Financial Services Bill (HL Bill 60)

(b) after subsection (4) insert—

“(4A) The Bank of England must not make a reverse property transfer
instrument unless—

(a) the onward transferee is—

(i) 5a company wholly owned by the Bank of
England,

(ii) a company wholly owned by the Treasury, or

(iii) a company wholly owned by a nominee of the
Treasury, or

(b) 10the reverse property transfer instrument is made with
the written consent of the onward transferee.”

(7) In section 46 (temporary public ownership: reverse property transfer)—

(a) in subsection (1) omit from “providing for” to the end, and

(b) after subsection (3) insert—

“(3A) 15The Treasury must not make a reverse property transfer order
unless—

(a) the transferee under the original order is—

(i) a company wholly owned by the Bank of
England,

(ii) 20a company wholly owned by the Treasury, or

(iii) a nominee of the Treasury, or

(b) the reverse property transfer order is made with the
written consent of the transferee under the original
order.”

(8) 25In section 48A (creation of liabilities), in subsection (1) after “42(3)(b),” insert
“42A(3)(b),”.

(9) In section 53 (onward and reverse transfers: compensation), in subsection (1)—

(a) before paragraph (a) insert—

“(za) the Bank of England makes a private sector reverse
30share transfer instrument under section 26A,”, and

(b) after paragraph (d) insert—

“(da) the Bank of England makes a private sector reverse
property transfer instrument under section 42A,”.

(10) In section 83 (supplemental), in subsection (2)(d)—

(a) 35at the end of sub-paragraph (iii) insert “and”, and

(b) for sub-paragraphs (iv) and (v) substitute—

“(iv) is not subject to the restriction in section 29(3)
that the securities issued by the bank were
transferred under the original order (as defined
40in section 29(1)).”

(11) In the Table in section 261 (index of defined terms), after the entry relating to
“partial property transfer”, insert—

98 Property transfer instruments: property held on trust

(1) The Banking Act 2009 is amended as follows.

(2) 5In section 34(7) (effect of property transfer instruments: provision in respect of
property held on trust), in paragraph (a) omit “(which provision may remove
or alter the terms of the trust)”.

(3) At the end of section 34 insert—

“(8) Provision under subsection (7)(a) may remove or alter the terms of the
10trust on which the property is held only to the extent that the Bank of
England thinks it necessary or expedient for the purpose of
transferring—

(a) the legal or beneficial interest of the transferor in the property;

(b) any powers, rights or obligations of the transferor in respect of
15the property.

(9) In subsection (8) references to the transferor are references to the
transferor under the property transfer instrument.”

(4) In section 45 (temporary public ownership: property transfer orders) after
subsection (5) insert—

“(5A) 20In the application of section 34(8) by virtue of subsection (5)(b) above,
the reference to the Bank of England is to be treated as a reference to the
Treasury.”

(5) In section 46 (temporary public ownership: reverse property transfer orders)
after subsection (5) insert—

“(5A) 25In the application of section 34(8) by virtue of subsection (5)(b) above,
the reference to the Bank of England is to be treated as a reference to the
Treasury.”

99 Reports following exercise of a stabilisation power

(1) After section 79 of the Banking Act 2009 insert—

“79A 30Private sector purchaser: report

(1) This section applies where the Bank of England sells all or part of a
bank’s business to a commercial purchaser.

(2) The Bank must report to the Chancellor of the Exchequer about the
exercise of the power to make share transfer instruments and property
35transfer instruments under section 11(2).

(3) The report must comply with any requirements as to content specified
by the Treasury.

(4) The report must be made as soon as is reasonably practicable after the
end of one year beginning with the date of the first transfer instrument
40made under section 11(2).”

(2) After section 81 of that Act insert—

“81A Accounting information to be included in reports under sections 80
and 81

(1) A report under section 80(1) or 81 must include accounting information
5in respect of the bank or bridge bank that is the subject of the report.

(2) In this section “accounting information” means—

(a) a balance sheet that, in the opinion of the person making the
report, gives a true and fair view of the state of affairs of the
bank or bridge bank as at the reporting date, and

(b) 10a profit and loss account that, in the opinion of the person
making the report, gives a true and fair view of the profit or loss
of the bank or bridge bank for the reporting period.

(3) In this section—

(a) “reporting period” means the period to which the report relates,
15and

(b) “reporting date” means the last day of the reporting period.”

(3) In section 1(6) of that Act (table describing provisions of Part 1), in the entry
relating to sections 76 to 81, for “81” substitute “81A”.

