Financial Services (Banking Reform) Bill

Insert the following new Clause—

“Court of directors to become board of directors

(1)   The court of directors of the Bank of England shall become the board of
directors of the Bank of England.

(2)   Accordingly, in the Bank of England Act 1998—

(a)   in sections 1(1), (2) and (4), 2(1), 4(2), (3) and (4), 9A(1), (4) and (5),
9B(1), 9G(2), paragraphs 8 to 12A and 13(1) and (3A) to (6) of
Schedule 1 and paragraphs 5 and 14 of Schedule 3, for “court”
substitute “board”,

(b)   in section 2(2) to (4) for court’s substitute “board’s”, and

(c)   in paragraph 14(2) of Schedule 1, for “court” substitute “board of
directors, or former members of the court of directors,”;

and any reference to the court in any other enactment or instrument is to be and any reference to the court in any other enactment or instrument is to be
read as (as appropriate) being or including a reference to the board.”read as (as appropriate) being or including a reference to the board.”

Insert the following new Clause—

“Constitution of board of directors

(1)   The Bank of England Act 1998 is amended as follows.

(2)   In section 1(2)—

(a)   before paragraph (a) insert—

“(za)   a non-executive chairman,”, and

(b)   in paragraph (e), for “9” substitute “4”.

(3)   Schedule 1 is amended as follows.

(4)   Before paragraph 1 insert—

“(A1)   Appointment as the non-executive chairman of the Bank shall be
for a period of 4 years, or such shorter period as may be specified
in the appointment.”

(5)   In paragraphs 4 and 7(2), after “appointed as” insert “non-executive
chairman,”.

(6)   Before paragraph 5 insert—

“4A    (1)   The person appointed to be the non-executive chairman of the
Bank must have considerable experience of prudential or
financial matters.

(2)   The persons appointed to be non-executive members of the Bank
must have—

(a)   experience in the running of large organisations and
financial institutions, and

(b)   expertise in prudential policy.”

(7)   In paragraphs 5(1) and 6(1), after “appointment as” insert “non-executive
chairman,”.

(8)   In paragraph 5(2), after “appointment as” insert “non-executive chairman
or”.

(9)   In paragraphs 6(2) and 8(1), after “office as” insert “non-executive
chairman,”.

(10)   In paragraph 12(2), for paragraphs (a) and (b) substitute—

“(a)   the non-executive chairman of the Bank, and

(b)   the Governor of the Bank (or in his absence a Deputy
Governor).”

(11)   For paragraph 13(3) substitute—

“(3)   Meetings of the board shall be chaired by—

(a)   the non-executive chairman of the Bank, or

(b)   in the absence of the non-executive chairman, a member
of the court designated by the Chancellor of the
Exchequer to chair meetings of the board in the absence
of the non-executive chairman.”

(12)   In paragraph 13(3A), omit “(a) or”.

(13)   In paragraph 15, for “A” substitute “The non-executive chairman or a”.”

Insert the following new Clause—

“Functions of board of directors etc.

(1)   The Bank of England Act 1988 is amended as follows.

(2)   In section 2(2), after “strategy” insert “and keep under review the Bank’s
performance in relation to the objectives and strategy”.

(3)   In section 2, after subsection (5) insert—

“(6)   The board must conduct and publish reviews of the Bank’s
performance in prudential and monetary policy.

(7)   The board must—

(a)   monitor the extent to which the objectives set in relation to
financial management have been met,

(b)   keep under review the internal financial controls of the
Bank with a view to securing the proper conduct of its
financial affairs, and

(c)   consider the Bank’s annual plans as to the allocation of
resources and make and publish a report of the nature and
extent of any changes in resource allocation in each area of
the Bank’s activities.

(8)   The board must provide to the Treasury and to any committee of
either House of Parliament (or both Houses of Parliament) any
information relating to the Bank (or any committee of the Bank or
sub-committee of the board) requested by the Treasury or any
committee of either House (or both Houses).”

(4)   After section 2 insert—

“2ZA Reviews

(1)   In the discharge of any of its functions, the board of directors of the
Bank may arrange—

(a)   for a review to be conducted in relation to any matter by a
person appointed by the board, and

(b)   for the person conducting the review to make one or more
reports to the board.

