(ii) to the extent that it is not possible to ensure that result,
minimising any potential liability falling within sub-
paragraph (i);

(b) make other provision about the making of arrangements for
5that purpose by a ring-fenced body which is an employer in
relation to a relevant pension scheme.

(3) The regulations may in particular—

(a) require a ring-fenced body to cease to participate in a relevant
pension scheme unless the scheme is divided into two or more
10sections in relation to which prescribed conditions are met;

(b) provide that assets or liabilities of a relevant pension scheme
may not be transferred under the arrangements to another
occupational pension scheme unless the other scheme meets
prescribed conditions;

(c) 15require ring-fenced bodies to establish new occupational
pension schemes in prescribed circumstances;

(d) provide that any provision of a relevant pension scheme that
might prevent a ring-fenced body from making the
arrangements, other than a provision requiring the consent of
20the trustees or managers of the scheme, is not to have effect in
prescribed circumstances;

(e) make provision enabling the trustees or managers of a relevant
pension scheme, with the consent of the employers in relation
to the scheme, to modify the scheme by resolution for the
25purpose of enabling a ring-fenced body to make the
arrangements;

(f) make provision enabling the court, on an application made in
accordance with the regulations by a ring-fenced body, if it
appears to the court that the trustees or managers of a relevant
30pension scheme, or an employer in relation to such a scheme,
have unreasonably refused their consent to any step that would
enable the ring-fenced body to make the arrangements, to order
that the step may be taken without that consent;

(g) require a ring-fenced body to make an application for clearance
35in connection with the making of the arrangements;

(h) confer exemption from any provision of the regulations in
prescribed cases;

(i) confer functions on the PRA;

(j) provide that a ring-fenced body which contravenes a prescribed
40requirement of the regulations is to be taken to have
contravened a requirement imposed by the PRA under this Act.

(4) An “application for clearance” is an application to the Pensions
Regulator under any of the following provisions—

(a) section 42 of the Pensions Act 2004 (clearance statements
45relating to contribution notice under section 38);

(b) section 46 of that Act (clearance statements relating to financial
support directions);

(c) Article 38 of the Pensions (Northern Ireland) Order 2005
(clearance statements relating to contribution notices under
50article 34);

(d) Article 42 of that Order (clearance statements relating to
financial support directions).

(5) In relation to a ring-fenced body that is not a PRA-authorised person,
references in subsection (3) to the PRA are to be read as references to the
5FCA.

(6) The regulations may not require ring-fenced bodies to achieve the
results mentioned in subsection (2) before 1 January 2026, but this does
not prevent the regulations requiring steps to be taken at any time after
the regulations come into force.

142L 10Further interpretative provisions for section 142K

(1) The following provisions have effect for the interpretation of section
142K.

(2) “Occupational pension scheme” has the meaning given in section 1 of
the Pension Schemes Act 1993 or section 1 of the Pension Schemes
15(Northern Ireland) Act 1993 and, in relation to such a scheme,
“employer”, “member” and “trustees or managers” have the same
meaning as in Part 1 of the Pensions Act 1995 or Part 2 of the Pensions
(Northern Ireland) Order 1995.

(3) “Money purchase scheme” has the meaning given in section 181(1) of
20the Pension Schemes Act 1993 or section 176(1) of the Pension Schemes
(Northern Ireland) Act 1993.

(4) “The court” means—

(a) in relation to England and Wales or Northern Ireland, the High
Court, and

(b) 25in relation to Scotland, the Court of Session.

Loss-absorbency requirements

142M Power of Treasury in relation to loss-absorbency requirements

(1) The Treasury may by order make provision about the exercise by either
regulator of its functions under this Act, so far as they are (apart from
30the order) capable of being exercised in relation to a relevant body so as
to require the relevant body—

(a) to issue any debt instrument, or

(b) to ensure that any part of the relevant body’s debt consists of
debt owed by it in respect of debt instruments, or debt
35instruments of a particular kind.

(2) A “relevant body” is—

(a) a ring-fenced body,

(b) any other body corporate that has a Part 4A permission relating
to the regulated activity of accepting deposits, or

(c) 40a body corporate that is a member of the group of a body falling
within paragraph (a) or (b).

