
F232S. 55(10) inserted (8.4.2010) by Financial Services Act 2010 (c. 28), ss. 21(3), 26(1)(f)
56Independent valuer: moneyU.K.
(1)The Treasury may by order provide for the payment by the Treasury of remuneration and allowances to—
(a)independent valuers,
(b)staff of independent valuers,
(c)appointing persons,
[F233(ca)persons mentioned in section 54(4)(b),] and
(d)monitors.
(a)must provide for the appointment by the Treasury of a person to monitor the operation of the arrangements for remuneration and allowances for independent valuers;
(b)may require, or enable a compensation scheme order[F234, third party compensation order or bail-in compensation order] to require, the monitor's approval before specified things may be done in the course of those arrangements;
(c)may include provision about records and accounts;
(d)may make provision about numbers of staff and the terms and conditions of their appointment (which may include provision requiring the approval of the Treasury or the monitor).
(3)In subsection (1) a reference to the payment of allowances to a person includes a reference to the payment to or in respect of the person of sums by way of or in respect of pension.
(4)Independent valuers (and their staff) are not liable for damages in respect of anything done in good faith for the purposes of or in connection with the functions of the office (subject to section 8 of the Human Rights Act 1998).
[F235(6)But subsection (5)(b) does not apply if the order is contained in a statutory instrument that contains an order to which section 62 applies.]
F233S. 56(1)(ca) inserted (8.4.2010) by Financial Services Act 2010 (c. 28), ss. 21(4)(a), 26(1)(f)
F235S. 56(6) inserted (8.4.2010) by Financial Services Act 2010 (c. 28), ss. 21(4)(b), 26(1)(f)
57Valuation principlesU.K.
(1)A compensation scheme order [F236or bail-in compensation order] may specify principles ("valuation principles") to be applied in determining the amount of compensation.
(2)Valuation principles may, in particular, require an independent valuer—
(a)to apply, or not to apply, specified methods of valuation;
(b)to assess values or average values at specified dates or over specified periods;
(c)to take specified matters into account in a specified manner;
(d)not to take specified matters into account.
(3)In determining an amount of compensation (whether or not in accordance with valuation principles) an independent valuer must disregard actual or potential financial assistance provided by the Bank of England or the Treasury (disregarding ordinary market assistance offered by the Bank on its usual terms).
(4)Valuation principles may require or permit an independent valuer to make assumptions; such as, for example, that the bank—
(a)has had a permission under [F237Part 4A] of the Financial Services and Markets Act 2000 (regulated activities) varied or cancelled,
(b)is unable to continue as a going concern,
(c)is in administration, or
(d)is being wound up.
(5)There is nothing to prevent the application of the valuation principles in an order from resulting in no compensation being payable to a transferor.
F236Words in s. 57(1) inserted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 6(7); S.I. 2014/3160, art. 2(1)(b)
F237Words in s. 57(4)(a) substituted (1.4.2013) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 17 para. 26 (with Sch. 20); S.I. 2013/423, art. 3, Sch.
58Resolution fundU.K.
(1)A resolution fund order must include provision for determining—
(a)who will be entitled to a share of the proceeds on disposal of things transferred,
(b)the way in which the proceeds will be calculated, and
(c)the way in which shares will be calculated.
(2)Provision under subsection (1)(b) may, in particular, provide for proceeds to be calculated net of—
(a)amounts required for the repayment of loans from public funds or for other payments in respect of public financial assistance;
(b)some or all of the administrative or other expenses incurred in connection with the provisions of this Part.
(3)A resolution fund order may include provision for—
(a)an independent valuer to make a determination under the order (in which case sections 54(2) to (5), 55 and 56 shall apply);
(b)valuation principles to be applied in making a determination (in which case section 57(2) shall apply).
(4)A resolution fund order may confer a discretionary function on—
(a)a Minister of the Crown,
(c)the Bank of England, or
(d)any other specified person.
