Financial Services Bill

Session 2010 - 12
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Other Bills before Parliament

Financial Services Bill

Financial Services Bill
Part 7 — Amendments of Banking Act 2009
156

(b)
“reporting date” means the last day of the reporting period.”
87
State aid
After section 145 of the Banking Act 2009 insert—
“145A
Power to direct bank administrator
(1)
This section applies where—
5
(a)
a bank administration order has been made, and
(b)
the Treasury are of the opinion that anything done, or proposed
to be done, in connection with the exercise of one or more of the
stabilisation powers may constitute the granting of aid to which
any of the provisions of Article 107 or 108 of TFEU applies
10
(“State aid”).
(2)
The Treasury may, in writing, direct the bank administrator to take
specified action to enable the United Kingdom to fulfil any of the
purposes specified in subsection (3).
(3)
The purposes are—
15
(a)
to inform the European Commission that State aid has been,
may have been, or may be, given;
(b)
to obtain a decision from the Commission whether State aid—
(i)
has been given, or
(ii)
would be given, if the action proposed was taken;
20
(c)
to apply for approval that such aid is, or would be, compatible
with the internal market, within the meaning of Article 107 of
TFEU;
(d)
to comply with any requirements to enable an investigation
under Article 108 of TFEU to be carried out;
25
(e)
to comply with any undertaking given to the European
Commission in connection with the application for approval
referred to in paragraph (c);
(f)
to comply with any requests from the Commission relating to
the application for approval, including the provision of
30
information;
(g)
to comply with any undertakings given to the Commission, or
conditions imposed by the Commission, where approval has
been given.
(4)
Before giving a direction under this section the Treasury must consult
35
the bank administrator.
(5)
The bank administrator must comply with the direction within the
period of time specified in the direction, or if no period of time is
specified, as soon as reasonably practicable.
(6)
A direction under this section is enforceable on an application made by
40
the Treasury, by injunction or, in Scotland, by an order for specific
performance under section 45 of the Court of Session Act 1988.
(7)
A direction may specify circumstances in which the bank administrator
is immune from liability in damages.
(8)
Immunity by virtue of subsection (7) does not extend to action—
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Financial Services Bill
Part 7 — Amendments of Banking Act 2009
157

(a)
in bad faith, or
(b)
in contravention of section 6(1) of the Human Rights Act 1998.
(9)
If the United Kingdom has made, or proposes to make, an application
to the Council of the European Union under Article 108 of the TFEU,
references in subsection (3) to the Commission are to be read as
5
including references to the Council.
(10)
In this section “TFEU” means the Treaty on the Functioning of the
European Union.”
Inter-bank payment systems
88
Inter-bank payment systems
10
(1)
Part 5 of the Banking Act 2009 (inter-bank payment systems) is amended as
follows.
(2)
After section 186 insert—
“186A
  Amendment of recognition order
(1)
The Treasury may amend a recognition order.
15
(2)
Before amending a recognition order the Treasury must—
(a)
consult the Bank of England,
(b)
notify the operator of the recognised inter-bank payment
system, and
(c)
consider any representations made.
20
(3)
In addition, the Treasury—
(a)
must consult the FCA before amending a recognition order in
respect of a payment system the operator of which—
(i)
is, or has applied to become, a recognised investment
exchange, or
25
(ii)
has, or has applied for, a Part 4A permission, and
(b)
if the operator has, or has applied for, a Part 4A permission for
the carrying on of a PRA-regulated activity, must also consult
the PRA.
(4)
The Treasury must consider any request by the operator of a recognised
30
inter-bank payment system for the amendment of its recognition
order.”
(3)
For section 191 substitute—
“191
Directions
(1)
The Bank of England may give directions in writing to the operator of
35
a recognised inter-bank system.
(2)
A direction may—
(a)
require or prohibit the taking of specified action in the operation
of the system;
(b)
set standards to be met in the operation of the system.
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Financial Services Bill
Part 7 — Amendments of Banking Act 2009
158

