Financial Services Bill

Session 2012 - 13
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Other Bills before Parliament

Financial Services Bill

Financial Services Bill
Part 3 — Mutual societies
131

to be transferred to, or to be exercisable concurrently by, the other
regulator;
(e)
providing for any function which is exercisable by the FCA and the
PRA (whether by virtue of a previous order under this section or
otherwise) to be exercisable only by one of them;
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(f)
making provision that appears to the Treasury to be necessary or
expedient in consequence of the provisions of this Act.
(4)
In relation to the Industrial and Provident Societies Act (Northern Ireland)
1969 and the Credit Unions (Northern Ireland) Order 1985, the relevant
purposes also include—
10
(a)
providing for any function of a Northern Ireland department or the
Registrar of Credit Unions for Northern Ireland to be transferred to the
FCA or the PRA, or to both the FCA and PRA to be exercised
concurrently;
(b)
providing for any function of a Northern Ireland department or the
15
Registrar of Credit Unions for Northern Ireland which relates to the
determination of disputes to be exercisable instead by a court.
48
Further provision that may be included in orders under section 47
(1)
In this section a “transfer order” means an order under section 47 making
provision for any of the purposes mentioned in subsection (3)(a) to (e) or (4) of
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that section.
(2)
The additional powers conferred by section 96(2) on a person making an order
under this Act include power for the Treasury, when making a transfer order,
to include—
(a)
such consequential provision as the Treasury consider appropriate;
25
(b)
provision for the transfer of any property, rights or liabilities held,
enjoyed or incurred by any person in connection with transferred
functions;
(c)
provision for the application of the Transfer of Undertakings
(Protection of Employment) Regulations 2006 in connection with any
30
transfer of staff;
(d)
provision for the carrying on and completion by or under the authority
of the person to whom the functions are transferred of any proceedings,
investigations or other matters commenced, before the order takes
effect, by or under the authority of the person from whom the functions
35
are transferred;
(e)
provision amending any enactment relating to transferred functions in
connection with their exercise by, or under the authority of, the person
to whom they are transferred;
(f)
provision requiring either regulator to consult the other, notify the
40
other or obtain the consent of the other in connection with the exercise
of transferred functions;
(g)
provision for the substitution of the person to whom functions are
transferred for the person from whom they are transferred, in any
instrument, contract or legal proceedings made or begun before the
45
order takes effect.
(3)
A transfer order may provide for—

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Part 3 — Mutual societies
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(a)
any provision of FSMA 2000 that would not otherwise apply in relation
to transferred functions to apply in relation to those functions with
such modifications as may be specified, or
(b)
any provision of FSMA 2000 that would otherwise apply in relation to
transferred functions not to apply in relation to them or to apply with
5
such modifications as may be specified.
(4)
For the purposes of subsections (2) and (3), a transfer order is to be taken to
transfer functions to any person by whom any function becomes exercisable by
virtue of the order.
(5)
On or after the making of a transfer order (“the original order”) the Treasury
10
may by order make any incidental, supplemental, consequential or transitional
provision or provision by virtue of subsection (2) or (3) which they had power
to include in the original order.
(6)
The provisions of this section do not limit—
(a)
the powers conferred by section 99 or 100(3), or
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(b)
the powers exercisable under Schedule 21 in connection with a transfer
order that transfers functions to the PRA or to the FCA and the PRA.
49
Evidence
(1)
A certificate issued by the Treasury that property vested in a person
immediately before a transfer order takes effect has been transferred as a result
20
of the order is conclusive evidence of the transfer.
(2)
“Transfer order” means—
(a)
an order under section 47,
(b)
an order under section 48(5), or
(c)
an order under Part 21 of FSMA 2000 (mutual societies).
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50
Repeals in Part 21 of FSMA 2000
(1)
The following provisions of Part 21 of FSMA 2000 are repealed—
(a)
in section 334 (the Friendly Societies Commission), subsections (1) and
(2);
(b)
section 335 (the Registry of Friendly Societies);
30
(c)
section 336 (the Building Societies Commission);
(d)
section 337 (the Building Societies Investor Protection Board);
(e)
section 338 (industrial and provident societies and credit unions);
(f)
section 339 (supplemental provisions).
(2)
The repeals in subsection (1) do not have the effect of revoking any order made
35
under any provision of Part 21 of FSMA 2000 before the commencement of this
section.
Building societies: miscellaneous
51
Building societies: creation of floating charges
(1)
Section 9B of the Building Societies Act 1986 (restriction on creation of floating
40
charges) is amended as follows.

