Financial Services (Banking Reform) Bill

Second
marshalled
list of Amendments
to be moved
in committee

The amendments have been marshalled in accordance with the Instruction of 30th July 2013, as follows—

Clauses 8 to 16
Schedule 2
Clauses 17 to 21

[Amendments marked * are new or have been altered]

After Clause 8

LORD SHARKEY

LORD GLASMAN

43

Insert the following new Clause—

“Competition and diversity

The Secretary of State must bring before Parliament within 6 months of the
passing of this Act proposals to increase competition and diversity in
banking by imposing upon any bank in which Her Majesty’s Government
is a majority shareholder a duty to apply the following principles—

(a)   the principle of regionality whereby each branch of the bank is
permitted to take on new deposits, open new accounts and make
loans to companies or individuals only when the registered
addresses of these companies or individuals is within the defined
geographical area of operation of that branch;

(b)   the network principle whereby regional groups of local branches
are autonomous in terms of governance, publish separate reports
and accounts, collaborate with other branches to share central
services such as the provision of systems, marketing, specialist
financial products, liquidity management and wholesale funding
while also maintaining appropriate mutual guarantees and self-
regulation within the group to ensure that failing local
management and branches are dealt with within the group with no
recourse to the taxpayer;

(c)   the stakeholder principle whereby the governance of regional
groupings of local branches explicitly includes stakeholder
representation, comprising local businesses, customers, suppliers
and employer and elected employee representatives;

(d)   the social purpose principle whereby a broader social purpose is
embodied either in the banking licence of the bank or other statute
so that the directors do not have a duty to maximise profit, but to
ensure the profitability and financially sustainability of their local
operations in supporting the economy of their regions of operations
and financial inclusion in those regions, and nothing in this social
purpose principle requires making loans that could not reasonably
be expected to be repaid.”

After Clause 12

LORD DEIGHTON

44

Insert the following new Clause—

“PART 3

BAIL-IN STABILISATION OPTION

Bail-in stabilisation option

(1)   Schedule (Bail-in stabilisation option) (which contains amendments relating
to a new stabilisation option in Part 1 of the Banking Act 2009) has effect.

(2)   The Treasury may by order make any provision they consider appropriate
in consequence of the application to building societies of the amendments
made by this Part.

(3)   An order may, in particular, amend section 84 of the Banking Act 2009, or
amend or modify the effect of any other enactment to which this subsection
applies.

(4)   Subsection (3) applies to any enactment (including a fiscal enactment)
passed or made—

(a)   before the passing of this Act, or

(b)   on or before the last day of the Session in which this Act is passed.

(5)   In this section “building society” has the same meaning as in section 84 of
the Banking Act 2009.”

45

Insert the following new Clause—

“PART 4

CONDUCT OF PERSONS WORKING IN FINANCIAL SERVICES SECTOR

Functions for which approval is required

(1)   Section 59 of FSMA 2000 (approval for particular arrangements) is
amended as follows.

(2)   Omit subsection (5).

(3)   For subsection (6) substitute—

“(6)   The PRA may specify a description of function under subsection
(3)(a) only if, in relation to the carrying on of a regulated activity by
a PRA-authorised person, it is satisfied that the function is a senior
management function as defined in section 59ZA.”

(4)   After subsection (6A) (inserted by section 5 above) insert—

“(6B)    If—

(a)   a function of a description specified in rules made by the
FCA under subsection (3)(a) or (b) is a controlled function in
relation to the carrying on of a regulated activity by a bank,
and

(b)   the FCA is satisfied that, in relation to the carrying on of a
regulated activity by a bank, the function is a senior
management function as defined in section 59ZA,

the FCA must designate the function in the rules as a senior
management function.

(6C)   If a function of a description specified in rules made by the PRA
under subsection (3)(a) is a controlled function in relation to the
carrying on of a regulated activity by a bank, the PRA must
designate the function in the rules as a senior management
function.”

(5)   Omit subsections (7) to (7B) and (11).”

46

Insert the following new Clause—

“Senior management functions

After section 59 of FSMA 2000 insert—

“59ZA           Senior management functions

(1)   This section has effect for determining whether a function is for the
purposes of section 59(6) and (6B) a senior management function.

(2)   A function is a “senior management function”, in relation to the
carrying on of a regulated activity by an authorised person, if—

(a)   the function will require the person performing it to be
responsible for managing one or more aspects of the
authorised person’s affairs, so far as relating to the activity,
and


13

(b)   those aspects involve, or might involve, a risk of serious
consequences—

(i)   for the authorised person, or

(ii)   for business or other interests in the United
Kingdom.

(3)   In subsection (2)(a) the reference to managing one or more aspects
of an authorised person’s affairs includes a reference to taking
decisions, or participating in the taking of decisions, about how one
21or more aspects of those affairs should be carried on.””