100 Groups

(1) 20The Banking Act 2009 is amended as follows.

(2) In section 1 (overview), for the entry in the Table relating to sections 82 and 83
substitute—

(3) In section 20 (directors), after subsection (1) insert—

“(1A) 25Subsection (1) also applies to a director of any undertaking which is a
banking group company in respect of a specified bank.”

(4) After section 36 insert—

“36A Directors

(1) A property transfer instrument may enable the Bank of England—

(a) 30to remove a director of a specified bank;

(b) to vary the service contract of a director of a specified bank;

(c) to terminate the service contract of a director of a specified
bank;

(d) to appoint a director of a specified bank.

(2) 35Subsection (1) also applies to a director of any undertaking which is a
banking group company in respect of a specified bank.

(3) Appointments under subsection (1)(d) are to be on terms and
conditions agreed with the Bank of England.”

(5) For the italic heading before section 82 substitute “Groups”, and after that

heading insert—

“81B Sale to commercial purchaser and transfer to bridge bank

(1) The Bank of England may exercise a stabilisation power in respect of a
banking group company in accordance with section 11(2) or 12(2) if the
5following conditions are met.

(2) Condition 1 is that the PRA is satisfied that the general conditions for
the exercise of a stabilisation power set out in section 7 are met in
respect of a bank in the same group.

(3) Condition 2 (which does not apply in a financial assistance case) is that
10the Bank of England is satisfied that the exercise of the power in respect
of the banking group company is necessary, having regard to the public
interest in—

(a) the stability of the financial systems of the United Kingdom,

(b) the maintenance of public confidence in the stability of those
15systems,

(c) the protection of depositors, or

(d) the protection of any client assets that may be affected.

(4) Condition 3 (which applies only in a financial assistance case) is that—

(a) the Treasury have recommended the Bank of England to
20exercise a stabilisation power on the grounds that it is necessary
to protect the public interest, and

(b) in the Bank’s opinion, exercise of the power in respect of the
banking group company is an appropriate way to provide that
protection.

(5) 25Condition 4 is that the banking group company is an undertaking
incorporated in, or formed under the law of any part of, the United
Kingdom.

(6) Before determining whether Condition 2 or 3 (as appropriate) is met,
the Bank of England must consult—

(a) 30the Treasury,

(b) the PRA, and

(c) the FCA.

(7) In exercising a stabilisation power in reliance on this section the Bank
of England must have regard to the need to minimise the effect of the
35exercise of the power on other undertakings in the same group.

(8) In this section “financial assistance case” means a case in which the
Treasury notify the Bank of England that they have provided financial
assistance in respect of a bank in the same group for the purpose of
resolving or reducing a serious threat to the stability of the financial
40systems of the United Kingdom.

81C Section 81B: supplemental

(1) In the following provisions references to banks include references to
banking group companies—

(a) section 10(1), and

(b) 45section 75(5)(a).

(2) Where the Bank of England exercises a stabilisation power in respect of
a banking group company in reliance on section 81B, the provisions
relating to the stabilisation powers and the bank administration
procedure contained in this Act (except sections 7 and 8) and any other
5enactment apply (with any necessary modifications) as if the banking
group company were a bank.

(3) For the purposes of the application of section 143 (grounds for applying
for bank administration order), the reference in subsection (2) to the
Bank of England exercising a stabilisation power includes a case where
10the Bank of England intends to exercise such a power.

81D Interpretation: “banking group company” &c.

(1) In this Part “banking group company” means an undertaking—

(a) which is (or, but for the exercise of a stabilisation power, would
be) in the same group as a bank, and

(b) 15in respect of which any conditions specified in an order made
by the Treasury are met.

(2) An order may require the Bank of England to consult specified persons
before determining whether the conditions are met.

(3) An order—

(a) 20is to be made by statutory instrument, and

(b) may not be made unless a draft has been laid before and
approved by resolution of each House of Parliament.

(4) If an order contains a statement that the Treasury are of the opinion
that, by reason of urgency, it is necessary to make the order without
25complying with subsection (3)(b)—

(a) the order may be made, and

(b) the order lapses unless approved by resolution of each House of
Parliament during the period of 28 days (ignoring periods of
dissolution, prorogation or adjournment of either House for
30more than 4 days) beginning with the day on which the order is
made.

