House of Commons Amendments

Session 2013 - 14
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Other Bills before Parliament

541

House of Commons

Monday 8 July 2013

Consideration of Bill

New Amendments handed in are marked thus

Financial Services (Banking Reform) Bill

Note

The amendments have been arranged in accordance with the Financial Services

(Banking Reform) Bill (Programme No.2) Motion to be proposed by Mr Chancellor

of the Exchequer.

Amendments to Clauses 1 to 8 other than amendments relating to

competition

Mr Chancellor of the Exchequer

1

Clause  1,  page  1,  line  20,  after ‘body’ insert ‘or of a member of a ring-fenced

body’s group’.

Mr Chancellor of the Exchequer

2

Clause  1,  page  2,  line  10,  at end insert—

‘(5)
In section 2J of FSMA 2000 (interpretation of Chapter 2 of Part 1)—

(a)
in subsection (3) for “a PRA-authorised” substitute “an authorised”,

(b)
after that subsection insert—

“(3A)
For the purposes of this Chapter, the cases in which a person

(“P”) other than an authorised person is to be regarded as failing

include any case where P enters insolvency.”, and

(c)
in subsection (4), for “subsection (3)(a)” substitute “subsections (3)(a)

and (3A)”.’.

Mr Chancellor of the Exchequer

3

Clause  2,  page  3,  line  8,  after ‘body’ insert ‘or of a member of a ring-fenced body’s

Consideration of Bill: 8 July 2013
542

Financial Services (Banking Reform) Bill, continued

group’.

Mr Chancellor of the Exchequer

4

Clause  2,  page  3,  line  9,  at end insert—

‘(4)
In subsection (3)(c), “failure” is to be read in accordance with section 2J(3) to

(4).’.

Ed Balls

Chris Leslie

Cathy Jamieson

Catherine McKinnell

17

Clause  4,  page  9,  leave out lines 8 to 21 and insert—

‘Reviews

142J
Reviews of ring-fencing

(1)
The Treasury must make arrangements for the carrying out of reviews of the

effects of the operation of the provision made by or under this Part in relation to

ring-fenced bodies, including ring-fencing rules made by the PRA and the FCA.

Such arrangements shall be set out in a statutory instrument subject to approval

by resolution of both Houses of Parliament.

(2)
The first review must be completed before the end of the period of two years

beginning with the date on which section 4 of the Financial Services (Banking

Reform) Act 2013, so far as it inserts this section, comes into force.

(3)
Subsequent reviews must be completed before the end of the period of two years

beginning with the date on which the previous review was completed.

(4)
Not less than nine months, nor more than 12 months, before the date on which a

review is due to be completed, the PRA and the FCA must publish a joint

assessment of the impact of the operation of their ring-fence rules.

(5)
For the purposes of this section a review is completed when the report of it is

published.

142JA
Persons by whom reviews are to be conducted

(1)
The Treasury shall appoint not fewer than five persons to conduct a review of

whom one is to chair it.

(2)
A person may not be appointed to chair a review unless the chairman of the

Treasury Committee of the House of Commons has notified the Treasury that, in

the chairman’s opinion, the person is likely to act independently of the Treasury,

the PRA and the FCA in carrying out the review.

(3)
The persons appointed to conduct a review must include at least one person with

substantial experience in central banking or financial regulation at a senior level.

(4)
The reference in subsection (2) 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

Consideration of Bill: 8 July 2013
543

Financial Services (Banking Reform) Bill, continued

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.

142JB
Reports of review

(1)
The persons appointed to conduct a review must give the Treasury a report of the

review.

(2)
The report must include an assessment of the extent to which the provision made

by or under this Part in relation to ring-fenced bodies, including ring-fencing rules

made by the PRA and by the FCA, are facilitating the advancement by the PRA

of the objective in section 2B(3)(c) and by the FCA of the continuity objective.

(3)
If the report is made before section 4 of the Financial Services (Banking Reform)

Act 2013, so far as it inserts section 142JD, has come into force it must also

include a recommendation as to whether or not section 4 of that Act should be

brought into force to that extent.

(4)
The report must include—

(a)
recommendations to the Treasury as to the provision that should be

included in orders and regulations under this Part, and

(b)
recommendations to the PRA and the FCA about the provision that

should be included in ring-fencing rules.

(5)
The Treasury must lay a copy of the report before Parliament and publish it in

such manner as it thinks fit.’.

Mr Chancellor of the Exchequer

6

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

‘Group restructuring powers

142JA
Cases in which group restructuring powers become exercisable

(1)
The appropriate regulator may exercise the group restructuring powers

only if it is satisfied that one or more of Conditions A to D is met in
5
relation to a ring-fenced body that is a member of a group.

(2)
Condition A is that the carrying on of core activities by the ring-fenced

body is being adversely affected by the acts or omissions of other

members of its group.

