Lords Amendments to the Financial Services (Banking Reform) Bill

House of Commons

Session 2013 - 14
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Other Bills before Parliament

Lords Amendments to the Financial Services (Banking Reform) Bill

LORDS amendments to the
Financial Services (Banking Reform) Bill
[The page and line references are to HL Bill 38, the bill as first printed for the Lords.]
Clause 4
1
Page 9, leave out lines 7 to 9 and insert—

“(a)
in relation to a PRA-authorised person, the PRA,

(b)
in relation to any other authorised person, the FCA;”
2
Page 9, line 27, at end insert “and of any rules made by it under section 192JA (rules

applying to parent undertakings of ring-fenced bodies).”
3
Page 12, line 19, leave out from “a” to end of line 24 and insert “notice (a

“preliminary notice”).

(1A)
The preliminary notice must—

(a)
state that it is a preliminary notice,

(b)
state that the regulator proposes to exercise the group restructuring

powers,

(c)
state the action which the regulator proposes to take in the exercise

of those powers,

(d)
be in writing, and

(e)
give reasons for the proposed action (which must include the

regulator’s reasons for being satisfied as to the matters mentioned

in section 142K(1)).”
4
Page 12, leave out lines 25 to 30 and insert—

“(2)
The appropriate regulator must give a copy of the preliminary notice to the

Treasury.”
5
Page 12, line 31, leave out “first”
6
Page 12, line 40, leave out from beginning to end of line 11 on page 13
7
Page 13, line 13, leave out “third preliminary notice” and insert “preliminary notice

under section 142M”

Bill 142 55/3

2
8
Page 13, line 15, after “if” insert “, having considered any representations made by

any of the relevant persons,”
9
Page 13, line 19, after “a” insert “written”
10
Page 13, line 19, at end insert “and give a copy of that notice to the Treasury.”
11
Page 13, line 20, leave out from second “period” to end of line 22 and insert—

“(a)
beginning 3 months after the end of the period specified under

section 142M(3) as that within which any representations must be

made, and

(b)
ending 6 months after the end of that period.”
12
Page 13, line 31, leave out “third”
13
Page 13, line 34, leave out “third”
14
Page 13, line 38, leave out “third”
15
Page 13, line 43, leave out from “must” to end of line 44 and insert “specify the date

or dates by which each of the following must be completed—”
16
Page 13, line 46, leave out “or”
17
Page 17, leave out lines 20 to 44 and insert—

“(1A)
The Treasury may by regulations require a ring-fenced body to make

arrangements for any one or more of the following purposes—

(a)
ensuring that, except in prescribed cases, the ring-fenced body

cannot become liable to meet, or contribute to the meeting of,

pension liabilities which arise in connection with persons’ service

on or after a date specified in the regulations (“the specified date”)

in any employment, other than service in an employment in respect

of which the employer is a ring-fenced body;

(b)
ensuring that, except in prescribed cases, the default of a person

other than another ring-fenced body would not result in the ring-

fenced body becoming liable to meet, or contribute to the meeting

of, pension liabilities arising in connection with persons’ service in

any employment before the specified date;

(c)
to the extent that it is not possible to ensure the result mentioned in

paragraph (a) or (b), minimising any potential liability falling

within paragraph (a) or (b).

(1B)
The regulations may make provision enabling the trustees or managers of

a relevant pension scheme in respect of which the employer or one of the

employers is a ring-fenced body—

(a)
to transfer to another relevant pension scheme all or part of the

pension liabilities arising in connection with persons’ service before

the specified date together with all or part of the assets of the

scheme, or

(b)
to divide the scheme into two or more sections in relation to which

prescribed conditions are met.

(1C)
The regulations may make provision—

(a)
enabling a ring-fenced body to apply to the court in a case where

the ring-fenced body has been unable to reach agreement with

another person (“P”) about the making of arrangements with P on

commercial terms for one or more of the purposes in subsection

(1A), and

3

(b)
enabling the court on such an application to order P to enter into

arrangements with the ring-fenced body for those purposes on such

terms as the court considers fair and reasonable in the

circumstances.

(1D)
The regulations must provide that any terms specified by the court by

virtue of provision made under subsection (1C)—

(a)
must be terms which, in the court’s opinion, represent terms on

which the arrangements might be entered into if they were being

entered into for commercial reasons between willing parties

dealing at arm’s length, and

(b)
may involve the payment of any sum by instalments.

