House of Commons Public Bill Committee Proceedings

Session 2012 - 13
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Other Bills before Parliament

9

House of Commons

Thursday 21 March 2013

Public Bill Committee Proceedings

Financial Services (Banking Reform) Bill

[Third and Fourth Sittings]

Clause 4.

Amendment (No. 20) proposed, in page 9, line 21, at end insert—

‘Power to order full separation

142JC
Power to order separation in case of particular groups

(1)
Where—

(a)
the members of a group include one or more ring-fenced bodies and one

or more other bodies, and

(b)
it appears to the appropriate regulator that the conduct of any one or more

of the members of the group is such that there is a significant risk that the

appropriate regulator will not be able to advance the objective in section

2B(3)(c) (in the case of the PRA) or the continuity objective (in the case

of the FCA) otherwise than by acting under this section,


the appropriate regulator may give a notice to each of the members of the group.

(2)
The notice must state that the appropriate regulator proposes to require the taking

of relevant steps in relation to the group before the date specified in the notice.

(3)
In this section “relevant steps” means steps to secure one of the following

results—

(a)
that there is no member of the group with a Part 4A permission to carry

on a regulated activity of a description specified in the notice;

(b)
that no member of the group is a ring-fenced body;

(c)
that there is no member of the group with a Part 4A permission to carry

on a regulated activity which is not a ring-fenced body.

(4)
The notice must—

(a)
specify a period, of not less than 3 months, during which any member of

the group may make representations to the appropriate regulator in

relation to its proposal, and

(b)
name an independent reviewer who is to report on the conduct of the

members of the group and the appropriateness of the proposal made by

the appropriate regulator.

(5)
A person may not be named as the independent reviewer without the consent of

the chairman of the Treasury Committee of the House of Commons; and the

reference in this subsection to the Treasury Committee of the House of

Commons—

Public Bill Committee Proceedings: 21 March 2013
10

Financial Services (Banking Reform) Bill, continued

(a)
if the name of that Committee is changed, is to be treated as a reference

to that Committee by its new name, and

(b)
if the functions of that Committee (or substantially corresponding

functions) become functions of a different Committee of the House of

Commons, is to be treated as a reference to the Committee by which the

functions are exercisable;


and any question arising under this paragraph (a) or (b) is to be determined by the

Speaker of the House of Commons.

(6)
After receiving any representations made in relation to the proposal by members

of the group and the report of the independent reviewer, the appropriate regulator

must decide whether it intends to implement the proposal.

(7)
If the appropriate regulator decides that it does intend to implement the proposal,

it must publish notice of the proposal, and of its decision to implement it, at least

60 days before it is implemented.

(8)
A person who is aggrieved by the decision of the appropriate regulator that it

intends to implement the proposal may refer the matter to the Tribunal.

(9)
The proposal may not be implemented without the consent of the Treasury; and

the Treasury must publish their decision on any application made by the

appropriate regulator for consent, together with their reasons for the decision, at

least 60 days before it is implemented.

(10)
Once the Treasury has consented to the implementation of the proposal and

either—

(a)
any reference to the Tribunal under subsection (8) has been dismissed, or

(b)
the period for making such a reference to the Tribunal has expired

without a reference having been made,


the appropriate regulator may implement the proposal by giving notice to the

members of the group requiring the taking of the relevant steps specified in the

proposal before the date so specified.

(11)
If the relevant steps have not been taken by the specified date, the appropriate

regulator may—

(a)
in a case where the relevant steps are aimed at securing the result in

paragraph (a) of subsection (3), take the action specified in subsection

(12),

(b)
in a case where the relevant steps are aimed at securing the result in

paragraph (b) of subsection (3), take the action specified in subsection

(13), or

(c)
in a case where the relevant steps are aimed at securing the result in

paragraph (c) of subsection (3), take the action specified in subsection

(14).

(12)
The action referred to in paragraph (a) of subsection (11) is—

(a)
to cancel the Part 4A permission of any member of the group to carry on

the regulated activity specified in the notice, and

(b)
to refuse to give a Part 4A permission to any member of the group to

carry on that activity.

(13)
The action referred to in paragraph (b) of subsection (11) is—

(a)
to cancel the Part 4A permission of any member of the group that is a

ring-fenced body to the extent that it relates to a core activity, and

(b)
to refuse to give any member of the group a Part 4A permission to carry

on a core activity.

(14)
The action referred to in paragraph (c) of subsection (11) is—

(a)
to cancel the Part 4A permission of any member of the group that is not

a ring-fenced body, and

Public Bill Committee Proceedings: 21 March 2013
11

Financial Services (Banking Reform) Bill, continued

(b)
to refuse to give a Part 4A permission to any member of the group that is

not a ring-fenced body.’.—(Chris Leslie).