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Part 3 — Mutual societies
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(2)
In subsection (1), at the end insert “unless it complies with the requirements in
subsection (1A)”.
(3)
After that subsection insert—
“(1A)
The requirements are that the floating charge—
(a)
is created in favour of a participant in a system, and
5
(b)
is created for the purpose of securing any rights and obligations
that may arise in connection with participation in that system.”
(4)
After subsection (2) insert—
“(3)
In this section “participant” and “system” have the meaning given by
Article 2 of Directive 98/26/EC of the European Parliament and of the
10
Council of 19th May 1998 on settlement finality in payment and
securities settlement systems (as amended by Directives 2009/44/EC
and 2010/78/EU).”
52
Power to direct transfer of building society’s business
(1)
Section 42B of the Building Societies Act 1986 (power to direct transfers of
15
engagements or business) is amended as follows.
(2)
In subsection (1)—
(a)
before the “or” at the end of paragraph (a) insert—
“(aa)
direct the society, within a specified period, to transfer
its business under section 97 to an existing or specially
20
formed company that is a subsidiary of another mutual
society by a transfer to which provision made by order
under section 3 of the 2007 Act (transfers to subsidiaries
of other mutuals) applies;”, and
(b)
in paragraph (b), for “to an existing company under section 97”
25
substitute “under section 97 to an existing company that is not a
subsidiary of another mutual society”.
(3)
After subsection (1) insert—
“(1A)
In this section—
(a)
“the 2007 Act” means the Building Societies (Funding) and
30
Mutual Societies (Transfers) Act 2007;
(b)
“mutual society” has the same meaning as in section 3 of that
Act.”
(4)
In subsection (4)—
(a)
in paragraph (a), for “(1)(b)” substitute “(1)(aa) or (b)”, and
35
(b)
in paragraph (b), after “existing company” insert “, or to a specially
formed company that is a subsidiary of another mutual society,”.
(5)
In Schedule 8A to that Act (directions under section 42B(4)), in paragraph 9(3),
for “section 42B(1)(b)” substitute “section 42B(1)(aa) or (b)”.
Interpretation
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53
Interpretation of Part 3
(1)
In this Part “regulator” means the FCA or the PRA.

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Part 4 — Collaboration between Treasury and Bank of England, FCA or PRA
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(2)
In this Part a reference to a person’s functions under an enactment includes a
reference to the person’s functions under any other enactment as applied by
that enactment.
Part 4
Collaboration between Treasury and Bank of England, FCA or PRA
5
54
Duty of Bank to notify Treasury of possible need for public funds
(1)
Where it appears to the Bank of England that there is a material risk of
circumstances within any of the following cases arising, the Bank must
immediately notify the Treasury.
(2)
A notification under subsection (1) or section 55(2) is referred to in this Part as
10
a “public funds notification”.
(3)
The first case is where the Treasury or the Secretary of State might reasonably
be expected to regard it as appropriate to provide financial assistance to or in
respect of a financial institution.
(4)
The second case is where—
15
(a)
the Treasury, the Bank of England, the PRA, the FCA or the Secretary
of State might reasonably be expected to regard it as appropriate to
exercise any of their respective powers under Parts 1 to 3 of the Banking
Act 2009, and
(b)
the Treasury might reasonably be expected to regard it as appropriate
20
to incur expenditure in connection with the exercise of any of those
powers (whether by the Treasury, the Bank, the PRA, the FCA or the
Secretary of State).
(5)
The third case is where the scheme manager of the Financial Services
Compensation Scheme might reasonably be expected to request—
25
(a)
a loan from the National Loans Fund under section 223B of FSMA 2000,
or
(b)
financial assistance from the Treasury,