(3)
If a direction is given for the purpose of resolving or reducing a threat
to the stability of the UK financial system, the operator (including its
officers and staff) has immunity from liability in damages in respect of
action or inaction in accordance with the direction.
(4)
A direction given for the purpose mentioned in subsection (3) must—
5
(a)
include a statement that it is given for that purpose, and
(b)
inform the operator of the effect of that subsection.
(5)
The Treasury may by order confer immunity on any person from
liability in damages in respect of action or inaction in accordance with
a direction (including a direction given for the purpose mentioned in
10
subsection (3)).
(6)
An order—
(a)
is to be made by statutory instrument, and
(b)
is subject to annulment in pursuance of a resolution of either
House of Parliament.
15
(7)
An immunity conferred by or under this section does not extend to
action or inaction—
(a)
in bad faith, or
(b)
in contravention of section 6(1) of the Human Rights Act 1998.”
(4)
In section 186 (procedure)—
20
(a)
for subsection (2) substitute—
“(2)
In addition, the Treasury—
(a)
must consult the FCA before making a recognition order
in respect of a payment system the operator of which—
(i)
is, or has applied to become, a recognised
25
investment exchange, or
(ii)
has, or has applied for, a Part 4A permission, and
(b)
if the operator has, or has applied for, a Part 4A
permission for the carrying on of a PRA-regulated
activity, must also consult the PRA.”, and
30
(b)
in subsection (3), for “or the FSA” substitute “, the FCA or the PRA”.
(5)
In section 187 (de-recognition), for subsection (4) substitute—
“(4)
In addition, the Treasury—
(a)
must consult the FCA before revoking a recognition order in
respect of a payment system the operator of which—
35
(i)
is, or has applied to become, a recognised investment
exchange, or
(ii)
has, or has applied for, a Part 4A permission, and
(b)
if the operator has, or has applied for, a Part 4A permission for
the carrying on of a PRA-regulated activity, must also consult
40
the PRA.”
(6)
In section 192 (role of FSA)—
(a)
in subsection (1), for “the FSA” substitute “the FCA or the PRA”,
(b)
for subsection (2) substitute—
“(2)
The Bank of England—
45

Financial Services Bill
Part 7 — Amendments of Banking Act 2009
159

(a)
must consult the FCA before taking action under this
Part in respect of a recognised inter-bank payment
system the operator of which satisfies section 186(2)(a),
and
(b)
must consult the PRA before taking action under this
5
Part in respect of a recognised inter-bank payment
system the operator of which satisfies section
186(2)(b).”,
(c)
in subsection (3)—
(i)
for “the FSA”, in the first place, substitute “the FCA or the PRA”,
10
(ii)
for “the FSA”, in the second place, substitute “it”,
(iii)
for “section 186(2)” substitute “section 186(2)(a) or (b)”, and
(iv)
in paragraph (a), for “the FSA” substitute “the FCA or (as the
case may be) the PRA”, and
(d)
in the heading, for “FSA” substitute “FCA and PRA”.
15
(7)
After section 202 insert—
“202A
Injunctions
(1)
If, on the application of the Bank of England, the court is satisfied—
(a)
that there is a reasonable likelihood that there will be a
compliance failure, or
20
(b)
that there has been a compliance failure and there is a
reasonable likelihood that it will continue or be repeated,

the court may make an order restraining the conduct constituting the
failure.
(2)
If, on the application of the Bank of England, the court is satisfied—
25
(a)
that there has been a compliance failure by the operator of a
recognised inter-bank payment system, and
(b)
that there are steps which could be taken for remedying the
failure,

the court may make an order requiring the operator, and anyone else
30
who appears to have been knowingly concerned in the failure, to take
such steps as the court may direct to remedy it.
(3)
If, on the application of the Bank of England, the court is satisfied—
(a)
that there may have been a compliance failure by the operator
of a recognised inter-bank payment system, or
35
(b)
that a person may have been knowingly concerned in a
compliance failure,

the court may make an order restraining the operator or person from
dealing with any assets which it is satisfied the operator or person is
reasonably likely to deal with.
40
(4)
The jurisdiction conferred by this section is exercisable—
(a)
in England and Wales and Northern Ireland, by the High Court,
and
(b)
in Scotland, by the Court of Session.
(5)
In this section—
45
(a)
references to an order restraining anything are, in Scotland, to
be read as references to an interdict prohibiting that thing,

Financial Services Bill
Part 7 — Amendments of Banking Act 2009
160

(b)
references to remedying a failure include mitigating its effect,
and
(c)
references to dealing with assets include disposing of them.”
(8)
After section 203 insert—
“203A
Records
5
(1)
The Bank of England must maintain satisfactory arrangements for—
(a)
recording decisions made in the exercise of its functions under
this Part, and
(b)
the safe-keeping of those records which it considers ought to be
preserved.
10
(2)
The duty in subsection (1) does not apply to a decision to issue a notice
under section 204(1).
203B
Annual report
(1)
At least once a year the Bank of England must make a report to the
Treasury on—
15
(a)
the discharge of its functions under this Part,
(b)
the extent to which, in its opinion, in discharging those
functions its financial stability objective has been met, and
(c)
such other matters as the Treasury may from time to time direct.
(2)
Subsection (1) does not require the inclusion in the report of any
20
information whose publication would in the opinion of the Bank of
England be against the public interest.
(3)
The Treasury must lay before Parliament a copy of each report received
by them under this section.”
(9)
In section 204 (information)—
25
(a)
after subsection (1), insert—
“(1A)
The Bank of England may by notice in writing require the
operator of a recognised inter-bank payment system to provide
information which the Bank requires in connection with the
exercise of its functions (whether under this Part or otherwise)
30
in pursuance of its financial stability objective.”,
(b)
in subsections (2) and (3), after “notice” insert “under subsection (1) or
(1A)”,
(c)
in subsection (4), for paragraph (b) substitute—
“(b)
the FCA;
35
(ba)
the PRA;”, and
(d)
in paragraph (c) of that subsection, for “or the FSA” substitute “, the
FCA or the PRA”.
(10)
In section 206A (services forming part of recognised inter-bank payment
systems)—
40
(a)
in subsection (4)(a), for “and the FSA” substitute “, the FCA and the
PRA”, and
(b)
in subsection (6), for paragraph (b) (and the “and” at the end of it)
substitute—
“(b)
the FCA,
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Financial Services Bill
Part 8 — Miscellaneous
161