(3) “Debt instrument” means—

(a) a bond,

(b) any other instrument creating or acknowledging a debt, or

(c) 45an instrument giving rights to acquire a debt instrument.

(4) An order under this section may in particular—

(a) require the regulator to exercise its functions so as to require
relevant bodies to do either or both of the things mentioned in
subsection (1);

(b) 5limit the extent to which the regulator may require a relevant
body’s debt to consist of debt owed in respect of debt
instruments or of debt instruments of a kind specified in the
order;

(c) require the regulator—

(i) 10to make, or not to make, provision by reference to
specified matters, or

(ii) to have regard, or not to have regard, to specified
matters;

(d) require the regulator to consult, or obtain the consent of, the
15Treasury before making rules of a specified description or
exercising any other specified function;

(e) impose on the regulator in connection with the exercise of a
specified function procedural requirements which would not
otherwise apply to the exercise of the function;

(f) 20refer to a publication issued by a regulator, another body in the
United Kingdom or an international organisation, as the
publication has effect from time to time.

(b)(b)limit the extent to which the regulator may require a relevant
body’s debt to consist of debt owed in respect of debt
25instruments or of debt instruments of a kind specified in the
order;

(c) require the regulator—

(i) to make, or not to make, provision by reference to
specified matters, or

(ii) 30to have regard, or not to have regard, to specified
matters;

(d) require the regulator to consult, or obtain the consent of, the
Treasury before making rules of a specified description or
exercising any other specified function;

(e) 35impose on the regulator in connection with the exercise of a
specified function procedural requirements which would not
otherwise apply to the exercise of the function;

(f) refer to a publication issued by a regulator, another body in the
United Kingdom or an international organisation, as the
40publication has effect from time to time.

(5) “Specified” means specified in the order.

General

142N Affirmative procedure in relation to certain orders under Part 9B

(1) This section applies to an order containing provision made under any
45of the following provisions of this Part—

(a) section 142A(2)(b);

(b) section 142B(2) or (5);

(c) section 142C;

(d) section 142D(2) or (4);

(e) 50section 142E;

(f) section 142I;

(g) section 142M.

(2) No order to which this section applies may be made unless—

(a) a draft of the order has been laid before Parliament and
55approved by a resolution of each House, or

(b) subsection (4) applies.

(3) Subsection (4) applies if an order under 142D(4) or 142E contains a
statement that the Treasury are of the opinion that, by reason of
urgency, it is necessary to make the order without a draft being so laid
60and approved.

(4) Where this subsection applies the order—

(a) must be laid before Parliament after being made, and

(b) ceases to have effect at the end of the relevant period unless
before the end of that period the order is approved by a

resolution of each House of Parliament (but without that
affecting anything done under the order or the power to make
a new order).

(5) The “relevant period” is a period of 28 days beginning with the day on
5which the order is made.

(6) In calculating the relevant 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.

142O Interpretation of Part 9B

10In this Part, any reference to—

(a) the regulated activity of accepting deposits, or

(b) the regulated activity of dealing in investments as principal,

is to be read in accordance with Schedule 2, taken with any order under
section 22.”

(2) 15In section 417 of FSMA 2000 (definitions), in subsection (1)—

(a) after the definition of “control of information rules” insert—

• ““core activities” has the meaning given in section 142B;

• “core services” has the meaning given in section 142C;”,

(b) after the definition of “ESMA” insert—

• 20““excluded activities” has the meaning given in section
  142D;”, and

(c) after the definition of “regulator” insert—

• ““ring-fenced body” has the meaning given in section
  142A;

• 25“ring-fencing rules” has the meaning given in section
  142H;”.

5 Directors of ring-fenced bodies to be approved persons

In section 59 of FSMA 2000 (approval for particular arrangements) after
subsection (7B) insert—

“(7C) 30In relation to a ring-fenced body, the function of acting as a director (or,
where the ring-fenced body does not have a board of directors, as a
member of its equivalent management body)—

(a) is a significant-influence function, and

(b) must be specified as a controlled function by rules made—

(i) 35in relation to ring-fenced bodies that are PRA-
authorised persons, by the PRA, or

(ii) in relation to other ring-fenced bodies, by the FCA.”