LORD BRENNAN

LORD MCFALL OF ALCLUITH

LORD WATSON OF INVERGOWRIE

[Amendments 46A and 46B are amendments to Amendment 46]

46A*


Line 13, leave out paragraph (b) and insert—

“(b)   those aspects involve, or might involve, a risk of—

(i)   serious consequences for the authorised person, or

(ii)   serious consequences for business or other interests
in the United Kingdom, or

(iii)   conduct or omissions by or on behalf of an
authorised person related to or resulting from the
authorised person transacting with criminal
property for its benefit or for the benefit on behalf of
other persons.”

46B*


Line 21, at end insert—

“(2)   In subsection 2(b)(iii) the reference to “conduct or omissions by an
authorised person related to or resulting from the authorised
person transacting with criminal property for its personal benefit or
for and on behalf of other persons” includes conduct or omissions
giving rise to criminal liability pursuant to the provisions of the
Fraud Act 2006, Part 7 of the Proceeds of Crime Act 2002, and the
Money Laundering Regulations 2007 and such other conduct and in
respect of such minimum sums as will be specified in rules made by
the FCA or the PRA.”

LORD DEIGHTON

47

Insert the following new Clause—

“Statements of responsibilities

(1)   Section 60 of FSMA 2000 (applications for approval) is amended as follows.

(2)   After subsection (2) insert—

“(2A)    If—

(a)   the application is for the approval of a person to perform a
designated senior management function, and

(b)   the authorised person concerned is a bank,

the appropriate regulator must require the application to contain,
or be accompanied by, a statement setting out the aspects of the
affairs of the authorised person concerned which it is intended that
the person will be responsible for managing in performing the
function.


14

(2B)   A statement provided under subsection (2A) is known as a
15“statement of responsibilities”.

(2C)   In subsection (2A) “designated senior management function”
means a function designated as a senior management function
under section 59(6B) or (6C).”

(3)   After subsection (6) insert—

“(6A)    Subsection (6) applies to references to a bank as it applies to
references to the authorised person concerned.””

LORD BRENNAN

LORD MCFALL OF ALCLUITH

LORD WATSON OF INVERGOWRIE

[Amendment 47A is an amendment to Amendment 47]

47A*


Leave out lines 14 and 15 and insert—

“(2B)    If the application provided under subsection (2A) is for the
approval of a person to perform a designated senior management
function under section 59ZA(2)(b)(iii), “a person” under subsection
(2A)(a) must include all persons responsible for compliance with
the Fraud Act 2006, Part 7 of the Proceeds of Crime Act 2002, and
the Money Laundering Regulations 2007 and such other conduct
and in respect of such minimum sums as will be specified in rules
made by the FCA or the PRA on behalf of the authorised person and
all persons responsible for management of persons responsible for
compliance with the Fraud Act 2006, Part 7 of the Proceeds of Crime
Act 2002, and the Money Laundering Regulations 2007 and such
other conduct and in respect of such minimum sums as will be
specified in rules made by the FCA or the PRA on behalf of the
authorised person.”

LORD DEIGHTON

48

Insert the following new Clause—

“Power to give approval subject to conditions or for limited period

(1)   Section 61 of FSMA 2000 (determination of applications) is amended as
follows.

(2)   For subsection (1) substitute—

“(1)   The regulator to which an application for approval is made under
section 60 may grant the application only if—

(a)   it is satisfied that the person in respect of whom the
application is made (“the candidate”) is a fit and proper
person to perform the function to which the application
relates, or

(b)   in a case where the application is for approval to perform a
designated senior management function in relation to the
carrying on of a regulated activity by a bank (a “bank-
related senior management application”), it is satisfied that
the condition in paragraph (a) will be met if the application
is granted subject to one or more conditions (as to which, see
subsection (2B)).”

(3)   In subsection (2), for “deciding that question” substitute “determining the
application”.

(4)   After subsection (2A) insert—

“(2B)    The regulator to which a bank-related senior management
application is made under section 60 may in particular—

(a)   grant the application subject to any conditions that the
regulator considers appropriate, and

(b)   grant the application so as to give approval only for a
limited period.

(2C)   A regulator may exercise the power under paragraph (a) or (b) of
subsection (2B) only if—

(a)   where the regulator is the FCA, it appears to the FCA that it
is desirable to do so in order to advance one or more of its
operational objectives, and

(b)   where the regulator is the PRA, it appears to the PRA that it
is desirable to do so in order to advance any of its objectives.

(2D)   Consent given by the FCA for the granting of the application may
be conditional on the manner in which the PRA exercises its power
under subsection (2B).”

(5)   After subsection (3) insert—

“(3ZA)   In the case of a bank-related senior management application, the
reference in subsection (3)(a) to granting the application is a
reference to granting it without imposing conditions or limiting the
period for which the approval has effect.”