(2)   The persons who may be appointed to conduct a review include an
officer or employee of the Bank.

(3)   A review under this section is a “performance review” if it—

(a)   is arranged by the board in the discharge of its function in
keeping the Bank’s performance under review under
section 2(2) or its function under section 2(7)(a), and

(b)   relates to past events.

(4)   If the person to be appointed to conduct a performance review is an
officer or employee of the Bank, the appointment requires the
consent of the Governor of the Bank.

(5)   In the case of a performance review, the board must have regard to
the desirability of ensuring that sufficient time has elapsed—

(a)   for the review to be effective, and

(b)   to avoid the review having a material adverse effect on the
exercise by the Bank of its functions.

(6)   The Bank must give the Treasury a copy of any report made to the
Board by a person appointed to conduct a performance review.

(7)   The Bank must publish the report unless the board of directors
consider that to publish any information would be against the
public interest (in which case it must not publish that information);
and in that case the board must keep under review whether
publication of the information remains against the public interest
and, if they decide it no longer is, the Bank must publish the
information.

(8)   The Treasury must lay before Parliament a copy of any report or
information published under subsection (7).

(9)   If a report makes recommendations to the Bank as to steps to be
taken by it, the board must monitor the Banks response and, if and
to the extent that the Bank accepts the recommendations, monitor
their implementation.

(5)   For section 9B(4) substitute—

“(4)   The board of directors must keep under review, and (where they
consider it appropriate to do so) require the modification of, the
procedures followed by the Financial Policy Committee; and for
that purpose the board may require access to any documents
considered, or other information held, by the Financial Policy
Committee.

(4A)   One or two members of the board of directors may attend any
meeting of the Financial Policy Committee, but a person attending
by virtue of this subsection may not speak unless invited to do so
by the person chairing the Financial Policy Committee.

(4B)   Subsection (4A) does not affect—

(a)   anything done in relation to the Financial Policy Committee
by a member of the Financial Policy Committee who is also
a member of the board of directors, or

(b)   the powers of the Financial Policy Committee under
paragraph 13 of Schedule 2A.”

(6)   In section 9C, after subsection (4) insert—

“(4A)    The board of directors shall keep under review the performance by
the Financial Policy Committee of the duty under this section.”

(7)   For section 16 substitute—

“16 Functions of board of directors

(1)   The board of directors must keep under review, and (where they
consider it appropriate to do so) require the modification of, the
procedures followed by the Monetary Policy Committee; and for
that purpose the board may require access to any documents
considered, or other information held, by the Monetary Policy
Committee.

(2)   In particular the board of directors must determine whether the
Monetary Policy Committee has collected the regional, sectoral and
other information necessary for the purposes of formulating
monetary policy.

(3)   One or two members of the board of directors may attend any
meeting of the Monetary Policy Committee, but a person attending
by virtue of this subsection may not speak unless invited to do so
by the person chairing the Monetary Policy Committee.

(4)   Subsection (3) does not affect the powers of the Monetary Policy
Committee under paragraph 13A of Schedule 3.”

(8)   After paragraph 13 of Schedule 1 insert—

“Minutes of meetings“Minutes of meetings

13A   (1)  After each meeting of the board, the Bank shall publish minutes
of the meeting before the end of the period of 6 weeks beginning
with the day of the meeting.

(2)   The minutes need not include any matters appearing to the board
to be confidential but where there is a public interest in any such
matters the non-executive chairman must inform the chairman of
the Treasury Committee of the House of Commons.

(3)   The reference in subsection (2) to the Treasury Committee of the
House of Commons—

(a)   if the name of that Committee is changed, is to be treated
as 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 and any question arising under paragraph (a) or (b) is to be determined by the Speaker of the House of Commons.”.”determined by the Speaker of the House of Commons.”.”

Insert the following new Clause—

“Abolition of Oversight Committee

(1)   The Oversight Committee of the court of directors of the Bank of England
is abolished.