(5) The lapse of an order under subsection (4)(b)—

(a) does not invalidate anything done under or in reliance on the
order before the lapse and at a time when neither House has
35declined to approve the order, and

(b) does not prevent the making of a new order (in new terms).

(6) Undertakings are in the same group for the purposes of sections 81B,
81C and this section if they are group undertakings in respect of each
other.

(7) 40Expressions defined in the Companies Act 2006 have the same meaning
in section 81B and this section as in that Act.”

(6) In the Table in section 259 (statutory instruments), in Part 1 after the entry
relating to section 78 insert—

(7) In the Table in section 261 (index of defined terms), after the entry relating to
“bank insolvency order” insert—

101 Application to investment firms

(1) The Banking Act 2009 is amended as follows.

(2) In section 1 (overview), after the entry in the Table relating to sections 84 to 89
insert—

(3) In section 2 (interpretation: “bank”), at the end insert—

“(8) Section 89A applies this Part to investment firms with modifications.”

(4) In section 75(5) (power to change law: application to other institutions), omit
the “or” following paragraph (c) and after that paragraph insert—

“(ca) 15to investment firms,”.

(5) After section 89 (and in Part 1) insert—

“Investment firms

89A Application to investment firms

(1) This Part applies to investment firms as it applies to banks, subject to
20the modifications in subsection (2).

(2) Ignore sections 1(2)(b), 4(2)(b) and (6), 5(1)(b), 7(7), 8(2)(c) and 14(5).”

(6) After section 159 insert—

“159A Application to investment firms

This Part applies to investment firms as it applies to banks.”

(7) 25After section 258 insert—

“258A Investment firm”

(1) In this Act “investment firm” means a UK institution which is (or, but
for the exercise of a stabilisation power, would be) an investment firm
for the purposes of Directive 2006/49/EC on the capital adequacy of
30investment firms and credit institutions.

(2) But “investment firm” does not include—

(a) an institution which is also—

(i) a bank (within the meaning of Part 1),

(ii) a building society (within the meaning of section 119 of
the Building Societies Act 1986), or

(iii) a credit union (within the meaning of section 31 of the
5Credit Unions Act 1979 or Article 2(2) of the Credit
Unions (Northern Ireland) Order 1985), or

(b) an institution which is of a class or description specified in an
order made by the Treasury.

(3) An order—

(a) 10is to be made by statutory instrument, and

(b) may not be made unless a draft has been laid before and
approved by resolution of each House of Parliament.

(4) If an order contains a statement that the Treasury are of the opinion
that, by reason of urgency, it is necessary to make the order without
15complying with subsection (3)(b)—

(a) the order may be made, and

(b) the order lapses unless approved by resolution of each House of
Parliament during the period of 28 days (ignoring periods of
dissolution, prorogation or adjournment of either House for
20more than 4 days) beginning with the day on which the order is
made.

(5) The lapse of an order under subsection (4)(b)—

(a) does not invalidate anything done under or in reliance on the
order before the lapse and at a time when neither House has
25declined to approve the order, and

(b) does not prevent the making of a new order (in new terms).

(6) In subsection (1) “UK institution” means an institution which is
incorporated in, or formed under the law of any part of, the United
Kingdom.”

(8) 30In the Table in section 259 (statutory instruments), in Part 7 after the entry
relating to section 257 insert—

(9) In the Table in section 261 (index of defined terms), after the entry relating to
35“inter-bank payment system”, insert—

(10) In section 214B(1)(a) of FSMA 2000 (contribution to costs of special resolution
regime) for “or credit union” substitute “, credit union or investment firm”.

102 Application to UK clearing houses

(1) 40The Banking Act 2009 is amended as follows.

(2) In section 1 (overview), after the entry in the Table relating to section 89A,
insert—

(3) In section 2 (interpretation: “bank”), after subsection (8) insert—

“(9) 5Section 89B applies this Part to UK clearing houses with modifications.”

(4) After section 39 insert—

“39A Banks which are clearing houses

Sections 89C to 89E (clearing house rules, membership and recognition)
apply in relation to a bank which would be a UK clearing house but for
10section 89G(2) (exclusion of banks etc from definition of UK clearing
house) as they apply in relation to a UK clearing house.”

(5) In section 75(5) (power to change law: application to other institutions), after
paragraph (ca) insert—

“(cb) to UK clearing houses, or”.

(6) 15After section 89A (and in Part 1) insert—

“UK clearing houses

89B Application to UK clearing houses

(1) This Part applies to UK clearing houses as it applies to banks, subject
to—

(a) 20the modifications specified in subsections (2) to (5), and in the
Table in subsection (6), and

(b) any other necessary modifications.