(3)
Condition B is that in carrying on its business the ring-fenced body—
10
(a)
is unable to take decisions independently of other members of its

group, or

(b)
depends on resources which are provided by a member of its

group and which would cease to be available in the event of the

insolvency of the other member.
15
(4)
Condition C is that in the event of the insolvency of one or more other

members of its group the ring-fenced body would be unable to continue

to carry on the core activities carried on by it.

(5)
Condition D is that the ring-fenced body or another member of its group

has engaged, or is engaged, in conduct which is having, or would apart
20
from this section be likely to have, an adverse effect on the advancement

by the appropriate regulator—

Consideration of Bill: 8 July 2013
544

Financial Services (Banking Reform) Bill, continued

(a)
in the case of the PRA, of the objective in section 2B(3)(c), or

(b)
in the case of the FCA, of the continuity objective.

(6)
The appropriate regulator may not exercise the group restructuring
25
powers in relation to any person if—

(a)
either regulator has previously exercised the group restructuring

powers in relation to that person, and

(b)
the decision notice in relation to the current exercise is given

before the second anniversary of the day on which the decision
30
notice in relation to the previous exercise was given.

(7)
In this section and sections 142JB to 142JG “the appropriate regulator”

means—

(a)
where the ring-fenced body is a PRA-authorised person, the

PRA;
35
(b)
where it is not, the FCA.

142JB
Group restructuring powers

(1)
In this Part “the group restructuring powers” means one or more of the

powers conferred by this section.

(2)
Where the appropriate regulator is the PRA, the powers conferred by this
40
section are as follows—

(a)
in relation to the ring-fenced body, power to impose a

requirement on the ring-fenced body requiring it to take any of

the steps mentioned in subsection (5),

(b)
in relation to any member of the ring-fenced body’s group which
45
is a PRA-authorised person, power to impose a requirement on

the PRA-authorised person requiring it to take any of the steps

mentioned in subsection (6),

(c)
in relation to any member of the ring-fenced body’s group which

is an authorised person but not a PRA-authorised person, power
50
to direct the FCA to impose a requirement on the authorised

person requiring it to take any of the steps mentioned in

subsection (6), and

(d)
in relation to a qualifying parent undertaking, power to give a

direction under this paragraph to the parent undertaking
55
requiring it to take any of the steps mentioned in subsection (6).

(3)
Where the appropriate regulator is the FCA, the powers conferred by this

section are as follows—

(a)
in relation to the ring-fenced body, power to impose a

requirement on the ring-fenced body requiring it to take any of
60
the steps mentioned in subsection (5),

(b)
in relation to any member of the ring-fenced body’s group which

is an authorised person but not a PRA-authorised person, power

to impose a requirement on the authorised person requiring it to

take any of the steps mentioned in subsection (6),
65
(c)
in relation to any member of the ring-fenced body’s group which

is a PRA-authorised person, power to direct the PRA to impose

a requirement on the authorised person requiring it to take any of

the steps mentioned in subsection (6), and

(d)
in relation to a qualifying parent undertaking, power to give a
70
direction under this paragraph to the parent undertaking

requiring it to take any of the steps mentioned in subsection (6).

Consideration of Bill: 8 July 2013
545

Financial Services (Banking Reform) Bill, continued

(4)
A parent undertaking of a ring-fenced body by reference to which the

group restructuring powers are exercisable is for the purposes of this Part

a “qualifying parent undertaking” if —
75
(a)
it is a body corporate which is incorporated in the United

Kingdom and has a place of business in the United Kingdom, and

(b)
it is not itself an authorised person.

(5)
The steps that the ring-fenced body may be required to take are—

(a)
to dispose of specified property or rights to an outside person;
80
(b)
to apply to the court under Part 7 for an order sanctioning a ring-

fencing transfer scheme relating to the transfer of the whole or

part of the business of the ring-fenced body to an outside person;

(c)
otherwise to make arrangements discharging the ring-fenced

body from specified liabilities.
85
(6)
The steps that another authorised person or a qualifying parent

undertaking may be required to take are—

(a)
to dispose of any shares in, or securities of, the ring-fenced body

to an outside person;

(b)
to dispose of any interest in any other body corporate that is a
90
member of the ring-fenced body’s group to an outside person;

(c)
to dispose of other specified property or rights to an outside

person;

(d)
to apply to the court under Part 7 for an order sanctioning a ring-

fencing transfer scheme relating to the transfer of the whole or
95
part of the business of the authorised person or qualifying parent

undertaking to an outside person.

(7)
In subsections (5) and (6) “outside person” means a person who, after the

implementation of the disposal or scheme in question, will not be a

member of the group of the ring-fenced body by reference to which the
100
powers are exercised (whether or not that body is to remain a ring-fenced

body after the implementation of the disposal or scheme in question).

(8)
It is immaterial whether a requirement to be imposed on an authorised

person by the appropriate regulator, or by the other regulator at the

direction of the appropriate regulator, is one that the regulator imposing
105
it could impose under section 55L or 55M.