(2)   Accordingly, in the Bank of England Act 1998—

(a)   omit sections 3A to 3F and section 4(2)(a), and

(b)   in paragraph 14(1) of Schedule 1, paragraphs 5 and 9(1) and (2) of
Schedule 2A and paragraphs 4(2) and 9(1) of Schedule 3, for
“Oversight Committee” substitute “board of directors”.”

(3)   And in paragraph 15 of Schedule 1ZB of FSMA 2000—

(a)   in sub-paragraph (1), for “Oversight Committee” substitute “board
of directors”, and

(b)   in sub-paragraph (2), for “Committee” substitute “board”.

Insert the following new Clause—

“Additional member of the Financial Policy Committee

(1)   Section 9B of the Bank of England Act 1998 is amended as follows.

(2)   In subsection (1)(e), for “4” substitute “5”.

(3)   After subsection (3) insert—

“(3A)    The Chancellor of the Exchequer must secure that one of the
persons appointed under subsection (1)(e) is a person with
knowledge of financial crises, and other circumstances occurring in
the past or present, (in the United Kingdom or elsewhere) which is
likely to be relevant to the Committee’s functions.”.”

Insert the following new Clause—

“Abolition of strategic objective of the FCA

In FSMA 2000—

(a)   In section 1B, omit—

(i)   in subsection (1), paragraph (a) (and the “and” following it)
and, in paragraph (b), “operational”,

(ii)   subsection (2),

(iii)   in subsection (3), “operational”,

(b)   omit section 1F,

(c)   in subsection (1K), omit “operational”

(d)   omit section 3B(3),

(e)   omit section 3D(4),

(f)   in section 55B(4), for the words after “advance” substitute “any of
its objectives”,

(g)   in section 55H(4), omit “operational”,

(h)   in section 55I(5), omit “operational”,

(i)   in section 55J(1)(c), for the words after “advance” substitute “any of
its objectives”,

(j)   in section 55L(6), omit “operational”,

(k)   in section 55T, omit “operational”,

(l)   in section 88E, in subsection (1) and in the heading, omit
“operational”,

(m)   in section 89U, in subsection (1) and in the heading, omit
“operational”,

(n)   in section 137A(1), omit “operational”,

(o)   in section 138A(5), omit “operational”,

(p)   in section 192C(2), for the words after “advance” substitute “any of
its objectives”,

(q)   in section 194(1)(c), for the words after “advance” substitute “any of
its objectives”,

(r)   in section 232A, omit “operational”,

(s)   in section 314(1), omit “operational”,

(t)   in section 316(1A)(a), omit “operational”,

(u)   in section 318(3A)(a), omit “operational”,

(v)   in section 340(8), for the words after “expedient” substitute “for the
purpose of advancing any of its objectives”,

(w)   in section 395(3), for the words after “procedure and” substitute
“the regulator considers that, in the particular case, it is necessary in
order to advance any of its objectives.”,

(x)   in paragraph 11(1)(b) of Schedule 1ZA, omit “operational”,

(y)   in paragraphs 6 and 6B of Schedule 1A, omit “operational”, and

(z)   in paragraphs 3C(1) and 3D(1) of Schedule 6, omit “operational”.”

Insert the following new Clause—

“Competition objective of the PRA

(1)   FSMA 2000 is amended as follows.

(2)   After section 2D insert—

“2DA Competition objective

(1)   In discharging its general functions the PRA must, so far as is
reasonably practicable, act in a way which advances its competition
objective.

(2)   The PRA’s competition objective is: to promote competition in the
relevant markets.

(3)   In subsection (2) “the relevant markets” means the markets for
services provided by PRA authorised persons in carrying on
regulated activities.

(4)   Subsection (1) is subject to section 2B.”

(3)   In section 2F—

(a)   after “general objective”, in the first place, insert “and competition
objective”, and

(b)   in paragraphs (a) and (b), for “is a reference to its general objective
and” substitute “includes a reference to”.

(4)   In section 2H, omit—

(a)   paragraph (b) of subsection (1) (and the “and” before it), and

(b)   subsection (2).”