Question proposed, That the Amendment be made.

Withdrawn

Chris Leslie

Cathy Jamieson

Negatived on division  22

Clause  4,  page  9,  line  21,  at end insert—

‘Full separation

142JD
General requirement of separation

(1)
Where the members of any group include one or more ring-fenced bodies and one

or more other bodies, the members of the group must, before the end of the period

of five years beginning with the relevant commencement date, take steps to

secure that there are no members of the group that are ring-fenced bodies.

(2)
If in the case of any group steps to secure that there are no members of the group

that are ring-fenced bodies are not taken within the period specified in subsection

(1)—

(a)
at the end of that period the Part 4A permission of each member of the

group that is a ring-fenced body shall be treated as having been cancelled

to the extent that it relates to a core activity, and

(b)
after the end of that period the appropriate regulator must refuse to give

any member of the group a Part 4A permission to carry on a core activity.

(3)
At the end of the period specified in subsection (1)—

(a)
section 142H(1)(b) and (4) to (7), and

(b)
section 142JC,


cease to have effect.

(4)
In subsection (1) “the relevant commencement date” means the day appointed for

the coming into force of section 4 of the Financial Services (Banking Reform) Act

2013 so far as it inserts this section.’.

Chris Leslie

Cathy Jamieson

Withdrawn  5

Clause  4,  page  12,  line  22,  at end insert—

‘(4A)
If the appropriate regulator is satisfied that—

(a)
a relevant body has contravened a requirement under subsection (1)(a) or

(1)(b) and knew or could reasonably be expected to have known it was

contravening such a requirement; or

(b)
has at any time attempted to contravene such a requirement and knew or

could reasonably be expected to have known it was contravening such a

requirement,


it may impose a penalty on the institution of such amount as it considers

appropriate.’.

Chris Leslie

Cathy Jamieson

Withdrawn  32

Clause  4,  page  12,  line  22,  at end insert—

Public Bill Committee Proceedings: 21 March 2013
12

Financial Services (Banking Reform) Bill, continued

‘( )
If an order under this section includes provision for the grant by a regulator of any

exemption from the requirements imposed by such an order, the order must—

(a)
require a relevant body claiming the exemption to satisfy the regulator

that the exemption should be granted;

(b)
require the regulator, in deciding whether to grant the exemption, to have

regard to all reasonably foreseeable circumstances;

(c)
include provision for reviews of, or appeals from, any decision not to

grant the exemption;

(d)
require the regulator to make to the Treasury a report setting out any

decision to grant the exemption and the terms of the exemption granted,

and

(e)
require the Treasury to lay a copy of such a report before Parliament and

to publish it in such manner as they think fit.’.

Chris Leslie

Cathy Jamieson

Not called  18

Clause  4,  page  12,  line  31,  at end insert—

‘( )
section 142H(7A);’.

Chris Leslie

Cathy Jamieson

Agreed to  1

Clause  4,  page  12,  line  29,  at end insert ‘and

(ba)
section 142C.’.

Chris Leslie

Cathy Jamieson

Withdrawn  2

Clause  4,  page  13,  line  7,  at end add—

‘(7)
A Treasury statement referred to in subsection (3) may only be made if the

Treasury considers that the statement is necessary—

(a)
to protect the continuity of provision in the UK of core services; or

(b)
to secure an appropriate degree of protection for depositors, or

(c)
to ensure the continuing stability of the UK financial service market.’.

Chris Leslie

Cathy Jamieson

Not moved  19

Clause  4,  page  13,  line  7,  at end insert—

‘142NA
Enhanced scrutiny procedure for certain affirmative procedure orders

(1)
This section applies if—

(a)
an order under section 142A(2)(b) exempts a class of UK institutions

from being ring-fenced bodies,

(b)
an order under sections 142B(2) or 142B(5) makes provision for a

regulated activity to be or cease to be a core activity or varies the

circumstances in which a regulated activity is a core activity,

(c)
an order under section 142D(2) varies the circumstances in which the

regulated activity of dealing in investments as principal is an excluded

activity,

Public Bill Committee Proceedings: 21 March 2013
13

Financial Services (Banking Reform) Bill, continued

(d)
an order under section 142D(4) provides for an activity to be or cease to

be an excluded activity or varies the circumstances in which an activity

is an excluded activity, or

(e)
an order under section 142E varies the scope of what ring-fenced bodies

are prohibited from doing by virtue of that section (including by varying

exemptions or conditions),

(f)
an order is made under section 142M,


and the order is not made in reliance on section 142N(4).

