101.26-31

Session 2012 - 13
Internet Publications
Other Bills before Parliament

Lords Amendments to the Financial Services Bill

26

“(8A)
Objective 6, which applies in any case in which client assets may be

affected, is to protect those assets.

(8B)
Objective 7 is to minimise adverse effects on institutions (such as

investment exchanges and clearing houses) that support the

operation of financial markets.”

(4)
In section 8(2) (Condition A: private sector purchaser and bridge bank)—

(a)
in paragraph (b) for “the banking systems of the United Kingdom,

or” substitute “those systems,”, and

(b)
after paragraph (c) insert “, or

(d)
the protection of any client assets that may be

affected.”

(5)
In section 47 (restriction of partial transfers), for subsection (3) substitute—

“(3)
Provision under subsection (2) may, in particular, refer to—

(a)
particular classes of deposit;

(b)
particular classes of client assets.”

(6)
In the Table in section 261 (index of defined terms), after the entry relating

to “central counterparty clearing services”, insert—

“Client assets (Part 1)
3”.”

Clause 84
123
Page 154, line 24, at end insert—

“( )
In section 83 (supplemental), in subsection (2)(d)—

(a)
at the end of sub-paragraph (iii) insert “and”, and

(b)
for sub-paragraphs (iv) and (v) substitute—

“(iv)
is not subject to the restriction in section 29(3)

that the securities issued by the bank were

transferred under the original order (as

defined in section 29(1)).”
Clause 86
124
Page 156, line 1, at end insert—

“( )
In section 1(6) of that Act (table describing provisions of Part 1), in the entry

relating to sections 76 to 81, for “81” substitute “81A”.”
After Clause 86
125
Insert the following new Clause—

“Groups

(1)
The Banking Act 2009 is amended as follows.

(2)
In section 1 (overview), for the entry in the Table relating to sections 82 and

83 substitute—

27

“Sections 81B to 83
Groups”.

(3)
In section 20 (directors), after subsection (1) insert—

“(1A)
Subsection (1) also applies to a director of any undertaking which is

a banking group company in respect of a specified bank.”

(4)
After section 36 insert—

“36A
Directors

(1)
A property transfer instrument may enable the Bank of England—

(a)
to remove a director of a specified bank;

(b)
to vary the service contract of a director of a specified bank;

(c)
to terminate the service contract of a director of a specified

bank;

(d)
to appoint a director of a specified bank.

(2)
Subsection (1) also applies to a director of any undertaking which is

a banking group company in respect of a specified bank.

(3)
Appointments under subsection (1)(d) are to be on terms and

conditions agreed with the Bank of England.”

(5)
For the italic heading before section 82 substitute “Groups”, and after that

heading insert—

“81B
Sale to commercial purchaser and transfer to bridge bank

(1)
The Bank of England may exercise a stabilisation power in respect

of a banking group company in accordance with section 11(2) or

12(2) if the following conditions are met.

(2)
Condition 1 is that the PRA is satisfied that the general conditions

for the exercise of a stabilisation power set out in section 7 are met

in respect of a bank in the same group.

(3)
Condition 2 (which does not apply in a financial assistance case) is

that the Bank of England is satisfied that the exercise of the power

in respect of the banking group company is necessary, having

regard to the public interest in—

(a)
the stability of the financial systems of the United Kingdom,

(b)
the maintenance of public confidence in the stability of

those systems,

(c)
the protection of depositors, or

(d)
the protection of any client assets that may be affected.

(4)
Condition 3 (which applies only in a financial assistance case) is

that—

(a)
the Treasury have recommended the Bank of England to

exercise a stabilisation power on the grounds that it is

necessary to protect the public interest, and

(b)
in the Bank’s opinion, exercise of the power in respect of the

banking group company is an appropriate way to provide

that protection.

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(5)
Condition 4 is that the banking group company is an undertaking

incorporated in, or formed under the law of any part of, the United

Kingdom.

(6)
Before determining whether Condition 2 or 3 (as appropriate) is

met, the Bank of England must consult—

(a)
the Treasury,

(b)
the PRA, and

(c)
the FCA.

(7)
In exercising a stabilisation power in reliance on this section the

Bank of England must have regard to the need to minimise the

effect of the exercise of the power on other undertakings in the same

group.

(8)
In this section “financial assistance case” means a case in which the

Treasury notify the Bank of England that they have provided

financial assistance in respect of a bank in the same group for the

purpose of resolving or reducing a serious threat to the stability of

the financial systems of the United Kingdom.

81C
Section 81B: supplemental

(1)
In the following provisions references to banks include references

to banking group companies—

(a)
section 10(1), and

(b)
section 75(5)(a).

(2)
Where the Bank of England exercises a stabilisation power in

respect of a banking group company in reliance on section 81B, the

provisions relating to the stabilisation powers and the bank

administration procedure contained in this Act (except sections 7

and 8) and any other enactment apply (with any necessary

modifications) as if the banking group company were a bank.

(3)
For the purposes of the application of section 143 (grounds for

applying for bank administration order), the reference in

subsection (2) to the Bank of England exercising a stabilisation

power includes a case where the Bank of England intends to

exercise such a power.

81D
Interpretation: “banking group company” &c.

(1)
In this Part “banking group company” means an undertaking—

(a)
which is (or, but for the exercise of a stabilisation power,

would be) in the same group as a bank, and

(b)
in respect of which any conditions specified in an order

made by the Treasury are met.