for the purpose of funding expenses incurred or expected to be incurred under
the Financial Services Compensation Scheme.
30
(6)
A public funds notification must give a general indication of the matters giving
rise to the notification.
(7)
A public funds notification must be given or confirmed in writing.
55
Duty of Bank to notify Treasury of changes
(1)
This section applies where a public funds notification has been given.
35
(2)
If the Bank of England is of the opinion that the risk to which the notification
relates continues but that there is a substantial change in the matters which
gave rise to the notification, the Bank must notify the Treasury.
(3)
If the Bank of England is of the opinion that the risk to which the notification
relates has ceased, it must notify the Treasury.
40
(4)
Before giving a notification under subsection (3), the Bank must consult the
Treasury.

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(5)
A notification under subsection (3) must be given or confirmed in writing.
56
Circumstances in which Treasury power of direction exercisable
(1)
This section makes provision about the circumstances in which the Treasury’s
power of direction under section 57 is exercisable, subject to the provisions of
that section.
5
(2)
Where a public funds notification has been given, the power of direction is
exercisable by reference to the notification unless the notification has been
superseded by a notification under section 55(3).
(3)
Where qualifying financial assistance has been provided, the power of
direction is exercisable by reference to the provision of the assistance unless it
10
appears to the Treasury that the assistance has been recovered.
(4)
It is immaterial for the purposes of subsection (3)—
(a)
whether the qualifying financial assistance was provided before or
after the commencement of this section, and
(b)
whether or not a public funds notification had been given in connection
15
with it.
(5)
For the purposes of this Part qualifying financial assistance is provided if, and
only if—
(a)
the Treasury or the Secretary of State provide financial assistance to or
in respect of a financial institution,
20
(b)
the Treasury incur expenditure in connection with the exercise by the
Treasury, the Bank, the PRA, the FCA or the Secretary of State of any of
their powers under Parts 1 to 3 of the Banking Act 2009,
(c)
the Treasury arrange a loan from the National Loans Fund in
pursuance of a request by the scheme manager of the Financial Services
25
Compensation Scheme under section 223B of FSMA 2000, or
(d)
the Treasury provide financial assistance to the scheme manager of that
scheme for the purpose of funding expenses incurred or expected to be
incurred under it.
(6)
For the purposes of this section the circumstances in which qualifying financial
30
assistance is to be taken to have been recovered include the following—
(a)
where, in the case of a loan, the principal of the loan has been repaid
and all interest due under the terms of the loan has been paid,
(b)
where, in the case of a guarantee or indemnity, the Treasury or the
Secretary of State will not become liable under the guarantee or
35
indemnity,
(c)
where, in a case involving the issue or transfer of shares to the Treasury
in connection with the provision of qualifying financial assistance, the
shares are no longer held by the Treasury.
57
Treasury power of direction
40
(1)
Subsection (2) applies where—
(a)
the power of direction is exercisable by virtue of section 56(2) by
reference to a public funds notification and the Treasury are satisfied
that Condition A is met, or