(5)A resolution fund order may include provision for the determination of disputes about the application of its provisions (whether by conferring jurisdiction on a court or tribunal or otherwise).
(6)A resolution fund order may require the Bank of England in managing a [F238resolution company] to aim to maximise the proceeds available for distribution in accordance with the order; and an order which includes a requirement must—
(a)specify its extent, and
(b)include provision about how the Bank is to comply with it.
(7)A resolution fund order may require the Treasury to ensure that a bank in temporary public ownership in accordance with section 13(2) is managed with the aim of maximising the proceeds available for distribution in accordance with the order; and an order which includes a requirement must—
(b)include provision about how the Treasury is to comply with it.
(8)A requirement under subsection (6) or (7) is to be complied with only in so far as is compatible with—
(a)pursuit of the special resolution objectives, and
(b)compliance with the code of practice under section 5.
F238Words in s. 58(6) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 66
59Third party compensation: discretionary provisionU.K.
(1)A power or duty in this Part to make a third party compensation order is a power or duty to make provision establishing a scheme for paying compensation to persons other than a transferor.
(2)A third party compensation order may—
(a)form part of a compensation scheme order or resolution fund order, or
(b)be a separate order.
(3)A third party compensation order may include provision for—
(a)an independent valuer (in which case sections 54 to 56 shall apply);
(b)valuation principles (in which case section 57(2) to (5) shall apply).
60Third party compensation: mandatory provisionU.K.
(1)The Treasury may make regulations about third party compensation arrangements in the case of partial property transfers.
(2)In making regulations the Treasury shall, in particular, have regard to the desirability of ensuring that if a residual bank enters insolvency after transfer, pre-transfer [F239shareholders or] creditors do not receive less favourable treatment than they would have received had it entered insolvency immediately before transfer.
(a)"residual bank" means a bank that is a transferor under a property transfer instrument,
(b)"pre-transfer [F240shareholder or] creditor" means a person who—
(i)[F241holds securities issued by, or is a creditor of, a] residual bank immediately before a property transfer instrument takes effect, and
(ii)satisfies conditions specified by the regulations, and
(c)the reference to insolvency includes a reference to (i) liquidation, (ii) bank insolvency, (iii) administration, (iv) bank administration, (v) receivership, (vi) a composition with creditors, and (vii) a scheme of arrangement.
(4)The regulations may—
(a)require a compensation scheme order or a resolution fund order to include a third party compensation order;
(b)require a third party compensation order to include provision of a specified kind or to specified effect;
(c)make provision which is to be treated as forming part of a third party compensation order (whether (i) generally, (ii) only if applied, (iii) unless disapplied, or (iv) subject to express modification).
(5)Regulations may provide for whether compensation is to be paid, and if so what amount is to be paid, to be determined by reference to any factors or combination of factors; in particular, the regulations may provide for entitlement—
(a)to depend in part upon the amounts which are or may be payable under a resolution fund order;
(b)to be contingent upon the occurrence or non-occurrence of specified events;
(c)to be determined wholly or partly by an independent valuer (within the meaning of sections 54 to 56) appointed in accordance with a compensation scheme order or resolution fund order.
(6)Regulations may make provision about payment including, in particular, provision for payments—
(a)on account subject to terms and conditions;
(b)by instalment.
(7)Regulations—
F240Words in s. 60(3)(b) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 67(3)(a)
F241Words in s. 60(3)(b)(i) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 67(3)(b)
[F24260AFurther mandatory provision: bail-in provisionU.K.
(1)The Treasury may make regulations about compensation arrangements in the case of—
(a)resolution instruments under section 12A(2) and supplemental resolution instruments under section 48U(2), and
(b)instruments (made under any provision) that include special bail-in provision.
(2)Regulations may—
(a)require a resolution fund order, a compensation scheme order, a third party compensation order or a bail-in compensation order to include provision of a specified kind or to specified effect;
(b)make provision that is to be treated as forming part of any such order (whether (i) generally, (ii) only if applied, (iii) unless disapplied, or (iv) subject to express modification).