Insert the following new Clause—

“Independent Banking Regulatory Decisions Committee of the FCA

(1)   After section 1L of FSMA 2000 insert—

“1LA Independent Banking Regulatory Decisions Committee

(1)   There is to be a Banking Regulatory Decisions Committee of the
FCA (“the Committee”).

(2)   The members of the Committee are to be appointed jointly by the
FCA and the PRA and hold office in accordance with the terms of
their appointment.

(3)   The person appointed to chair the Committee must have experience
of acting in a senior judicial capacity.

(4)   A majority of the members of the Committee must be persons
appearing to the FCA and the PRA to have (and to have had) no
professional connection with the provision of financial services.

(5)   The remaining members of the Committee must include persons
appearing to the FCA and the PRA to have extensive experience in
senior roles in banking.

(6)   The function of the Committee is to exercise the banking regulatory
decisions function of the FCA and the PRA.

(7)   “Banking regulatory decisions function” means the function of
taking decisions for enforcing compliance with relevant
requirements, within the meaning of Part 14, in cases where the
authorised person is a bank.

(8)   The banking regulatory decisions function of the FCA and the PRA
is delegated to the Committee; and references in this Act to the FCA
and the PRA in relation to that function are to be construed
accordingly.

(9)   The FCA shall meet the reasonable costs of the Committee in
discharging its function but the Committee—

(a)   is not subject to direction by the FCA or the PRA as to the
exercise of its function,

(b)   is not accountable to the FCA or the PRA for the exercise of
its function, and

(c)   may appoint its own officers and staff.

(10)   At least once a year the Committee must make a report to the
Treasury on the discharge of its function.

(11)   The Treasury must lay before Parliament a copy of each report
received by them under subsection (10).

(12)   In this section “bank” has the meaning given by section 2 of the
Banking Act 2009.”

(2)   The FCA and the PRA must carry out a review of the operation of the
Banking Regulatory Decisions Committee of the FCA.

(3)   The review must be completed before the end of 2018.

(4)   The FCA and the PRA must give the Treasury a report of the review.

(5)   The report must include an assessment of whether the function of the
Banking Regulatory Decisions Committee would be better discharged by a
body that was entirely independent of the FCA and the PRA.

(6)   The Treasury must lay a copy of the report before Parliament and publish
it in such manner as they think fit.”

Insert the following new Clause—

“Meetings between regulators and bank auditors

(1)   The FCA and the PRA must make arrangements to meet the auditors of
each bank at least twice in each calendar year.

(2)   The FCA and the PRA may conduct meetings under subsection (1) jointly
or separately (but each bank’s auditors must be met separately).

(3)   The purpose of each meeting is to discuss matters about which the FCA or
the PRA believe that the auditors may have views or information.

(4)   A bank has a duty to ensure that its auditors attend meetings in accordance
with this section (and compliance with that duty may be considered for
purposes of the exercise of functions under FSMA 2000).

(5)   In this section “bank” has the meaning given by section 2 of the Banking
Act 2009.”

Insert the following new Clause—

“Leverage ratio

(1)   The Treasury must make an order under section 9L of the Bank of England
Act 1998 (macro-prudential measures) enabling the Financial Policy
Committee to give a direction under section 9H in respect of a leverage
ratio for banks.

(2)   The direction above may specify the leverage ratio to be used.

(3)   For the purposes of this section—

(a)   “leverage ratio” has the meaning which the Financial Policy
Committee considers that it has in European Union law or
procedure from time to time, and

(b)   “bank” has the meaning given by section 2 of the Banking Act 2009.

(4)   The order under subsection (1) must be made within the period of 6 months
beginning with the date on which this Act receives Royal Assent.”

Insert the following new Clause—

“Proprietary trading

(1)   The PRA and the FCA must carry out a review of proprietary trading by
banks.

(2)   The review must be completed before the end of the period of 3 years
beginning with the day on which this Act is passed.

(3)   The PRA and the FCA must give the Treasury a report of the review.