(2)
The Treasury must, before laying a draft of the order before either House of

Parliament for approval, consult such persons as the Treasury considers

appropriate in relation to the proposed draft.

(3)
If, after the consultation required by subsection (2), the Treasury considers that it

is appropriate to proceed with the making of an order, the Treasury must lay

before each House of Parliament a draft of the order together with an explanatory

document—

(a)
explaining the provisions in the draft order, and

(b)
giving details of the consultation under subsection (2), any

representations received as a result of the consultation and any changes

made to the proposed draft as a result of the representations.

(4)
If a joint committee of both Houses of Parliament is charged with reporting on the

draft order—

(a)
the chairman of the Treasury Committee of the House of Commons is to

be the chairman of the joint committee, and

(b)
the Treasury must have regard to any recommendations of the joint

committee made during the 60-day period.

(5)
If, after the expiry of the 60-day period, the Treasury wish to make an order

including material changes from the draft order, they must lay before

Parliament—

(a)
a revised draft order, and

(b)
a statement giving details of the revisions

(6)
After the expiry of the 60-day period (and, if subsection (5) applies, after

complying with that subsection) the Treasury may make the order in the terms of

the draft, or revised draft, if it is approved by a resolution of each House of

Parliament (as required by section 142N(2)(a)).

(7)
In this section “the 60-day period” means the period of 60 days beginning with

the day on which the draft order is laid before Parliament under subsection (3).

(8)
In calculating the 60-day period no account is to be taken of any time during

which Parliament is dissolved or prorogued or during which either House is

adjourned for more than 4 days.

(9)
The references in this section to the Treasury Committee of the House of

Commons—

(a)
if the name of that Committee is changed, is to be treated as a reference

to that Committee by its new name, and

(b)
if the functions of that Committee (or substantially corresponding

functions) become functions of a different Committee of the House of

Commons, is to be treated as a reference to the Committee by which the

functions are exercisable;


and any question arising under paragraph (a) or (b) is to be determined by the

Speaker of the House of Commons.”.’.

Public Bill Committee Proceedings: 21 March 2013
14

Financial Services (Banking Reform) Bill, continued

Clause Agreed to.

Chris Leslie

Cathy Jamieson

Withdrawn  10

Clause  5,  page  13,  line  36,  at end insert—

‘(7D)
In relation to the directors of a ring-fenced body, the following arrangements shall

apply—

(a)
Half of the board of directors of the ring-fenced body, both executive and

non-executive, will be made up of independent persons.

(b)
In this section an “independent person” means a person who—

(i)
has not been an employee of the group within the previous five

years;

(ii)
does not have a material business relationship with the group and

has not had one within the previous three years, including an

indirect relationship as a partner, director, senior employee or

shareholder or an adviser or major customer or supplier;

(iii)
does not receive remuneration from the group, other than

remuneration in their capacity as an independent person, does

not participate in the group’s share option or performance-

related pay schemes and is not a member of the pension scheme;

(iv)
does not have close family ties with any of the company’s

advisers, directors or senior employees;

(v)
does not hold cross-directorships or have significant links with

other directors through involvement in other companies or

bodies;

(vi)
does not represent a significant shareholder; and

(vii)
has not served on the board of any body in the group for more

than nine years.

(c)
The board of directors of the ring-fenced body, both executive and non-

executive, will have no formal, business or family relationship with the

directors of the rest of the group, other than by virtue of their appointment

to the same group.

(d)
The primary objective of the board of directors of the ring-fenced body,

both executive and non-executive, shall be on the performance and

functions of the ring-fenced body and they will have no responsibility for

the performance and functions of the remainder of group.

(e)
All directors of the ring-fenced body shall have a duty to preserve the

integrity of the ring-fence between the group and its subsidiary.’.

Clause Agreed to.

Chris Leslie

Cathy Jamieson

Negatived on division  25

Clause  6,  page  14,  line  7,  at end insert—

Public Bill Committee Proceedings: 21 March 2013
15

Financial Services (Banking Reform) Bill, continued

‘( )
the nature and extent of the dealings by ring-fenced bodies in derivative

products (including options, futures, contracts for differences and similar

products);’.

Chris Leslie

Cathy Jamieson

Not called  27

Clause  6,  page  14,  line  7,  at end insert ‘and

( )
developments affecting the appropriateness of the amount for the time

being specified for the purposes of any exemption under section

142A(2)(b) for UK institutions holding deposits below that specified

amount.’.

[Adjourned until Tuesday 26 March at 9.10 am



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