(c)to be determined wholly or partly by an independent valuer (within the meaning of sections 54 to 56) appointed in accordance with a compensation scheme order or bail-in compensation order.
(a)are to be made by statutory instrument, and
F242Ss. 60A, 60B inserted (1.3.2014 for specified purposes, 31.12.2014 in so far as not already in force) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 6(8); S.I. 2014/377, art. 2(1)(b), Sch. Pt. 2; S.I. 2014/3160, art. 2(1)(b)
60BPrinciple of no less favourable treatmentU.K.
(1)In making regulations under section 60A the Treasury must, in particular, have regard to the desirability of ensuring that pre-resolution shareholders and creditors of a bank do not receive less favourable treatment than they would have received had the bank entered insolvency immediately before the coming into effect of the initial instrument.
(2)References in this section to the initial instrument are—
(a)in relation to compensation arrangements in the case of property transfer instruments under section [F24311(2), 12(2) or 12ZA(2)], to the first instrument to be made under [F244those provisions] with respect to the bank;
(b)in relation to compensation arrangements in other cases, to the first resolution instrument to be made under section 12A with respect to the bank.
(3)The "pre-resolution shareholders and creditors" of a bank are the persons who held securities issued by the bank, or were creditors of the bank, immediately before the coming into effect of the initial instrument.
(4)References in this section to insolvency include a reference to (i) liquidation, (ii) bank insolvency, (iii) administration, (iv) bank administration, (v) receivership, (vi) composition with creditors, and (vii) a scheme of arrangement.]
F243Words in s. 60B(2)(a) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 68(a)
F244Words in s. 60B(2)(a) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 68(b)
61Sources of compensationU.K.
(1)This section applies to—
(a)compensation scheme orders,
(b)resolution fund orders,
(c)third party compensation orders, F245...
[F246(ca)bail-in compensation orders,]
(d)regulations under section 60[F247, and]
[F247(e)regulations under section 60A.]
(2)An order or regulations may provide for compensation or other payments to be made by—
(b)the Financial Services Compensation Scheme, [F248subject to section 214C of the Financial Services and Markets Act 2000 (limit on amount of special resolution regime payments),] or
(c)any other specified person.
F245Word in s. 61(1)(c) omitted (31.12.2014) by virtue of Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 6(9)(a); S.I. 2014/3160, art. 2(1)(b)
F246S. 61(1)(ca) inserted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 6(9)(b); S.I. 2014/3160, art. 2(1)(b)
F247S. 61(1)(e) and preceding word inserted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 6(9)(c); S.I. 2014/3160, art. 2(1)(b)
F248Words in s. 61(2)(b) substituted (8.4.2010) by Financial Services Act 2010 (c. 28), s. 26(1)(l), Sch. 2 para. 41
(b)resolution fund orders, F249...
[F250(ba)bail-in compensation orders, and]
(c)third party compensation orders.
F249Word in s. 62(1)(b) omitted (31.12.2014) by virtue of Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 6(10); S.I. 2014/3160, art. 2(1)(b)
F250S. 62(1)(ba) inserted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 6(10); S.I. 2014/3160, art. 2(1)(b)
[F251Independent valuer: valuation under section 6E or 48XU.K.
F251S. 62A and cross-heading inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 69
62A.Independent valuer: sections 6E and 48XU.K.
(1)The Bank of England must make arrangements for the appointment of a person to act as independent valuer for the purposes of a valuation to be conducted under section 6E or 48X.
(2)A person may not be appointed as independent valuer under subsection (1) unless that person—
(a)qualifies as "independent" in accordance with regulatory technical standards adopted by the European Commission under Article 36.16 of the recovery and resolution directive, or
(b)if no such regulatory technical standards have been adopted by the European Commission, satisfies the independence requirement set out in section 1151 of the Companies Act 2006.