6 PRA annual report

(1) In Schedule 1ZB to FSMA 2000 (the Prudential Regulation Authority),
40paragraph 19 (annual report) is amended as follows.

(2) After sub-paragraph (1) insert—

“(1A) In the report the PRA must also report in general terms on—

(a) the extent to which, in its opinion, ring-fenced bodies have
complied with the ring-fencing provisions,

(b) steps taken by ring-fenced bodies in order to comply with the
ring-fencing provisions,

(c) 5steps taken by it to enforce the ring-fencing provisions, and

(d) the extent to which ring-fenced bodies appear to it to have
acted in accordance with any guidance which it has given to
ring-fenced bodies and which relates to the operation of the
ring-fencing provisions.

(1B) 10In sub-paragraph (1A)—

(a) references to “ring-fenced bodies” relate only to ring-fenced
bodies that are PRA-authorised persons, and

(b) “the ring-fencing provisions” means ring-fencing rules and
the duty imposed as a result of section 142G.”

(3) 15In sub-paragraph (2), for “Sub-paragraph (1) does not” substitute “Sub-
paragraphs (1) and (1A) do not”.”

7 Ring-fencing transfer schemes

The Schedule (which contains amendments of Part 7 of FSMA 2000 relating to
ring-fencing transfer schemes) has effect.

8 20Building societies: power to make provision about ring-fencing

(1) The Treasury may by regulations—

(a) make provision in relation to building societies for purposes
corresponding to those of any provision made, in relation to authorised
persons other than building societies, by or under any provision of Part
259B of FSMA 2000 (ring-fencing) apart from sections 142K to 142M, and

(b) provide for the application of the relevant continuity provision in
relation to the exercise by the FCA or the PRA of any function conferred
on it by or under provision made pursuant to paragraph (a).

(2) The regulations may, in particular—

(a) 30amend the Building Societies Act 1986;

(b) apply any of the provisions contained in, or made under, Part 9B of
FSMA 2000, with such modifications as the Treasury consider
appropriate;

(c) authorise the making of rules or other instruments by the FCA or the
35PRA for the purposes of, or connected with, any provision made by the
regulations;

(d) confer functions on the FCA or the PRA;

(e) make such consequential provision including amendments of any
enactment as the Treasury consider appropriate.

(3) 40This section does not affect the application of section 142M of FSMA 2000
(power of Treasury in relation to loss-absorbency requirements) to building
societies that are relevant bodies for the purposes of that section.

(4) In this section—

• “building society” has the same meaning as in the Building Societies Act
  451986;

Financial Services (Banking Reform) BillPage 15

• “the relevant continuity provision” means—

  (a)

  in the case of functions exercisable by the FCA, the continuity
  objective set out in section 1EA of FSMA 2000, or

  (b)

  in the case of functions exercisable by the PRA, section 2B(3)(c)
  5and (4A) of that Act.

Depositor preference

9 Preferential debts: Great Britain

(1) In Schedule 6 to the Insolvency Act 1986 (categories of preferential debts) after
paragraph 15A insert—

10“Category 7: Deposits covered by Financial Services Compensation Scheme

15B So much of any amount owed at the relevant date by the debtor in
respect of an eligible deposit as does not exceed the compensation
that would be payable in respect of the deposit under the Financial
Services Compensation Scheme to the person or persons to whom
15the amount is owed.

Interpretation for Category 7

15C (1) In paragraph 15B “eligible deposit” means a deposit in respect of
which the person, or any of the persons, to whom it is owed would
be eligible for compensation under the Financial Services
20Compensation Scheme.

(2) For this purpose a “deposit” means rights of the kind described in—

(a) paragraph 22 of Schedule 2 to the Financial Services and
Markets Act 2000 (deposits), or

(b) section 1(2)(b) of the Dormant Bank and Building Society
25Accounts Act 2008 (balances transferred under that Act to
authorised reclaim fund).”

(2) In section 386 of the Insolvency Act 1986 (categories of preferential debt), in
subsection (1), after “production” insert ”;  deposits covered by Financial
Services Compensation Scheme”.

