142.73-79

House of Commons

Session 2013 - 14
Internet Publications
Other Bills before Parliament

Lords Amendments to the Financial Services (Banking Reform) Bill

73

(a)
the representations made to it in accordance with subsection (3)(d),

and

(b)
its response to them.

(6)
If the requirement differs from the draft published under subsection (2)(b)

in a way which is, in the opinion of the Payment Systems Regulator,

significant the Payment Systems Regulator must (in addition to complying

with subsection (5)) publish details of the difference together with a cost

benefit analysis.

(7)
For the purposes of this section a “cost benefit analysis” is—

(a)
an analysis of the costs together with an analysis of the benefits that

will arise—

(i)
if the proposed requirement is imposed, or

(ii)
if subsection (6) applies, from the requirement imposed, and

(b)
subject to subsection (8), an estimate of those costs and of those

benefits.

(8)
If, in the opinion of the Payment Systems Regulator—

(a)
the costs or benefits referred to in subsection (7) cannot reasonably

be estimated, or

(b)
it is not reasonably practicable to produce an estimate,


the cost benefit analysis need not estimate them, but must include a

statement of the Payment Systems Regulator’s opinion and an explanation

of it.

(9)
The Payment Systems Regulator may charge a reasonable fee for providing

a person with a copy of a draft published under subsection (2)(b).

(10)
Subsections (2)(b) and (3) to (6) do not apply if the Payment Systems

Regulator considers that the delay involved in complying with them would

be prejudicial to the interests of those who use, or are likely to use, services

provided by regulated payment systems.

(11)
Subsections (3)(a) and (6) do not apply if the Payment Systems Regulator

considers that, making the appropriate comparison—

(a)
there will be no increase in costs, or

(b)
there will be an increase in costs but the increase will be of minimal

significance.

(12)
In subsection (11) the “appropriate comparison” means—

(a)
in relation to subsection (3)(a), a comparison between the overall

position if the requirement is imposed and the overall position if it

is not imposed;

(b)
in relation to subsection (6), a comparison between the overall

position after the imposing of the requirement and the overall

position before it was imposed.”
129
Insert the following new Clause—

“Independent inquiries

(1)
Section 68 of the Financial Services Act 2012 (cases in which Treasury may

arrange independent inquiries) is amended as follows.

(2)
In subsection (1), for “two” substitute “three”.

74

(3)
After subsection (3) insert—

“(3A)
The third case is where it appears to the Treasury that—

(a)
events have occurred in relation to a regulated payment

system which caused or risked causing significant damage

to business or other interests throughout the United

Kingdom, and

(b)
those events might not have occurred, or the threat or

damage might have been reduced, but for a serious failure

in—

(i)
the system established by Part 5 of the Financial

Services (Banking Reform) Act 2013 for the

regulation of payment systems, or

(ii)
the operation of that system.”

(4)
In section 83(1) (interpretation), after the definition of “regulated activity”

insert—

““regulated payment system” has the same meaning as in Part

5 of the Financial Services (Banking Reform) Act 2013 (see

section (Interpretation) of that Act);”.”
130
Insert the following new Clause—

“Investigations into regulatory failure

(1)
Part 5 of the Financial Services Act 2012 (inquiries and investigations) is

amended as follows.

(2)
After section 76 insert—

“76A
Duty of Payment Systems Regulator to investigate and report on

possible regulatory failure

(1)
Subsection (3) applies where it appears to the Payment Systems

Regulator that—

(a)
events have occurred in relation to a regulated payment

system which had or could have had a significant adverse

effect on effective competition in the interests of—

(i)
participants in the payment system, or

(ii)
those who use, or are likely to use, the services

provided by the payment system, and

(b)
those events might not have occurred, or the adverse effect

might have been reduced, but for a serious failure in—

(i)
the system established by Part 5 of the Financial

Services (Banking Reform) Act 2013 for the

regulation of payment systems, or

(ii)
the operation of that system.

(2)
Subsection (3) also applies where the Treasury direct the Payment

Systems Regulator that it appears to the Treasury that the

conditions in subsection (1) are met in relation to specified events.

(3)
The Payment Systems Regulator must carry out an investigation

into the events and the circumstances surrounding them and report

to the Treasury on the result of the investigation.

75

(4)
Subsection (3) does not apply by virtue of subsection (1) if the

Treasury direct the Payment Systems Regulator that it is not

required to carry out an investigation into the events concerned.

(5)
In this section “participant”, in relation to a regulated payment

system, has the same meaning as in Part 5 of the Financial Services

(Banking Reform) Act 2013 (see section (Participants in payment

systems etc) of that Act).”