142JC
Procedure: preliminary notices

(1)
If the appropriate regulator proposes to exercise the group restructuring

powers in relation to any authorised person or qualifying parent

undertaking (“the person concerned”), the regulator must give each of the
110
relevant persons a first preliminary notice stating—

(a)
that the regulator is of the opinion that the group ring-fencing

powers have become exercisable in relation to the person

concerned, and

(b)
its reasons for being satisfied as to the matters mentioned in
115
section 142JA(1).

(2)
Before giving a first preliminary notice, the regulator must—

(a)
give the Treasury a draft of the notice,

(b)
provide the Treasury with any information that the Treasury may

require in order to decide whether to give their consent, and
120
(c)
obtain the consent of the Treasury.

Consideration of Bill: 8 July 2013
546

Financial Services (Banking Reform) Bill, continued

(3)
The first preliminary notice must specify a reasonable period (which may

not be less than 14 days) within which any of the relevant persons may

make representations to the regulator.

(4)
The relevant persons are—
125
(a)
the person concerned,

(b)
the ring-fenced body, if not the person concerned, and

(c)
any other authorised person who will, in the opinion of the

appropriate regulator, be significantly affected by the exercise of

the group restructuring powers.
130
(5)
After considering any representations made by any of the relevant

persons, the regulator must either—

(a)
with the consent of the Treasury, give each of the persons a

second preliminary notice, or

(b)
give each of them a notice stating that it has decided not to
135
exercise its group restructuring powers.

(6)
A second preliminary notice is a notice stating—

(a)
that the regulator proposes to exercise the group restructuring

powers, and

(b)
the manner in which it proposes to do so.
140
(7)
The second preliminary notice must specify a reasonable period (which

may not be less than 14 days) within which any of the relevant persons

may make representations to the regulator about the proposals.

(8)
The regulator must after considering any representations made in

response to the second preliminary notice give each of the relevant
145
persons a third preliminary notice stating—

(a)
whether it has made any revisions to the proposals, and

(b)
if so, what the revisions are.

142JD
Procedure: warning notice and decision notice

(1)
If the appropriate regulator has given a third preliminary notice, it must
150
either—

(a)
if it still proposes to exercise the group restructuring powers,

give each of the relevant persons a warning notice during the

warning notice period, or

(b)
before the end of the warning notice period, give each of them a
155
notice stating that it has decided not to exercise the powers.

(2)
The “warning notice period” is the period of 6 months beginning with the

first anniversary of the day on which the third preliminary notice was

given.

(3)
Before giving a warning notice under subsection (1)(a), the appropriate
160
regulator must —

(a)
give the Treasury a draft of the notice,

(b)
provide the Treasury with any information that the Treasury may

require in order to decide whether to give their consent, and

(c)
obtain the consent of the Treasury.
165
(4)
The action specified in the warning notice may be different from that

specified in the third preliminary notice if—

Consideration of Bill: 8 July 2013
547

Financial Services (Banking Reform) Bill, continued

(a)
the appropriate regulator considers that different action is

appropriate as a result of any change in circumstances since the

third preliminary notice was given, or
170
(b)
the person concerned consents to the change.

(5)
The regulator must, in particular, have regard to anything that—

(a)
has been done by the person concerned since the giving of the

third preliminary notice, and

(b)
represents action that would have been required in pursuance of
175
the proposals in that notice.

(6)
If the regulator decides to exercise the group restructuring powers it must

give each of the relevant persons a decision notice.

(7)
The decision notice must allow at least 5 years from the date of the

decision notice for the completion of—
180
(a)
any disposal of shares, securities or other property that is

required by the notice, or

(b)
any transfer of liabilities for which the notice requires

arrangements to be made.

(8)
The giving of consent for the purpose of subsection (4)(b) does not affect
185
any right to refer to the Tribunal the matter to which any decision notice

resulting from the warning notice relates.

(9)
“The relevant persons” has the same meaning as in section 142JC.

142JE
References to Tribunal

(1)
A notified person who is aggrieved by—
190
(a)
the imposition by either regulator of a requirement as a result of

section 142JB(2)(a) or (b) or (3)(a) or (b),

(b)
a requirement to be imposed as a result of the giving by one

regulator to the other of a direction under section 142JB(2)(c) or

(3)(c), or
195
(c)
the giving by either regulator of a direction under section

142JB(2)(d) or (3)(d),


may refer the matter to the Tribunal.

(2)
“Notified person” means a person to whom a decision notice under

section 142JD(6) was given or ought to have been given.
200
142JF
Subsequent variation of requirement or direction

(1)
A regulator may at any time with the consent of the person concerned

vary—

(a)
a requirement imposed by it as a result of section 142JB(2)(a) or

(b) or (3)(a) or (b), or
205
(b)
a direction given by it as a result of section 142JB(2)(c) or (d) or

(3)(c) or (d).

(2)
The person concerned may at any time apply to the appropriate regulator

for the variation of—

(a)
a requirement imposed by it as a result of section 142JB(2)(a) or
210
(b) or (3)(a) or (b), or

(b)
a direction given by it as a result of section 142JB(2)(c) or (d) or

(3)(c) or (d).



© Parliamentary copyright	Revised 8 July 2013