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(b)
the power of direction is exercisable by virtue of section 56(3) by
reference to the provision of qualifying financial assistance and the
Treasury are satisfied that Condition A or Condition B is met.
(2)
The Treasury may give a direction to the Bank of England relating to one or
more of the following—
5
(a)
the provision by the Bank to one or more financial institutions of
financial assistance other than ordinary market assistance offered by
the Bank on its usual terms,
(b)
the exercise by the Bank of any of the stabilisation powers, as defined
by section 1(4) of the Banking Act 2009, or
10
(c)
the exercise by the Bank of its powers under Part 3 of that Act (bank
administration).
(3)
Condition A is that the giving of the direction is necessary to resolve or reduce
a serious threat to the stability of the financial system of the United Kingdom
which is connected—
15
(a)
in case within subsection (1)(a), with the matters to which the public
funds notification relates;
(b)
in a case within subsection (1)(b), with the matters that gave rise to the
provision of the qualifying financial assistance.
(4)
Condition B is that—
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(a)
the qualifying financial assistance was provided for the purpose of
resolving or reducing a serious threat to the stability of the financial
system of the United Kingdom, and
(b)
the giving of the direction is necessary to protect the public interest in
connection with the provision of that assistance.
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(5)
References to the provision of qualifying financial assistance are to be read in
accordance with section 56(5).
(6)
This section is subject to section 58.
(7)
Nothing in this section limits the powers conferred by section 4(1) of the Bank
of England Act 1946 (Treasury directions to the Bank).
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58
Directions under section 57: supplementary provisions
(1)
References in this section to a direction are to a direction under section 57.
(2)
Before giving a direction, the Treasury must consult the Bank of England.
(3)
On being given a direction, the Bank must give the Treasury one or more
reports on how it is complying or intends to comply with the direction, and on
35
such other matters relating to the direction as it considers appropriate.
(4)
The Treasury may at any time by notice to the Bank revoke a direction.
(5)
The revocation of a direction does not affect the validity of anything previously
done in accordance with it.
(6)
Where Treasury’s power of direction is exercised by virtue of section 56(2) by
40
reference to a public funds notification, the direction remains in force (unless
revoked under subsection (4)) even if the public funds notification is
subsequently superseded by a notification under section 55(3).

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(7)
Where Treasury’s power of direction is exercised by virtue of section 56(3) by
reference to the provision of qualifying financial assistance, the direction
remains in force (unless revoked under subsection (4)) even if it appears to the
Treasury that the qualifying financial assistance has subsequently been
recovered.
5
(8)
Each of the following must be in writing—
(a)
a direction,
(b)
a report under subsection (3), and
(c)
a notice revoking a direction.
59
Duty to lay direction etc before Parliament
10
(1)
As soon as practicable after giving or revoking a direction under section 57 or
receiving a report under section 58(3), the Treasury must lay before Parliament
a copy of the direction, notice of revocation or report.
(2)
But subsection (1) does not apply in a case where the Treasury consider that the
publication of the direction, notice of revocation or report would be against the
15
public interest.
(3)
Where the Treasury decide that publication of a direction, notice of revocation
or report would be against the public interest, they must from time to time
review that decision and if they subsequently decide that publication is no
longer against the public interest they must comply with subsection (1).
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60
Duty of Treasury, Bank and PRA to co-ordinate discharge of functions
(1)
The Treasury (on the one hand) and the Bank of England and the PRA (on the
other) must arrange to co-ordinate the discharge of their respective functions
so far as they—
(a)
relate to the stability of the UK financial system, and
25
(b)
affect the public interest.
(2)
In complying with subsection (1), the Treasury, the Bank and the PRA must
have regard in particular to the importance of co-ordination in circumstances
where the Bank has given, or is considering the giving of, a public funds
notification.
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61
Memorandum of understanding: crisis management
(1)
The Treasury (on the one hand) and the Bank of England and the PRA (on the
other) must prepare and maintain a memorandum describing in general terms
how they intend to comply with section 60 in relation to the circumstances
mentioned in subsection (2) of that section.
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(2)
The memorandum must, in particular, make provision about—
(a)
what the Treasury and the Bank regard as a material risk for the
purposes of section 54(1);
(b)
steps to be taken when the Bank has given a public funds notification;
(c)
the respective roles of the Treasury, the Bank and the PRA, in cases
40
where the Bank has given a public funds notification, in relation to the
consideration and assessment of, and taking of, steps to resolve or
reduce, threats to the stability of the UK financial system;