(ba)
the PRA, and”.
89
International obligations
In Part 5 of the Banking Act 2009, after section 206A insert—
“206B
International obligations
(1)
If it appears to the Treasury that any action proposed to be taken by the
5
Bank of England in exercising its powers under this Part would be
incompatible with EU obligations or any other international obligations
of the United Kingdom, the Treasury may direct the Bank not to take
that action.
(2)
If it appears to the Treasury that any action which the Bank of England
10
has power under this Part to take is required for the purpose of
implementing any such obligation, the Treasury may direct the Bank to
take that action.
(3)
A direction under this section—
(a)
may include such supplemental or incidental requirements as
15
the Treasury consider necessary or expedient, and
(b)
is enforceable on an application by the Treasury, by injunction
or, in Scotland, by an order for specific performance under
section 45 of the Court of Session Act 1988.”
Further amendments
20
90
Amendments relating to new regulators
Schedule 17 contains amendments of the Banking Act 2009 related to the
provisions of Part 2 of this Act.
Part 8
Miscellaneous
25
Amendments of Companies Act 1989
91
Amendments of Companies Act 1989
(1)
Section 166 of the Companies Act 1989 (power of Secretary of State to give
directions to recognised investment exchange or recognised clearing house) is
amended as follows.
30
(2)
In subsection (2)(a)—
(a)
for “Authority”, in the first place, substitute “appropriate regulator”,
and
(b)
for “Authority”, in the second place, substitute “regulator”.
(3)
In subsection (2)(b)—
35
(a)
for “Authority”, in the first place, substitute “appropriate regulator”,
and
(b)
for “Authority”, in the second place, substitute “regulator”.

Financial Services Bill
Part 8 — Miscellaneous
162

(4)
In subsection (3)—
(a)
for “Authority” substitute “appropriate regulator”,
(b)
omit the “or” following paragraph (a), and
(c)
at the end insert—
“(c)
in either case, that the direction is necessary having
5
regard to the public interest in the stability of the
financial system of the United Kingdom, or
(d)
in either case, that the direction is necessary—
(i)
to facilitate a proposed or possible use of a
power under Part 1 of the Banking Act 2009
10
(special resolution regime), or
(ii)
in connection with a particular exercise of a
power under that Part.”
(5)
In subsection (7)—
(a)
for “Authority”, in the first place, substitute “appropriate regulator”,
15
and,
(b)
omit the words from “The Authority shall not” to the end.
(6)
After that subsection insert—
“(7A)
Where the exchange or clearing house is acting in accordance with a
direction under subsection (2)(a) that was given only by virtue of
20
paragraph (a) of subsection (3), the appropriate regulator shall not give
a direction under subsection (7) unless it is satisfied that the direction
under that subsection will not impede or frustrate the proper and
efficient conduct of the default proceedings.
(7B)
Where the exchange or clearing house has taken action under its default
25
rules without being directed to do so, the appropriate regulator shall
not give a direction under subsection (7) unless—
(a)
it is satisfied that the direction under that subsection will not
impede or frustrate the proper and efficient conduct of the
default proceedings, or
30
(b)
it is satisfied that the direction is necessary—
(i)
having regard to the public interest in the stability of the
financial system of the United Kingdom,
(ii)
to facilitate a proposed or possible use of a power under
Part 1 of the Banking Act 2009 (special resolution
35
regime), or
(iii)
in connection with a particular exercise of a power
under that Part.”
(7)
In subsection (8), for “Authority” substitute “the regulator which gave the
direction”.
40
(8)
At the end insert—
“(9)
“The appropriate regulator”—
(a)
in relation to a recognised UK investment exchange, means the
FCA, and
(b)
in relation to a recognised UK clearing house, means the Bank
45
of England.”
(9)
In the heading, omit “of Secretary of State”.