Session 2013 - 14
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157

 

SUPPLEMENT TO THE VOTES AND PROCEEDINGS

 
 

Monday 8 July 2013

 

Report Stage Proceedings

 

Financial Services (Banking Reform) Bill


 

Amendments to Clauses 1 to 8 other than amendments relating to

 

competition

 

Mr Chancellor of the Exchequer

 

Agreed to  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

 

Agreed to  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

 

Agreed to  3

 

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

 

group’.

 

Mr Chancellor of the Exchequer

 

Agreed to  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).’.

 



 
 

Report Stage Proceedings: 8 July 2013                  

158

 

Financial Services (Banking Reform) Bill, continued

 
 

Ed Balls

 

Chris Leslie

 

Cathy Jamieson

 

Catherine McKinnell

 

Not called  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

 

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.


 
 

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Financial Services (Banking Reform) Bill, continued

 
 

(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

 

Agreed to  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—

 

(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—


 
 

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Financial Services (Banking Reform) Bill, continued

 
 

(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).

 

(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 —

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(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;


 
 

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Financial Services (Banking Reform) Bill, continued

 
 

(c)    

otherwise to make arrangements discharging the ring-fenced

 

body from specified liabilities.

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(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

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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

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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.

 

(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—

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(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.


 
 

Report Stage Proceedings: 8 July 2013                  

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Financial Services (Banking Reform) Bill, continued

 

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.

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(4)    

The action specified in the warning notice may be different from that

 

specified in the third preliminary notice if—

 

(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

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(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

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the proposals in that notice.


 
 

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Financial Services (Banking Reform) Bill, continued

 
 

(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).

 

(3)    

Sections 55U, 55V, 55X and 55Z3 apply to an application under

 

subsection (2) as they apply to an application for the variation of a

215

requirement imposed by the appropriate regulator under section 55L or

 

55M.

 

142JG

 Consultation etc. between regulators

 

(1)    

Where a notice under section 142JC or a warning notice or decision

 

notice under section 142JD relates to a requirement to be imposed in

220

pursuance of a direction to be given as a result of section 142JB(2)(c) or

 

(3)(c), the appropriate regulator must—


 
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