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Lords Amendments to the Financial Services (Banking Reform) Bill


 
 

30

 
 

         

“Consequential amendments relating to Part 4

 

    

Schedule (Consequential amendments relating to Part 4) (which contains

 

further amendments relating to the provisions of this Part) has effect.”

60

Insert the following new Clause—

 

Offence

 

         

Offence relating to a decision causing a financial institution to fail

 

(1)    

A person (“S”) commits an offence if—

 

(a)    

at a time when S is a senior manager in relation to a financial

 

institution (“F”), S—

 

(i)    

takes, or agrees to the taking of, a decision by or on behalf of

 

F as to the way in which the business of a group institution

 

is to be carried on, or

 

(ii)    

fails to take steps that S could take to prevent such a decision

 

being taken,

 

(b)    

at the time of the decision, S is aware of a risk that the

 

implementation of the decision may cause the failure of the group

 

institution,

 

(c)    

in all the circumstances, S’s conduct in relation to the taking of the

 

decision falls far below what could reasonably be expected of a

 

person in S’s position, and

 

(d)    

the implementation of the decision causes the failure of the group

 

institution.

 

(2)    

A “group institution”, in relation to a financial institution (“F”), means F or

 

any other financial institution that is a member of F’s group for the purpose

 

of FSMA 2000 (see section 421 of that Act).

 

(3)    

Subsections (1) and (2) are to be read with the interpretative provisions in

 

section (Interpretation of terms used in offence).

 

(4)    

A person guilty of an offence under this section is liable—

 

(a)    

on summary conviction—

 

(i)    

in England and Wales, to imprisonment for a term not

 

exceeding 12 months (or 6 months, if the offence was

 

committed before the commencement of section 154(1) of

 

the Criminal Justice Act 2003) or a fine, or both;

 

(ii)    

in Scotland, to imprisonment for a term not exceeding 12

 

months or a fine not exceeding the statutory maximum, or

 

both;

 

(iii)    

in Northern Ireland, to imprisonment for a term not

 

exceeding 6 months or a fine not exceeding the statutory

 

maximum, or both;

 

(b)    

on conviction on indictment, to imprisonment for a term not

 

exceeding 7 years or a fine, or both.”

61

Insert the following new Clause—


 
 

31

 
 

         

“Section (Offence relating to a decision causing a financial institution to fail):

 

interpretation

 

(1)    

This section has effect for the interpretation of section (Offence relating to a

 

decision causing a financial institution to fail).

 

(2)    

“Financial institution” means a UK institution which—

 

(a)    

meets condition A or B, and

 

(b)    

is not an insurer or a credit union.

 

(3)    

Condition A is that it has permission under Part 4A of FSMA 2000 to carry

 

on the regulated activity of accepting deposits.

 

(4)    

Condition B is that—

 

(a)    

it is for the purposes of FSMA 2000 an investment firm (see section

 

424A of that Act),

 

(b)    

it has permission under Part 4A of that Act to carry on the regulated

 

activity of dealing in investments as principal, and

 

(c)    

when carried on by it, that activity is a PRA-regulated activity.

 

(5)    

In subsection (2)—

 

(a)    

“UK institution” means an institution which is incorporated in, or

 

formed under the law of any part of, the United Kingdom;

 

(b)    

“insurer” means an institution which is authorised under FSMA

 

2000 to carry on the regulated activity of effecting or carrying out

 

contracts of insurance as principal;

 

(c)    

“credit union” means a credit union as defined by section 31 of the

 

Credit Unions Act 1979 or a credit union as defined by Article 2(2)

 

of the Credit Unions (Northern Ireland) Order 1985.

 

(6)    

Subsections (3), (4) and (5)(b) are to be read in accordance with sections 22

 

and 22A of FSMA 2000, taken with Schedule 2 to that Act and any order

 

under section 22.

 

(7)    

A person is a “senior manager” in relation to a financial institution if, under

 

an arrangement entered into by the institution, or by a contractor of the

 

institution, in relation to the carrying on by the institution of a regulated

 

activity, the person performs a senior management function.

 

(8)    

A “senior management function” is a function designated as such—

 

(a)    

by the FCA under subsection (6A) of section 59 of FSMA 2000

 

(approval for particular arrangements), or

 

(b)    

by the PRA under subsection (6B) of that section.

 

(9)    

A financial institution (“F”) is to be regarded as failing where—

 

(a)    

F enters insolvency,

 

(b)    

any of the stabilisation options in Part 1 of the Banking Act 2009 is

 

achieved in relation to F, or

 

(c)    

F is taken for the purposes of the Financial Services Compensation

 

Scheme to be unable, or likely to be unable, to satisfy claims against

 

F.

 

(10)    

In subsection (9)(a) “insolvency” includes—

 

(a)    

bankruptcy,

 

(b)    

liquidation,

 

(c)    

bank insolvency,

 

(d)    

administration,


 
 

32

 
 

(e)    

bank administration,

 

(f)    

receivership,

 

(g)    

a composition between F and F’s creditors, and

 

(h)    

a scheme of arrangement of F’s affairs.”