(3) 30In Part 1 of Schedule 3 to the Bankruptcy (Scotland) Act 1985 (list of preferred
debts), after paragraph 6A insert—

“Deposits covered by Financial Services Compensation Scheme

6B So much of any amount owed at the relevant date by the debtor in
respect of an eligible deposit as does not exceed the compensation
35that would be payable in respect of the deposit under the Financial
Services Compensation Scheme to the person or persons to whom
the amount is owed.”

(4) In Part 2 of Schedule 3 to the Bankruptcy (Scotland) Act 1985 (interpretation of

Part 1), after paragraph 9 insert—

“Meaning of eligible deposit

9A (1) In paragraph 6B “eligible deposit” means a deposit in respect of
which the person, or any of the persons, to whom it is owed would
5be eligible for compensation under the Financial Services
Compensation Scheme.

(2) For this purpose a “deposit” means rights of the kind described in
paragraph 22 of Schedule 2 to the Financial Services and Markets Act
2000 (deposits).”

10Financial Services Compensation Scheme

10 Discharge of functions by the scheme manager

After section 224 of FSMA 2000 insert—

“224ZA Discharge of functions

(1) In discharging its functions the scheme manager must have regard to—

(a) 15the need to ensure efficiency and effectiveness in the discharge
of those functions, and

(b) the need to minimise public expenditure attributable to loans
made or other financial assistance given to the scheme manager
for the purposes of the scheme.

(2) 20In subsection (1)(b) “financial assistance” includes the giving of
guarantees and indemnities and any other kind of financial assistance
(actual or contingent).”

11 Power to require information from scheme manager

After section 218A of FSMA 2000 insert—

218B 25  Treasury’s power to require information from scheme manager

(1) The Treasury may by notice in writing require the scheme manager to
provide specified information or information of a specified description
that the Treasury reasonably require in connection with the duties of
the Treasury under the Government Resources and Accounts Act 2000.

(2) 30Information required under this section must be provided before the
end of such reasonable period as may be specified.

(3) “Specified” means specified in the notice.”

12 Scheme manager: appointment of accounting officer

(1) Section 212 of FSMA 2000 (the scheme manager of the Financial Services
35Compensation Scheme) is amended as follows.

(2) In subsection (3)—

(a) omit the “and” following paragraph (a),

(b) after that paragraph insert—

“(aa) a chief executive (who is to be the accounting officer);
and”, and

(c) in paragraph (b), after “chairman” insert “and chief executive”.

(3) 5In subsection (4)—

(a) after “chairman”, in the first place, insert “, chief executive”, and

(b) after “chairman”, in the second place, insert “and the chief executive”.

Fees to meet Treasury expenditure

13 Fees to meet Treasury expenditure relating to international organisations

10After section 410 of FSMA 2000 insert—

“Fees to meet Treasury expenses

410A Fees to meet certain expenses of the Treasury

(1) The Treasury may by regulations—

(a) enable the Treasury from time to time by direction to require the
15FCA, the PRA or the Bank of England (each a “regulator”) to
require the payment of fees by relevant persons, or such class of
relevant person as may be specified in, or determined by the
regulator in accordance with, the direction, for the purpose of
meeting relevant expenses incurred by the Treasury;

(b) 20make provision about how the regulator to which a direction is
given is to comply with the direction;

(c) require the regulator to pay to the Treasury, by such time or
times as may be specified in the direction, the amount of any
fees received by the regulator.

(2) 25“Relevant expenses” are expenses (including any expenses of a capital
nature) which are attributable to United Kingdom membership of, or
Treasury participation in, a prescribed international organisation so far
as those expenses—

(a) represent a contribution (by way of subscription or otherwise)
30to the resources of the international organisation, and

(b) are in the opinion of the Treasury attributable to functions of the
organisation which relate to financial stability or financial
services.

(3) The regulations must provide for the charging of fees in pursuance of a
35direction given under the regulations to the FCA or the PRA to be by
rules made by that regulator.