(1E)
The regulations may make other provision—

(a)
about the making by a ring-fenced body of arrangements for one or

more of the purposes in subsection (1A);

(b)
about any transfer or division falling within subsection (1B).”
18
Page 18, line 11, leave out “a ring-fenced body from making” and insert “the

making of”
19
Page 18, line 18, leave out “a ring-fenced body to make the arrangements” and

insert “the arrangements to be made”
20
Page 18, line 19, at end insert—

“( )
require the trustees or managers of a relevant pension scheme or

any employer in relation to a relevant pension scheme to give notice

of prescribed matters to prescribed persons;”
21
Page 18, line 25, leave out “the ring-fenced body to make the arrangements” and

insert “the arrangements to be made”
22
Page 18, leave out lines 27 and 28
23
Page 18, line 34, at end insert—

“( )
modify, exclude or apply (with or without modification) any

primary or subordinate legislation.”
24
Page 18, line 34, at end insert—

“(3A)
The Treasury may by regulations require an authorised person who will or

may be a ring-fenced body or an authorised person who will or may be a

member of a ring-fenced body’s group to do all it can to obtain from the

Pensions Regulator a clearance statement in relation to any arrangements

to be made for the purpose of complying with—

(a)
regulations under this section, or

(b)
any provision made by or under this Part (other than this section)

when the provision comes into force.”
25
Page 18, line 35, leave out from beginning to “the” and insert “A “clearance

statement” is a statement issued by”
26
Page 18, line 49, leave out “The regulations” and insert “Regulations under this

section”
27
Page 19, line 5, at end insert “and this section”
28
Page 19, line 5, at end insert—

4

“(1A)
“Relevant pension scheme” means an occupational pension scheme that is

not a money purchase scheme.”
29
Page 19, line 9, leave out ““employer”,”
30
Page 19, line 14, at end insert—

“(3A)
“Employer”, in relation to a relevant pension scheme, means—

(a)
a person who is for the purposes of Part 1 of the Pensions Act 1995

or Part 2 of the Pensions (Northern Ireland) Order 1995 an

employer in relation to the scheme, and

(b)
any other person who has or may have any liability under the

scheme.

(3B)
“Employment” has the meaning given in section 181(1) of the Pension

Schemes Act 1993 or section 176(1) of the Pension Schemes (Northern

Ireland) Act 1993.

(3C)
“Pension liabilities” means liabilities attributable to or associated with the

provision under a relevant pension scheme of pensions or other benefits.”
31
Page 21, line 12, at end insert—

“(4)
Any reference to a qualifying parent undertaking is to be read in

accordance with section 142L(4).””
32
Page 21, line 15, at end insert—

“( )
In section 391 of FSMA 2000 (publication), in subsection (1ZB), after

paragraph (i) insert—

“(ia)
section 142N;”.”
Clause 5
33
Leave out Clause 5
Clause 6
34
Page 22, line 13, after “provisions,” insert—

“( )
the extent to which ring-fenced bodies are carrying on the regulated

activity of dealing in investments as principal (whether in the

United Kingdom or elsewhere) in circumstances where as a result

of an order under section 142D(2) that activity is not an excluded

activity,

( )
the extent to which ring-fenced bodies are carrying on activities that

would be excluded activities by virtue of an order under section

142D(4) but for an exemption or exclusion made by such an order,

( )
the extent to which ring-fenced bodies are doing things that they

would be prohibited from doing by an order under section 142E but

for an exemption made by such an order,”
After Clause 8
35
Insert the following new Clause—

5


“Independent review of operation of legislation relating to ring-fencing

(1)
The Treasury must, before the end of the initial period, appoint a panel of

at least 5 persons (“the review panel”) to carry out a review of the operation

of the legislation relating to ring-fencing.

(2)
“The legislation relating to ring-fencing” means—

(a)
Part 9B of FSMA 2000 (as inserted by section 4);

(b)
orders and regulations made by the Treasury under that Part;

(c)
ring-fencing rules, as defined by section 142H(3) of FSMA 2000,

made by the FCA or the PRA;

(d)
section 192JA of FSMA 2000 (as inserted by section (Power of FCA

and PRA to make rules applying to parent undertakings));

(e)
rules made by the FCA or the PRA under that section.

(3)
The initial period is the period of 2 years beginning with the first day on

which section 142G of FSMA 2000 is fully in force.

(4)
The members of the review panel must be persons—

(a)
who appear to the Treasury to be independent of the PRA, the FCA,

the Bank of England and the Treasury, and

(b)
who do not appear to the Treasury to have any financial or other

interests that could reasonably be regarded as affecting their

suitability to serve as members of the review panel.

(5)
In appointing the members of the review panel, the Treasury—

(a)
must have regard to the need to ensure that the review panel

(considered as a whole) has the necessary experience to undertake

the review, and

(b)
must ensure that at least one of the members is a person appearing

to the Treasury to have substantial experience in central banking or

banking regulation at a senior level.