(2) For section 13 substitute—

“13 Transfer of ownership

(1) 25The third stabilisation option is to transfer ownership of the UK
clearing house to any person.

(2) For that purpose the Bank of England may make one or more
share transfer instruments.”

(3) For sections 28 and 29 substitute—

“28 30Onward transfer

(1) This section applies where the Bank of England has made a
share transfer instrument, in respect of securities issued by a UK
clearing house, in accordance with section 13(2) (“the original
instrument”).

(2) 35The Bank of England may make one or more onward share
transfer instruments.

(3) An onward share transfer instrument is a share transfer
instrument which—

(a) provides for the transfer of—

(i) securities which were issued by the UK clearing
house before the original instrument and have
been transferred by the original instrument or a
5supplemental share transfer instrument, or

(ii) securities which were issued by the UK clearing
house after the original instrument;

(b) makes other provision for the purposes of, or in
connection with, the transfer of securities issued by the
10UK clearing house (whether the transfer has been or is to
be effected by that instrument, by another share transfer
instrument or otherwise).

(4) An onward share transfer instrument may not transfer
securities to the transferor under the original instrument.

(5) 15The Bank of England may not make an onward share transfer
instrument unless the transferee under the original instrument
is—

(a) the Bank of England,

(b) a nominee of the Treasury, or

(c) 20a company wholly owned by the Bank of England or the
Treasury.

(6) Sections 7 and 8 do not apply to an onward share transfer
instrument (but it is to be treated in the same way as any other
share transfer instrument for all other purposes, including for
25the purposes of the application of a power under this Part).

(7) Before making an onward share transfer instrument the Bank of
England must consult—

(a) if the UK clearing house is a PRA-authorised person, the
PRA, and

(b) 30the FCA.

(8) Section 26 applies where the Bank of England has made an
onward share transfer instrument.

29 Reverse share transfer

(1) This section applies where the Bank of England has made a
35share transfer instrument in accordance with section 13(2) (“the
original instrument”) providing for the transfer of securities
issued by a UK clearing house to a person (“the original
transferee”).

(2) The Bank of England may make one or more reverse share
40transfer instruments in respect of securities issued by the UK
clearing house and held by the original transferee (whether or
not they were transferred by the original instrument).

(3) If the Bank of England makes an onward share transfer
instrument in respect of securities transferred by the original
45instrument, the Bank may make one or more reverse share
transfer instruments in respect of securities issued by the UK
clearing house and held by a transferee under the onward share
transfer instrument (“the onward transferee”).

(4) A reverse share transfer instrument is a share transfer
instrument which—

(a) provides for transfer to the transferor under the original
instrument (where subsection (2) applies);

(b) 5provides for transfer to the original transferee (where
subsection (3) applies);

(c) makes other provision for the purposes of, or in
connection with, the transfer of securities which are,
could be or could have been transferred under
10paragraph (a) or (b).

(5) The Bank of England may not make a reverse share transfer
instrument under subsection (2) unless—

(a) the original transferee is—

(i) the Bank of England,

(ii) 15a company wholly owned by the Bank of
England or the Treasury, or

(iii) a nominee of the Treasury, or

(b) the reverse share transfer instrument is made with the
written consent of the original transferee.

(6) 20The Bank of England may not make a reverse share transfer
instrument under subsection (3) unless—

(a) the onward transferee is—

(i) the Bank of England,

(ii) a company wholly owned by the Bank of
25England or the Treasury, or

(iii) a nominee of the Treasury, or

(b) the reverse share transfer instrument is made with the
written consent of the onward transferee.

(7) Sections 7 and 8 do not apply to a reverse share transfer
30instrument (but it is to be treated in the same way as any other
share transfer instrument for all other purposes including for
the purposes of the application of a power under this Part).

(8) Before making a reverse share transfer instrument the Bank of
England must consult—

(a) 35if the UK clearing house is a PRA-authorised person, the
PRA, and

(b) the FCA.

(9) Section 26 applies where the Bank of England has made a
reverse share transfer instrument.”

(4) 40For sections 45 and 46 substitute—

“45 Transfer of ownership: property transfer

(1) This section applies where the Bank of England has made a
share transfer instrument, in respect of securities issued by a UK
clearing house, in accordance with section 13(2) (“the original
45instrument”).

(2) The Bank of England may make one or more property transfer
instruments.