(4)   The report must include—

(a)   an analysis of any action taken by the PRA and the FCA to monitor
whether and to what extent banks engage in proprietary trading
and any action taken by the PRA or the FCA to discourage banks
from doing so;

(b)   an account of any difficulties encountered by the PRA or the FCA
in taking that action and an assessment of its efficacy;

(c)   an account of any requirement imposed on banks which the PRA or
the FCA consider may be engaging in proprietary trading to
publish a statement of the banks’ exposure to risk in their trading
operations and of the controls applied to limit that risk;

(d)   an assessment of the impact of the ring-fencing rules on proprietary
trading by banks;

(e)   an assessment, drawing on experience in countries other than the
United Kingdom, of the feasibility of prohibiting banks from
engaging in proprietary trading or limiting the extent to which, or
circumstances in which, they may do so (having regard, in
particular, to any difficulties of definition); and

(f)   a comprehensive analysis of the advantages and disadvantages of
prohibiting banks from engaging in proprietary trading or limiting
the extent to which, or circumstances in which, they may do so.

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

(6)   The PRA and the FCA must publish the report in such manner as they think
fit.

(7)   The Treasury must, following receipt of the report, make arrangements for
the carrying out of an independent review to consider the case for the
taking of action in relation to proprietary trading by banks.

(8)   The appointment by the Treasury of persons to carry out the review
requires the consent of the Treasury Committee of the House of Commons.

(9)   The reference in subsection (8) to the Treasury Committee of the House of
Commons—

(a)   if the name of that Committee is changed, is to be treated as 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 and any question arising under paragraph (a) or (b) is to be determined by
the Speaker of the House of Commons.the Speaker of the House of Commons.

(10)   The persons appointed to carry out the review must give the Treasury a
report of the review once it has been concluded.

(11)   The Treasury must lay a copy of the report before Parliament and publish
it in such manner as it thinks fit.

(12)   In this section—

(a)   “proprietary trading”, in relation to a bank, means trading with
funds on markets on the bank’s own account (whether or not in
connection with business with the bank’s customers),

(b)   “bank” has the meaning given by section 2 of the Banking Act 2009,

(c)   “ring-fencing rules” has the meaning given by section 417 of FSMA
2000.”

Insert the following new Clause—

“Remuneration code

(1)   The FCA and the PRA must prepare (and may from time to time revise) a
remuneration code.

(2)   The remuneration code is to apply to all persons employed by a bank who
are covered by the licensing regime.

(3)   The remuneration code must—

(a)   require that persons to whom the remuneration code applies are,
except in specified circumstances, to receive a proportion of their
remuneration in the form of variable remuneration,

(b)   require that a specified measure of profits is to be used in
calculating any variable remuneration which is calculated by
reference to profits,

(c)   require that the nature and amount of variable remuneration is to
strike an appropriate balance between risk to the bank providing it
and fair reward for the receipient of it,

(d)   require a proportion of variable remuneration to be deferred for
such period, not exceeding 10 years, as is appropriate to strike a
balance between risk to the bank providing it and fair reward for
the recipient of it,

(e)   require that no, or only a limited amount of, variable remuneration
of a person to whom the remuneration code applies is to be
calculated by reference to sales made by the person or by any group
of persons employed by the bank providing it, and

(f)   require that non-executive directors of a bank are not to receive
variable remuneration.

(4)   A requirement imposed by the remuneration code is a relevant
requirement for the purposes of Part 14 of FSMA 2000.

(5)   In this section—

(a)   “variable remuneration” means remuneration (whether in money
or in securities or any other form of money’s worth) the amount or
value of which varies in accordance with profits, sales or other
matters;

(b)   “bank” has the meaning given by section 2 of the Banking Act 2009.”

Insert the following new Clause—

“Powers of regulator where Bank receiving State support

(1)   This section applies where—

(a)   all or part of the business of a bank has been transferred to a bridge
bank under section 12 of the Banking Act 2009,

(b)   a bank has been taken into public ownership under section 13 of
that Act, or

(c)   the Treasury has acquired shares or other securities in a bank or has
provided a guarantee in respect of the liabilities of a bank.

(2)   The appropriate regulator may make an order under subsection (3).