62

Insert the following new Clause—

 

         

“Institution of proceedings

 

(1)    

In this section “an offence” means an offence under section (Offence relating

 

to a decision causing a financial institution to fail).

 

(2)    

Proceedings for an offence may be instituted in England and Wales only—

 

(a)    

by the FCA, the PRA or the Secretary of State, or

 

(b)    

by or with the consent of the Director of Public Prosecutions.

 

(3)    

Proceedings for an offence may be instituted in Northern Ireland only—

 

(a)    

by the FCA, the PRA or the Secretary of State, or

 

(b)    

by or with the consent of the Director of Public Prosecutions for

 

Northern Ireland.

 

(4)    

In exercising its power to institute proceedings for an offence, the FCA or

 

the PRA must comply with any conditions or restrictions imposed in

 

writing by the Treasury.

 

(5)    

Conditions or restrictions may be imposed under subsection (4) in relation

 

to—

 

(a)    

proceedings generally, or

 

(b)    

such proceedings, or categories of proceedings, as the Treasury

 

may direct.”

63

Insert the following new Clause—

 

“Part 5

 

Regulation of payment systems

 

Overview

 

Overview

 

(1)    

This Part contains provision for the establishment of a new body (the

 

“Payment Systems Regulator”) to exercise functions in relation to payment

 

systems.

 

(2)    

Section (The Payment Systems Regulator) provides for the establishment of

 

the Payment Systems Regulator.

 

(3)    

Sections (Meaning of “payment system”) and (Participants in payment systems

 

etc) contain definitions of “payment system” and related terms.

 

(4)    

Sections (Designation orders) to (Publication) make provision about

 

designating a payment system as a regulated payment system.

 

(5)    

Sections (Regulator’s general duties in relation to payment systems) to

 

(Regulatory principles) contain provision about the general duties of the

 

Payment Systems Regulator under this Part.


 
 

33

 
 

(6)    

Sections (Directions) to (Amendments relating to Regulator’s competition

 

powers) confer various regulatory and competition functions on the

 

Payment Systems Regulator.

 

(7)    

Sections (Complaints by representative bodies) to (Complaints: guidance)

 

contain provision about the making of complaints to the Payment Systems

 

Regulator.

 

(8)    

Sections (Meaning of “compliance failure”) to (Enforcement of requirement to

 

dispose of interest in payment system) contain provision about enforcement

 

and appeals.

 

(9)    

Sections (Power to obtain information or documents) to (Disclosure of

 

information by Bank to Regulator) contain information and investigation

 

powers and provision about the disclosure of information.

 

(10)    

Sections (Guidance) and (Reports) contain supplementary powers.

 

(11)    

Sections (Duty of regulators to ensure co-ordinated exercise of functions) to

 

(Power of PRA to require Regulator to refrain from specified action) contain

 

provision about the Payment Systems Regulator’s relationship with other

 

regulators.

 

(12)    

Sections (Regulator’s general duty to consult) to (Competition scrutiny) contain

 

provision about consultation, accountability and oversight.

 

(13)    

Sections (Relationship with Part 8 of the Payment Services Regulations 2009) to

 

(Interpretation) contain miscellaneous and supplemental provision.”

64

Insert the following new Clause—

 

The Payments System Regulator

 

         

The Payment Systems Regulator

 

(1)    

The FCA must establish a body corporate to exercise the functions

 

conferred on the body by or under this Part.

 

(2)    

The body established under subsection (1) is referred to in this Part as the

 

Payment Systems Regulator.

 

(3)    

The FCA must take such steps as are necessary to ensure that the Payment

 

Systems Regulator is, at all times, capable of exercising the functions

 

referred to in subsection (1).

 

(4)    

In complying with the duty imposed by subsection (3) the FCA may, in

 

particular—

 

(a)    

provide staff to the Payment Systems Regulator, and

 

(b)    

provide services to the Payment Systems Regulator which the FCA

 

considers would facilitate the exercise of any of those functions.

 

(5)    

Schedule (The Payment Systems Regulator) (which contains further provision

 

about the Payment Systems Regulator) has effect.”

65

Insert the following new Clause—


 
 

34

 
 

“Payment system” etc

 

         

Meaning of “payment system”

 

(1)    

In this Part “payment system” means a system which is operated by one or

 

more persons in the course of business for the purpose of enabling persons

 

to make transfers of funds, and includes a system which is designed to

 

facilitate the transfer of funds using another payment system.

 

(2)    

But “payment system” does not include—

 

(a)    

any arrangements for the physical movement of cash;

 

(b)    

a system which does not make any provision for the transfer of

 

funds by payers, or to recipients, in the United Kingdom;

 

(c)    

a securities settlement system operated by a person approved

 

under regulations under section 785 of the Companies Act 2006

 

(provision enabling procedures for evidencing and transferring

 

title);

 

(d)    

a system operated by a recognised clearing house;

 

(e)    

any other system whose primary purpose is not that of enabling

 

persons to transfer funds.

 

(3)    

In this section—

 

“recognised clearing house” has the meaning given by section 285(1)

 

of FSMA 2000;

 

“securities settlement system” means a computer-based system, and

 

procedures, which enable title to units of a security to be evidenced

 

and transferred without a written instrument, and which facilitate

 

supplementary and incidental matters.