(6)
Before appointing the members of the review panel, the Treasury must

consult the chair of the Treasury Committee of the House of Commons.

(7)
The reference in subsection (6) to the Treasury Committee of the House of

Commons—

(a)
if the name of that Committee is changed, is 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.

(8)
The Treasury must appoint one of the members of the review panel to be

the chair of the panel.

(9)
The review panel must, within a reasonable time after the end of the initial

period, make a written report to the Treasury—

(a)
setting out the results of the review, and

(b)
making such recommendations (if any) as the panel considers

appropriate.

(10)
The Treasury must—

6

(a)
lay a copy of the report before Parliament, and

(b)
publish the report in such manner as they think fit.

(11)
Any expenses reasonably incurred in the conduct of the review are to be

paid by the Treasury out of money provided by Parliament.”
36
Insert the following new Clause—


“PRA review of proprietary trading

(1)
The PRA must carry out a review of proprietary trading engaged in

(whether or not as a regulated activity) by relevant authorised persons, for

the purpose of considering whether further restrictions on any kind of

proprietary trading ought to be imposed.

(2)
The review must begin before the end of the 12 months beginning with the

first day on which section 142G of FSMA 2000 is fully in force.

(3)
On completion of the review, the PRA must make a written report to the

Treasury on—

(a)
the extent to which relevant authorised persons engage in

proprietary trading;

(b)
whether proprietary trading engaged in by relevant authorised

persons gives rise to any risks to their safety and soundness;

(c)
whether any kinds of proprietary trading are particularly likely to

give rise to such risks;

(d)
anything done by the PRA to minimise risks to the safety and

soundness of relevant authorised persons arising from proprietary

trading engaged in by them;

(e)
any difficulties encountered by the PRA in seeking to minimise

such risks.

(4)
The report must include an assessment by the PRA of each of the

following—

(a)
whether the PRA’s powers under FSMA 2000 are, and might be

expected to continue to be, sufficient to enable it to advance its

objectives in relation to relevant authorised persons who engage in

proprietary trading;

(b)
the effectiveness of restrictions imposed in countries or territories

outside the United Kingdom on proprietary trading by banks (so

far as experience in those countries or territories appears to the PRA

to be of relevance to the United Kingdom).

(5)
The report must be made within 9 months of the beginning of the review.

(6)
The Treasury must lay a copy of the report before Parliament.

(7)
The PRA must publish the report in such manner as it thinks fit.

(8)
The functions of the PRA under this section are to be taken for the purposes

of FSMA 2000 to be functions under that Act.

(9)
This section is to be read with the interpretative provisions in section

(Reviews of proprietary trading: interpretation).”
37
Insert the following new Clause—

7


“Independent review of proprietary trading

(1)
The Treasury must, after receiving the report of the PRA under section

(PRA review of proprietary trading) but before the end of the initial period,

appoint one or more persons (“the review panel”) to carry out a review of

proprietary trading engaged in (whether or not as a regulated activity) by

relevant authorised persons.

(2)
The initial period is the period of 2 years beginning with the first day on

which section 142G of FSMA 2000 is fully in force.

(3)
The members of the review panel must be persons—

(a)
who appear to the Treasury to be independent of the PRA, the FCA,

the Bank of England and the Treasury, and

(b)
who do not appear to the Treasury to have any financial or other

interests that could reasonably be regarded as affecting their

suitability to serve as members of the review panel.

(4)
In appointing the members of the review panel, the Treasury must have

regard to the need to ensure that the review panel (considered as a whole)

has the necessary experience to undertake the review.

(5)
Before appointing the members of the review panel, the Treasury must

consult the chair of the Treasury Committee of the House of Commons.

(6)
The reference in subsection (5) to the Treasury Committee of the House of

Commons—

(a)
if the name of that Committee is changed, is 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.

(7)
If the review panel consists of two or more members, the Treasury must

appoint one of them to be the chair of the panel.

(8)
The review panel must, within a reasonable time after the end of the initial

period, make a written report to the Treasury—

(a)
stating whether the panel agrees with the conclusions reached by

the PRA in its report under section (PRA review of proprietary

trading),

(b)
stating whether the panel recommends any further restrictions on

any kind of proprietary trading in relation to relevant authorised

persons, and

(c)
making such other recommendations as the panel thinks fit.

(9)
The Treasury must—

(a)
lay a copy of the report before Parliament, and

(b)
publish the report in such manner as they think fit.

(10)
Any expenses reasonably incurred in the conduct of the review are to be

paid by the Treasury out of money provided by Parliament.

(11)
This section is to be read with the interpretative provisions in section

(Reviews of proprietary trading: interpretation).”