(5)
In section 77 (power of Treasury to require FCA or PRA to undertake

investigation)—

(a)
in subsection (1)(a), for “either regulator” substitute “a regulator”;

(b)
in subsection (3), omit the “or” at the end of paragraph (b) and after

paragraph (c) insert “, or

(d)
a regulated payment system.”;

(c)
the heading of that section becomes “Power of Treasury to require

regulator to undertake investigation”.

(6)
In section 78 (conduct of investigation), in subsection (1), for “or 74”

substitute “, 74 or 76A”.

(7)
In section 79 (conclusion of investigation), for “or 74” substitute “, 74 or

76A”.

(8)
In section 80 (statements of policy), in subsection (1)(a), for “or 74”

substitute “, 74 or 76A”.

(9)
In section 81 (publication of directions), in subsection (1), after paragraph

(b) insert—

“(ba)
section 76A(4);”.

(10)
In section 83(1) (interpretation)—

(a)
after the definition of “listed securities” insert—

““the Payment Systems Regulator” means the body

established under section (The Payment Systems

Regulator) of the Financial Services (Banking

Reform) Act 2013;”;

(b)
in the definition of “regulator”, for “or the PRA” substitute “, the

PRA or the Payment Systems Regulator”.”
131
Insert the following new Clause—

“Competition scrutiny

(1)
Chapter 4 of Part 9A of FSMA 2000 (competition scrutiny) applies to the

Payment Systems Regulator’s practices and regulating provisions in

relation to payment systems as it applies to the FCA’s practices and

regulating provisions within the meaning of that Chapter.

(2)
In subsection (1)—

(a)
the reference to the Payment Systems Regulator’s practices in

relation to payment systems is a reference to practices adopted by

it in the exercise of functions under this Part, and

(b)
the reference to the Payment Systems Regulator’s regulating

provisions in relation to payment systems is a reference to the

following—

(i)
any general directions given under section (Directions);

76

(ii)
any generally-imposed requirements under section (System

rules);

(iii)
any guidance given under section (Guidance).”
132
Insert the following new Clause—

“Miscellaneous and supplemental

Relationship with Part 8 of the Payment Services Regulations 2009

(1)
The Payment Systems Regulator may not exercise any power under this

Part for the purposes of enabling a relevant person to obtain access to, or

otherwise participate in, a payment system if the payment system is one to

which Part 8 of the Payment Services Regulations 2009 (S.I. 2009/209) does

not apply.

(2)
A person is a “relevant person” for the purposes of subsection (1) if

regulation 97 of the Payment Services Regulations 2009 (prohibition on

restrictive rules on access to payment systems) applies in relation to access

to, or participation in, a payment system by the person.”
133
Insert the following new Clause—


“Exemption from liability in damages for FCA and PRA

(1)
In paragraph 25 of Schedule 1ZA to FSMA 2000 (FCA’s exemption from

liability in damages), after sub-paragraph (1) insert—

“(1A)
In sub-paragraph (1) the reference to the FCA’s functions

includes its functions under Part 5 of the Financial Services

(Banking Reform) Act 2013 (regulation of payment systems).”

(2)
In paragraph 33 of Schedule 1ZB to FSMA 2000 (PRA’s exemption from

liability in damages), after sub-paragraph (1) insert—

“(1A)
In sub-paragraph (1) the reference to the PRA’s functions

includes its functions under Part 5 of the Financial Services

(Banking Reform) Act 2013 (regulation of payment systems).”

(3)
For provision conferring immunity from liability in damages on the Bank

of England in respect of its functions, see section 244 of the Banking Act

2009.”
134
Insert the following new Clause—

“Interpretation of Part

(1)
In this Part—

“CAT-appealable decision” has the meaning given by section (Appeals:

general)(4);

“CMA-appealable decision” has the meaning given by section

(Appeals: general)(7);

“compliance failure” has the meaning given by section (Meaning of

“compliance failure”);

“designation order” has the meaning given by section (Designation

orders);

77

“direct access”, in relation to a payment system, is to be read in

accordance with section (Participants in payment systems etc)(6);

“document” includes information recorded in any form and, in

relation to information recorded otherwise than in legible form,

references to its production include references to producing a copy

of the information in legible form or in a form from which it can

readily be produced in visible and legible form;

“general direction” has the meaning given by section (Directions)(5);

“general guidance” has the meaning given by section (Guidance)(3);

“generally-imposed requirement” has the meaning given by section

(System rules)(3);

“infrastructure provider”, in relation to a payment system, has the

meaning given by section (Participants in payment systems etc)(4);

“operator”, in relation to a payment system, has the meaning given by

section (Participants in payment systems etc)(3);

“participant”, in relation to a payment system, has the meaning given

by section (Participants in payment systems etc) (and references to

participation in a payment system are to be read in accordance with

that section);

“payment service provider”, in relation to a payment system, has the

meaning given by section (Participants in payment systems etc)(5);

“payment system” has the meaning given by section (Meaning of

“payment system”);

“recognised inter-bank payment system” means an inter-bank

payment system (within the meaning of Part 5 of the Banking Act

2009) specified as a recognised system for the purposes of that Part;

“regulated payment system” means a payment system designated as

a regulated payment system by a designation order;

“the UK financial system” has the meaning given by section 1I of

FSMA 2000.