 

(4)    

The Treasury may by order amend this section so as to—

 

(a)    

add descriptions of systems or arrangements that are not to be

 

regarded as payment systems, or

 

(b)    

vary or remove any such description.”

66

Insert the following new Clause—

 

         

“Participants in payment systems etc

 

(1)    

This section applies for the purposes of this Part.

 

(2)    

The following persons are “participants” in a payment system—

 

(a)    

the operator of the payment system (see subsection (3));

 

(b)    

any infrastructure provider (see subsection (4));

 

(c)    

any payment service provider (see subsection (5)).

 

    

(But see also subsection (8).)

 

(3)    

“Operator”, in relation to a payment system, means any person with

 

responsibility under the system for managing or operating it; and any

 

reference to the operation of a payment system includes a reference to its

 

management.

 

(4)    

“Infrastructure provider”, in relation to a payment system, means any

 

person who provides or controls any part of the infrastructure used for the

 

purposes of operating the payment system.


 
 

35

 
 

(5)    

“Payment service provider”, in relation to a payment system, means any

 

person who provides services to persons who are not participants in the

 

system for the purposes of enabling the transfer of funds using the

 

payment system.

 

(6)    

A payment service provider has “direct access” to a payment system if the

 

payment service provider is able to provide services for the purposes of

 

enabling the transfer of funds using the payment system as a result of

 

arrangements made between the payment service provider and the

 

operator of the payment system.

 

(7)    

Any reference to participation in a payment system is to be read in

 

accordance with this section, and in particular—

 

(a)    

in the case of an operator of a payment system, includes a reference

 

to developing the system, and

 

(b)    

in the case of a payment service provider with direct access to a

 

payment system, includes a reference to entering into an agreement

 

with a person to enable the person to become a payment service

 

provider in relation to the system.

 

(8)    

The Bank of England is not to be regarded as a participant of any kind in

 

any payment system.”

67

Insert the following new Clause—

 

Designation as a regulated payment system

 

         

Designation orders

 

(1)    

The Treasury may by order (a “designation order”) designate a payment

 

system as a regulated payment system for the purposes of this Part.

 

(2)    

A designation order must specify in as much detail as is reasonably

 

practicable the arrangements that constitute the payment system.”

68

Insert the following new Clause—

 

         

“Designation criteria

 

(1)    

The Treasury may make a designation order in respect of a payment

 

system only if they are satisfied that any deficiencies in the design of the

 

system, or any disruption of its operation, would be likely to have serious

 

consequences for those who use, or are likely to use, the services provided

 

by the system.

 

(2)    

In considering whether to make a designation order in respect of a

 

payment system, the Treasury must have regard to—

 

(a)    

the number and value of the transactions that the system presently

 

processes or is likely to process in the future,

 

(b)    

the nature of the transactions that the system presently processes or

 

is likely to process in the future,

 

(c)    

whether those transactions or their equivalent could be handled by

 

other payment systems, and

 

(d)    

the relationship between the system and other payment systems.”

69

Insert the following new Clause—


 
 

36

 
 

         

“Procedure

 

(1)    

Before making a designation order in respect of a payment system the

 

Treasury must—

 

(a)    

consult the Payment Systems Regulator and, if the system is a

 

recognised inter-bank payment system, the Bank of England,

 

(b)    

notify the operator of the system, and

 

(c)    

consider any representations made.

 

(2)    

In considering whether to make a designation order in respect of a

 

payment system, the Treasury may rely on information provided by—

 

(a)    

the Bank of England,

 

(b)    

the FCA,

 

(c)    

the PRA, or

 

(d)    

the Payment Systems Regulator.”

70

Insert the following new Clause—

 

         

“Amendment of designation order

 

(1)    

The Treasury may amend a designation order.

 

(2)    

Before amending a designation order made in respect of a payment system,

 

the Treasury must—

 

(a)    

consult the Payment Systems Regulator and, if the payment system

 

is a recognised inter-bank payment system, the Bank of England,

 

(b)    

notify the operator of the payment system, and

 

(c)    

consider any representations made.

 

(3)    

The Treasury must consider any request by the operator of a regulated

 

payment system for the amendment of its designation order.”

71

Insert the following new Clause—

 

         

“Revocation of designation orders

 

(1)    

The Treasury may revoke a designation order.

 

(2)    

The Treasury must revoke a designation order if they are not satisfied that

 

the criteria in section (Designation criteria) are met in respect of the payment

 

system to which the order relates.

 

(3)    

Before revoking a designation order made in respect of a payment system,

 

the Treasury must—

 

(a)    

consult the Payment Systems Regulator and, if the payment system

 

is a recognised inter-bank payment system, the Bank of England,

 

(b)    

notify the operator of the payment system, and

 

(c)    

consider any representations made.

 

(4)    

The Treasury must consider any request by the operator of a regulated

 

payment system for the revocation of its designation order.”

72

Insert the following new Clause—

 

         

“Publication

 

(1)    

The Treasury must publish any designation order.


 
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