(3)   An order under this subsection may do all or any of the following—

(a)   cancel any entitlement to deferred remuneration payable (but not
yet paid) to persons covered by the licensing regime who are
employed by the Bank,

(b)   remove any entitlement of such persons to payments for loss of
office or payments on a change in control of the bank, or

(c)   remove rights to pension benefits to or in respect of such persons
which have not yet become payable.

(4)   In this section—

(a)   “the appropriate regulator” means—

(i)   if the bank is a PRA-authorised person (within the meaning
of FSMA 2000), the PRA, and

(ii)   otherwise, the FCA;

(b)   “bank” has the meaning given by section 2 of the Banking Act 2009.”

Insert the following new Clause—

“Special measures

(1)   This section applies where the FCA or the PRA—

(a)   has reason to believe that a bank’s systems or professional
standards or culture do not provide sufficient safeguards against
the commission of actions in respect of which the FCA or the PRA
has power to take action, but

(b)   do not have reason to believe that any such action has been
committed (ignoring any action which is already being investigated
or in respect of which action has been or is being taken).

(2)   The FCA or the PRA may give notice to the bank of the belief mentioned in
subsection (1)(a).

(3)   If the FCA or the PRA gives a notice under subsection (2), it must invite the
bank to make representations showing that sufficient safeguards are in
place.

(4)   Following the giving of a notice under subsection (2) and the receipt of
representations under subsection (3) (if any are made), the FCA or the PRA
may commission an independent investigation into the bank’s systems and
professional standards and culture with a view to establishing whether
sufficient safeguards are in place; and for that purpose—

(a)   “independent” means independent of the FCA, the PRA and the
bank, and

(b)   an investigation may not be commissioned from a person involved
in the auditing of companies.

(5)   The bank must cooperate with the investigation.

(6)   Following receipt of the report of the investigation under subsection (4) the
FCA or the PRA may by notice require the bank to take measures to
provide sufficient safeguards and to monitor their effectiveness.

(7)   The bank must—

(a)   comply with the notice, and

(b)   appoint an appropriately senior member of the bank’s staff to
oversee compliance.

(8)   Compliance by a bank with a duty under this section may be considered for
the purposes of the exercise by the FCA or the PRA of functions under
FSMA 2000.

(9)   In this section “bank” has the meaning given by section 2 of the Banking
Act 2009.”

Insert the following new Clause—

“Whistleblowers’ compensation

(1)   After section 206A of FSMA 2000 (suspending permission to carry on
regulated activities) insert—

“206B          Whistleblowers’ compensation

(1)   If as a result of an investigation carried out in accordance with this
Act the appropriate regulator is satisfied that an authorised person
has mistreated a whistleblower, the appropriate regulator may
require the authorised person to pay to the whistleblower
compensation of an amount determined by the appropriate
regulator to be appropriate having regard to the financial
implications of the mistreatment for the whistleblower.

(2)   In this section “whistleblower” means an individual who works or
worked for the authorised person (whether or not as an employee)
and who—

(a)   gave information to the appropriate regulator for the
purpose of initiating or facilitating the carrying out of an
investigation in accordance with this Act, or

(b)   gave to a colleague information relating to any matter which
might be relevant if the appropriate regulator were deciding
whether to initiate the carrying out of such an investigation
or were carrying out such an investigation.

(3)   In this section a reference to mistreatment includes a reference to
any form of discriminatory or unfavourable treatment.

(4)   A payment under subsection (1) is to be made only if the
whistleblower chooses to accept it; and a whistleblower who
accepts compensation under this section may not bring civil
proceedings (including, but not limited to, proceedings before an
employment tribunal) in respect of, or in reliance on, the
mistreatment in respect of which the compensation is offered.

(5)   The procedural provisions of this Act in relation to the imposition
of a penalty under section 206 apply to an award of compensation
under this section.”.”

Insert the following new Clause—

“Abolition of UKFI

(1)   All property, rights and liabilities of UKFI are, by virtue of this section,
transferred to the Treasury.

(2)   Immediately after the transfer effected by subsection (1) UKFI is dissolved.

(3)   “UKFI” means UK Financial Investments Limited, company registered
number 06720891.”