(2)
An order may require the Bank of England to consult specified

persons before determining whether the conditions are met.

(3)
An order—

(a)
is to 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.

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(4)
If an order contains a statement that the Treasury are of the opinion

that, by reason of urgency, it is necessary to make the order without

complying with subsection (3)(b)—

(a)
the order may be made, and

(b)
the order lapses unless approved by resolution of each

House of Parliament during the period of 28 days (ignoring

periods of dissolution, prorogation or adjournment of either

House for more than 4 days) beginning with the day on

which the order is made.

(5)
The lapse of an order under subsection (4)(b)—

(a)
does not invalidate anything done under or in reliance on

the order before the lapse and at a time when neither House

has declined to approve the order, and

(b)
does not prevent the making of a new order (in new terms).

(6)
Undertakings are in the same group for the purposes of sections

81B, 81C and this section if they are group undertakings in respect

of each other.

(7)
Expressions defined in the Companies Act 2006 have the same

meaning in section 81B and this section as in that Act.”

(6)
In the Table in section 259 (statutory instruments), in Part 1 after the entry

relating to section 78 insert—

“81D
Meaning of “banking group
Draft affirmative resolution

company”
(except for urgent cases)”.

(7)
In the Table in section 261 (index of defined terms), after the entry relating

to “bank insolvency order” insert—

“Banking group company
81D”.”

126
Insert the following new Clause—

“Application to investment firms

(1)
The Banking Act 2009 is amended as follows.

(2)
In section 1 (overview), after the entry in the Table relating to sections 84 to

89 insert—

“Section 89A
Investment firms”.

(3)
In section 2 (interpretation: “bank”), at the end insert—

“(8)
Section 89A applies this Part to investment firms with

modifications.”

(4)
In section 75(5) (power to change law: application to other institutions),

omit the “or” following paragraph (c) and after that paragraph insert—

“(ca)
to investment firms,”.

30

(5)
After section 89 (and in Part 1) insert—

“Investment firms

89A
Application to investment firms

(1)
This Part applies to investment firms as it applies to banks, subject

to the modifications in subsection (2).

(2)
Ignore sections 1(2)(b), 4(2)(b) and (6), 5(1)(b), 7(7), 8(2)(c) and

14(5).”

(6)
After section 159 insert—

“159A
Application to investment firms

This Part applies to investment firms as it applies to banks.”

(7)
After section 258 insert—

“258A
“Investment firm”

(1)
In this Act “investment firm” means a UK institution which is (or,

but for the exercise of a stabilisation power, would be) an

investment firm for the purposes of Directive 2006/49/EC on the

capital adequacy of investment firms and credit institutions.

(2)
But “investment firm” does not include—

(a)
an institution which is also—

(i)
a bank (within the meaning of Part 1),

(ii)
a building society (within the meaning of section 119

of the Building Societies Act 1986), or

(iii)
a credit union (within the meaning of section 31 of

the Credit Unions Act 1979 or Article 2(2) of the

Credit Unions (Northern Ireland) Order 1985), or

(b)
an institution which is of a class or description specified in

an order made by the Treasury.

(3)
An order—

(a)
is to 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.

(4)
If an order contains a statement that the Treasury are of the opinion

that, by reason of urgency, it is necessary to make the order without

complying with subsection (3)(b)—

(a)
the order may be made, and

(b)
the order lapses unless approved by resolution of each

House of Parliament during the period of 28 days (ignoring

periods of dissolution, prorogation or adjournment of either

House for more than 4 days) beginning with the day on

which the order is made.

(5)
The lapse of an order under subsection (4)(b)—

(a)
does not invalidate anything done under or in reliance on

the order before the lapse and at a time when neither House

has declined to approve the order, and

(b)
does not prevent the making of a new order (in new terms).

31

(6)
In subsection (1) “UK institution” means an institution which is

incorporated in, or formed under the law of any part of, the United

Kingdom.”

(8)
In the Table in section 259 (statutory instruments), in Part 7 after the entry

relating to section 257 insert—

“258A
Meaning of “investment firm”
Draft affirmative resolution

(except for urgent cases)”.

(9)
In the Table in section 261 (index of defined terms), after the entry relating

to “inter-bank payment system”, insert—

“Investment firm
258A”.

(10)
In section 214B(1)(a) of FSMA 2000 (contribution to costs of special

resolution regime) for “or credit union” substitute “, credit union or

investment firm”.”
127
Insert the following new Clause—

“Application to UK clearing houses

(1)
The Banking Act 2009 is amended as follows.

(2)
In section 1 (overview), after the entry in the Table relating to section 89A,

insert—

“Sections 89B to 89G
UK clearing houses”.

(3)
In section 2 (interpretation: “bank”), after subsection (8) insert—

“(9)
Section 89B applies this Part to UK clearing houses with

modifications.”

(4)
After section 39 insert—

“39A
Banks which are clearing houses

Sections 89C to 89E (clearing house rules, membership and

recognition) apply in relation to a bank which would be a UK

clearing house but for section 89G(2) (exclusion of banks etc from

definition of UK clearing house) as they apply in relation to a UK

clearing house.”

(5)
In section 75(5) (power to change law: application to other institutions),

after paragraph (ca) insert—

“(cb)
to UK clearing houses, or”.

(6)
After section 89A (and in Part 1) insert—