(3)An independent valuer is to hold and vacate office in accordance with the terms of his or her appointment.
(4)An independent valuer may be removed from office only on the grounds of incapacity or serious misconduct.
(5)In the event of the death of an independent valuer, or an independent valuer being removed from office or resigning, a new independent valuer must be appointed by the Bank in accordance with this section.
(6)Sections 55(1) to (5) and (7) to (10), and 56 apply in relation to an independent valuer appointed in accordance with this section as they apply to an independent valuer appointed by virtue of section 54.]
[F252Resolution administratorU.K.
F252Ss. 62B-62E and cross-heading inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 70
62B.Resolution administratorU.K.
(1)The Bank of England may appoint an individual or body corporate as a resolution administrator.
(2)The power under subsection (1) may be exercised—
(a)by a separate instrument of appointment under this section, or
(b)by way of provision in a mandatory reduction instrument, a share transfer instrument, a property transfer instrument or a resolution instrument.
(3)In this section and sections 62C to 62E—
"appointment instrument" means an instrument under subsection (2)(a);
"Part 1 instrument" means an instrument of a kind mentioned in subsection (2)(b).
(4)A resolution administrator is appointed—
(a)to hold any securities that may be transferred or issued to that person in the capacity of resolution administrator, and
(b)to perform any other functions that may be conferred under any provision of this Part.
(5)The Bank of England may appoint more than one resolution administrator to perform functions in relation to a bank (but no more than one of them may at any one time be authorised to hold securities as mentioned in subsection (4)(a)).
(6)Securities held by a resolution administrator (in that capacity, and whether as a result of a Part 1 instrument or otherwise) are to be held in accordance with the terms of a Part 1 instrument that transfers those, or other, securities to the resolution administrator.
(7)For example, the following provision may be made by virtue of subsection (6)—
(a)provision that specified rights of a resolution administrator with respect to all or any of the securities are to be exercisable only as directed by the Bank of England;
(b)provision specifying rights or obligations that the resolution administrator is, or is not, to have in relation to some or all of the securities.
(8)A resolution administrator must—
(a)in accordance with the Part 1 instrument or the appointment instrument, take all measures necessary to promote the special resolution objectives, and
(b)have regard, in performing any functions of the office, to any other objectives that may be specified in a Part 1 instrument or the appointment instrument.
(9)Where one or more objectives are specified in accordance with subsection (8), the objectives are to be taken to have equal status with each other, unless the contrary is stated in the Part 1 instrument or the appointment instrument.
(10)The following provisions apply in relation to an appointment instrument as they apply in relation to a resolution instrument—
(a)section 48S(2) and (3) (power to make incidental, consequential provision etc);
(b)section 48T (procedure).
62C.Resolution administrator: further functionsU.K.
(1)An appointment instrument or a Part 1 instrument may—
(a)authorise a resolution administrator to manage the bank's business (or confer on a resolution administrator any other power with respect to the management of the bank's business);
(b)authorise a resolution administrator to exercise any other powers of the bank;
(c)confer on a resolution administrator any other power the Bank of England may consider appropriate;
(d)provide that the exercise of any power conferred by the instrument in accordance with this section is to be subject to conditions specified in the instrument.
(2)An appointment instrument or a Part 1 instrument may require a resolution administrator to make reports to the Bank of England—
(a)on any matter specified in the instrument, and
(b)at the times or intervals specified in the instrument.
(3)If an instrument specifies a matter in accordance with subsection (2)(a), it may provide for further requirements as to the contents of the report on that matter to be specified in an agreement between the Bank of England and the resolution administrator.
(a)require a resolution administrator to consult specified persons before exercising specified functions (and may specify particular matters on which the specified person must be consulted);
(b)provide that a resolution administrator is not to exercise specified functions without the consent of a specified person.
62D.Resolution administrator: supplementaryU.K.
(1)A resolution administrator may do anything necessary or desirable for the purposes of or in connection with the performance of the functions of the office.