(2)
References in this Part to the Payment Systems Regulator’s payment

systems objectives are to be read in accordance with section (Regulator’s

general duties in relation to payment systems)(2).

(3)
References in this Part to the Bank of England’s capacity as a monetary

authority are to be read in accordance with section 244 of the Banking Act

2009.”
135
Insert the following new Clause—

“Part 6

Special Administration for operators of certain infrastructure systems

Introductory


Financial market infrastructure administration

This Part—

(a)
provides for a procedure to be known as FMI administration, and

(b)
restricts the powers of persons other than the Bank of England in

relation to the insolvency of infrastructure companies.”
136
Insert the following new Clause—

78


“Interpretation: infrastructure companies

(1)
In this Part “infrastructure company” has the meaning given by this

section.

(2)
“Infrastructure company” means a company which is—

(a)
the operator of a recognised inter-bank payment system, other than

an operator excluded by subsection (3),

(b)
approved under regulations under section 785 of the Companies

Act 2006 (provision enabling procedures for evidencing and

transferring title) as the operator of a securities settlement system,

or

(c)
a company designated by the Treasury under subsection (4).

(3)
But a company is not an infrastructure company if it is a recognised central

counterparty, as defined by section 285 of FSMA 2000.

(4)
The Treasury may by order designate a company for the purposes of

subsection (2)(c) if—

(a)
the company provides services to a person falling within subsection

(2)(a) or (b), and

(b)
the Treasury are satisfied that an interruption in the provision of

those services would have a serious adverse effect on the effective

operation of the recognised inter-bank payment system or

securities settlement system in question.

(5)
An order under subsection (4) must specify the recognised inter-bank

payment system or securities settlement system in connection with which

the company is designated.

(6)
Before designating a company under subsection (4), the Treasury must

consult—

(a)
the company to be designated,

(b)
the person within subsection (2)(a) or (b) to whom the company

provides services,

(c)
the Bank of England,

(d)
if the company is a PRA-authorised person, the PRA and the FCA,

and

(e)
if the company is an authorised person other than a PRA-

authorised person, the FCA.”
137
Insert the following new Clause—


“Interpretation: other expressions

(1)
In this Part—

“company” means a company registered under the Companies Act

2006;

“operator”, in relation to a recognised inter-bank payment system, is

to be read in accordance with section 183 of the Banking Act 2009;

“recognised inter-bank payment system” means an inter-bank

payment system, as defined by section 182 of the Banking Act 2009,

in respect of which a recognition order under section 184 of that Act

is in force;

“the relevant system” means—

79

(a)
in relation to an infrastructure company falling within

subsection (2)(a) of section (Interpretation: infrastructure

companies), the recognised inter-bank payment system,

(b)
in relation to an infrastructure company falling within

subsection (2)(b) of that section, the securities settlement

system,

(c)
in relation to a company designated under subsection (4) of

that section, the recognised inter-bank payment system or

securities settlement system falling within paragraph (b) of

that subsection;

“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.

(2)
Expressions used in the definition of “securities settlement system” in

subsection (1) are to be read in accordance with section 783 of the

Companies Act 2006.”
138
Insert the following new Clause—

“FMI administration orders


FMI administration orders

(1)
In this Part “FMI administration order” means an order which—

(a)
is made by the court in relation to an infrastructure company, and

(b)
directs that, while the order is in force, the affairs, business and

property of the company are to be managed by a person appointed

by the court.

(2)
A person appointed as mentioned in subsection (1)(b) is referred to in this

Part as an FMI administrator.

(3)
The FMI administrator of a company must manage its affairs, business and

property, and exercise and perform the FMI administrator’s functions, so

as to achieve the objective in section (Objective of FMI administration).”
139
Insert the following new Clause—


“Objective of FMI administration

(1)
Where an FMI administrator is appointed in relation to the operator of a

recognised inter-bank payment system or a securities settlement system,

the objective of the FMI administration is—

(a)
to ensure that the system is and continues to be maintained and

operated as an efficient and effective system,

(b)
where the operator of the system is also a clearing house falling

within section 285(1)(b)(ii) of FSMA 2000 (recognised clearing

house that is not a recognised central counterparty), to ensure that

the protected activities continue to be carried on, and

(c)
to ensure by one or both of the specified means that it becomes

unnecessary for the FMI administration order to remain in force for

that purpose or those purposes.