(4) The provisions of Chapter 2 of Part 9A apply to rules of the FCA or the
PRA providing for the charging of fees in pursuance of a direction
given under the regulations—

(a) 40in the case of the FCA, as they apply to rules relating to the
payment of fees under paragraph 23 of Schedule 1ZA;

(b) in the case of the PRA, as they apply to rules relating to the
payment of fees under paragraph 31 of Schedule 1ZB.

(5) Paragraph 36(1) of Schedule 17A applies to the charging of fees by the
Bank of England in pursuance of a direction given to the Bank under
the regulations.

(6) The regulations may in particular—

(a) 5make provision about what is, or is not, to be regarded as an
expense;

(b) specify requirements that the Treasury must comply with
before giving a direction;

(c) enable a direction to be varied or revoked by a subsequent
10direction;

(d) confer functions on a regulator.

(7) An amount payable to a regulator as a result of—

(a) any provision of rules made by the FCA or the PRA as a result
of the regulations, or

(b) 15the imposition of fees by the Bank of England as a result of a
direction given under the regulations to the Bank,

may be recovered as a debt due to the regulator.

(8) “Relevant persons” means—

(a) in the case of a direction given to the PRA, PRA-authorised
20persons;

(b) in the case of a direction given to the FCA, authorised persons
and recognised investment exchanges who (in either case) are
not PRA-authorised persons;

(c) in the case of a direction given to the Bank of England,
25recognised clearing houses, other than those falling within
paragraph (a) or (b).

(9) This section is subject to section 410B.

410B Directions in pursuance of section 410A

(1) In this section “a fees direction” means a direction given by the
30Treasury as a result of regulations under section 410A.

(2) Before giving a fees direction to the FCA, the PRA or the Bank of
England (each a “regulator”), the Treasury must consult the regulator
concerned.

(3) A fees direction must—

(a) 35be in writing;

(b) except in the case of a direction that revokes a previous
direction or a direction that varies a previous direction without
affecting the total amount intended to be raised by the fees,
specify the total amount intended to be raised by the fees to be
40charged by the regulator and explain how that amount is
calculated;

(c) contain such other information as may be prescribed.

(4) As soon as practicable after giving a fees direction, the Treasury must
lay before Parliament a copy of the direction.”

Parliamentary control of statutory instruments under FSMA 2000

14 Amendments of section 429 of FSMA 2000

(1) Section 429 of FSMA 2000 (Parliamentary control of statutory instruments) is
amended as follows.

(2) 5In subsection (1)(a) (orders subject to affirmative procedure), for “144(4), 192(b)
or (e), 138K(6)(c)” substitute “138K(6)(c), 144(4), 192(b) or (e)”.

(3) In subsection (2) (regulations subject to affirmative procedure), after “90B,”
insert “142K,”.

(4) After subsection (2) insert—

“(2A) 10Regulations to which subsection (2B) applies are not to be made unless
a draft of the regulations has been laid before Parliament and approved
by a resolution of each House.

(2B) This subsection applies to regulations which contain provision made
under section 410A, other than provision made only by virtue of
15subsection (2) of that section.”

(5) In subsection (8), for “or 23A” substitute “, 23A or 142N”.

Bank of England

15 Accounts of Bank of England and its wholly-owned subsidiaries

(1) The Bank of England Act 1998 is amended as follows.

(2) 20In section 7 (accounts), in subsection (4), for the words from “appropriate” to
the end substitute “necessary to do so having regard to the Financial Stability
Objective”.

(3) After section 7 insert—

“7A Accounts of companies wholly owned by the Bank

(1) 25If the Bank considers it necessary to do so having regard to the
Financial Stability Objective, the Bank may by direction to a qualifying
company exclude the application to the qualifying company of any of
the relevant Companies Act requirements.

(2) The relevant Companies Act requirements are the requirements to
30which the directors of the qualifying company would otherwise be
subject under the Companies Act 2006 (except sections 412 and 413
(directors’ benefits)) in relation to the preparation of accounts under
section 394 of that Act.

(3) A direction under subsection (1) may relate to one or more specified
35accounting periods of the qualifying company, or to a specified
accounting period and all subsequent accounting periods of the
qualifying company.

(4) The Bank must consult the Treasury before giving a direction under
subsection (1).