(2)A resolution administrator is not a servant or agent of the Crown (and, in particular, is not a civil servant).
(3)Where a resolution administrator is appointed under this Part, the Bank of England—
(a)must make provision in the appointment instrument or a Part 1 instrument for the resignation and replacement of the resolution administrator;
(b)may remove the resolution administrator from office only (i) on the ground of incapacity or misconduct, or (ii) on the ground that there is no further need for a person to perform the functions conferred on the resolution administrator.
62E.Resolution administrator: moneyU.K.
(1)An appointment instrument or a Part 1 instrument may provide for the payment of remuneration and allowances to a resolution administrator.
(2)Provision made under subsection (1) may provide that the amounts are—
(a)to be paid by the Bank of England, or
(b)to be determined by the Bank of England and paid by the bank.
(3)A resolution administrator is not liable for damages in respect of anything done in good faith for the purposes of or in connection with the functions of the office (subject to section 8 of the Human Rights Act 1998).]
Incidental functionsU.K.
63General continuity obligation: property transfersU.K.
(1)In this section and section 64—
(a)"residual bank" means a bank all or part of whose business has been transferred in accordance with section 11(2)(b)[F253, 12(2)[F254, 12ZA(3)] or 41A(2)],
(b)"group company" means anything which is, or was immediately before the transfer, a group undertaking in relation to a residual bank,
(c)"group undertaking" has the meaning given by section 1161(5) of the Companies Act 2006 (interpretation),
(d)"the transferred business" means the part of the bank's business that has been transferred, and
(e)"transferee" means a commercial purchaser or [F255resolution company] to whom all or part of the transferred business has been transferred.
[F256(1A)In this section a reference to insolvency includes a reference to (i) liquidation, (ii) bank insolvency, (iii) administration, (iv) bank administration, (v) receivership, (vi) composition with creditors and (vii) a scheme of arrangement.]
(2)The residual bank and each group company must provide such services and facilities as are required to enable a transferee to operate the transferred business, or part of it, effectively.
(3)The duty under subsection (2) (the "continuity obligation") may be enforced as if created by contract between the residual bank or group company and the transferee.
[F257(3A)The continuity obligation continues to apply despite the residual bank or group company entering insolvency, and may not be disclaimed by a liquidator under section 178(2) of the Insolvency Act 1986 or Article 152(2) of the Insolvency (Northern Ireland) Order 1989.]
(4)The duty to provide services and facilities in pursuance of the continuity obligation is subject to a right to receive reasonable consideration.
[F258(4A)But if the services and facilities provided in pursuance of the continuity obligation were provided to the bank whose business has been transferred, under an agreement with that bank, before the property transfer instrument providing for the transfer was made, they are to continue for the duration of that agreement to be provided on the terms set out in that agreement (and subsection (4) does not apply).]
(5)The continuity obligation is not limited to the provision of services or facilities directly to a transferee.
(6)The Bank of England may, with the consent of the Treasury, by notice to the residual bank or a group company state that in the Bank's opinion—
(a)specified activities are required to be undertaken in accordance with the continuity obligation;
(b)activities are required be undertaken in accordance with the continuity obligation on specified terms.
(7)A notice under subsection (6) shall be determinative of the nature and extent of the continuity obligation as from the time when the notice is given.
F253Words in s. 63(1)(a) substituted (31.12.2014) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 2 para. 17; S.I. 2014/3160, art. 2(1)(b)
F254Words in s. 63(1)(a) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 71(2)(a)
F255Words in s. 63(1)(e) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 71(2)(b)
F256S. 63(1A) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 71(3)
64Special continuity obligations: property transfersU.K.
(1)Expressions in this section have the same meaning as in section 63.
(2)The Bank of England may—
(a)cancel a contract or other arrangement between the residual bank and [F259a third party] (whether or not rights or obligations under it have been transferred to a transferee);
(b)modify the terms of a contract or other arrangement between the residual bank and [F260a third party] (whether or not rights or obligations under it have been transferred to a transferee);
(c)add or substitute a transferee as a party to a contract or other arrangement between the residual bank and [F261a third party];
(d)confer and impose rights and obligations on a group company and a transferee, which shall have effect as if created by contract between them;
(e)confer and impose rights and obligations on the residual bank and a transferee which shall have effect as if created by contract between them.
(3)In modifying or setting terms under subsection (2) the Bank of England shall aim, so far as is reasonably practicable, to preserve or include—
(a)provision for reasonable consideration, and
(b)any other provision that would be expected in arrangements concluded between parties dealing at arm's length.
[F262(4)The power under subsection (2) must be exercised by way of provision in a property transfer instrument (or supplemental instrument).
(5)The power in subsection (2)(d) and (e) may be exercised only—
(a)in so far as the Bank of England thinks it necessary to do so to ensure the provision of such services and facilities as are required to enable the transferee to operate the transferred business, or part of it, effectively, and
(b)with the consent of the Treasury.
(6)An obligation imposed on the residual bank or a group company under subsection (2)(d) or (e) continues to apply despite the residual bank or group company entering insolvency, and may not be disclaimed by a liquidator under section 178(2) of the Insolvency Act 1986 or Article 152(2) of the Insolvency (Northern Ireland) Order 1989.]
[F263(7)For the purposes of subsection (2), "third party" includes a group company.]
F259Words in s. 64(2)(a) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 72(2)
F260Words in s. 64(2)(b) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 72(2)
F261Words in s. 64(2)(c) substituted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 72(2)
F262S. 64(4)-(6) substituted for s. 64(4) (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 72(3)
65Continuity obligations: onward property transfersU.K.
(a)"onward transfer" means a transfer of property, rights or liabilities (whether or not under a power in this Part) from—
(i)a person who is a transferee under a property transfer instrument under section 12(2) [F264or 12ZA(3)] (an "original transferee"), or
(ii)a bank, securities issued by which were earlier transferred by [F265a share transfer instrument under section 12(2) or] a share transfer order under section 13(2), and
(b)the person to whom the onward transfer is made is referred to as an "onward transferee".
(2)The continuity authority may—
(a)provide for an obligation under section 63 to apply in respect of an onward transferee;
(b)extend section 64 so as to permit action to be taken under section 64(2) for the purpose of enabling an onward transferee to operate transferred business, or part of it, effectively.
(3)"The continuity authority" means—
(a)the Bank of England, where subsection (1)(a)(i) applies, and
(b)the Treasury, where subsection (1)(a)(ii) applies.
(4)Subsection (2) may be relied on to impose obligations on—
(a)an original transferee (where the original transfer was a property transfer),
(b)a residual bank within the meaning of section 63 (where the original transfer was a property transfer),
(c)the bank (where the original transfer was a share transfer),
(d)anything which is or was a group undertaking (within the meaning of section 1161(5) of the Companies Act 2006) of anything within paragraphs (a) to (c), or
(e)any combination.
(5)Subsection (2) may be used to impose obligations—
(a)in addition to obligations under or by virtue of section 63 or 64, or
(b)replacing obligations under or by virtue of either of those sections to a specified extent.
(6)A power under subsection (2) is exerciseable by giving a notice to each person—
(a)on whom a continuity obligation is to be imposed under the power, or
(b)who is expected to benefit from a continuity obligation under the power.
(7)Sections 63(3) to (7) and 64(3) and (4) apply to an obligation as applied under subsection (2)—
(a)construing "transferred business" as the business transferred by means of the onward transfer, and
(b)with any other necessary modification.
(8)The Bank of England may act under or by virtue of subsection (2) only with the consent of the Treasury.
F264Words in s. 65(1)(a)(i) inserted (1.1.2015) by The Bank Recovery and Resolution Order 2014 (S.I. 2014/3329), arts. 1(2), 73(a)