(6)   After subsection (5) insert—

“(6)   In this section—

(a)   “designated senior management function” means a function
designated as a senior management function under section
59(6B) or (6C);

(b)   any reference to a bank includes a reference to a person who
has applied for permission under Part 4A and will be a bank
if permission is given.”

(7)   In section 62 of FSMA 2000 (applications for approval: procedure and right
to refer to Tribunal)—

(a)   in subsection (2), after “the application” insert “, or to grant the
application subject to conditions or for a limited period (or both)”;

(b)   in subsection (3), after “the application” insert “, or to grant the
application subject to conditions or for a limited period (or both)”;

(c)   in subsection (4), after “the application” insert “, or to grant the
application subject to conditions or for a limited period (or both)”.”

49

Insert the following new Clause—

“Changes in responsibilities of senior managers

After section 62 of FSMA 2000 insert—

“62A          Changes in responsibilities of senior managers

(1)   This section applies where—

(a)   an authorised person has made an application to the
appropriate regulator for approval under section 59 for a
person to perform a designated senior management
function,

(b)   the application contained, or was accompanied by, a
statement of responsibilities under section 60(2A), and

(c)   the application has been granted.

(2)   If, since the granting of the application, there has been any
significant change in the aspects of the authorised person’s affairs
which the person is responsible for managing in performing the
function, the authorised person must provide the appropriate
regulator with a revised statement of responsibilities.

(3)   The appropriate regulator may require the authorised person—

(a)   to provide information which the person is required to give
under this section in such form as the appropriate regulator
may direct, or

(b)   to verify such information in such a way as the appropriate
regulator may direct.

(4)   In this section—

“the appropriate regulator” has the same meaning as in section
60;

“designated senior management function” means a function
designated as a senior management function under section
59(6B) or (6C).””

50

Insert the following new Clause—

“Variation of approval

After section 63 of FSMA 2000 insert—

“63ZA           Variation of senior manager’s approval at request of bank

(1)   Where an application for approval under section 59 is granted
subject to conditions, the authorised person concerned may apply
to the appropriate regulator to vary the approval by—

(a)   varying a condition,

(b)   removing a condition, or

(c)   imposing a new condition.

(2)   “The appropriate regulator”—

(a)   in the case of an application for variation of an approval in
a way described in subsection (1)(a) or (b), means whichever
of the FCA or the PRA imposed the condition concerned;

(b)   in the case of an application for variation of an approval in
the way described in subsection (1)(c), means the regulator
who gave the approval.

(3)   The PRA must consult the FCA before determining an application
under this section, unless the application relates to the variation or
removal of a condition which was imposed by the PRA in exercise
of its power under section 63ZB.

(4)   The regulator to which an application is made under this section
must, before the end of the period for consideration, determine
whether—

(a)   to grant the application; or

(b)   to give a warning notice under section 62(2).

(5)   “The period for consideration” means the period of 3 months
beginning with the date on which the regulator receives the
application.

(6)   The FCA may refuse an application under this section if it appears
to the FCA that it is desirable to do so in order to advance one or
more of its operational objectives.

(7)   The PRA may refuse an application under this section if it appears
to the PRA that it is desirable to do so in order to advance any of its
objectives.

(8)   The following provisions apply to an application made under this
section for variation of an approval as they apply to an application
for approval made under section 60—

  section 60(2) to (8),

  section 61(4) and (5),

  section 62.

63ZB       Variation of senior manager’s approval on initiative of regulator

(1)   The FCA may vary an approval under section 59 given by the FCA
or the PRA for the performance of a designated senior management
function in relation to the carrying on of a regulated activity by a
bank if the FCA considers that it is desirable to do so in order to
advance one or more of its operational objectives.

(2)   The PRA may vary an approval under section 59 for the
performance of a designated senior management function in
relation to the carrying on of a regulated activity by a bank if—

(a)   either—

(i)   the PRA gave the approval, or

(ii)   the FCA gave the approval and the bank is a PRA-
authorised person, and

(b)   the PRA considers that it is desirable to do so in order to
advance any of its objectives.

(3)   A regulator may vary an approval by—

(a)   imposing a condition,

(b)   varying a condition,

(c)   removing a condition, or

(d)   limiting the period for which the approval is to have effect.

(4)   Before one regulator varies an approval given by the other
regulator, it must consult the other regulator.

(5)   In this section “designated senior management function” means a
function designated as a senior management function under section
59(6B) or (6C).

63ZC       Exercise of power under section 63ZB: procedure

(1)   This section applies to an exercise, by either regulator, of the power
to vary an approval under section 63ZB.

(2)   A variation takes effect—

(a)   immediately, if the notice given under subsection (4) states
that that is the case,

(b)   on such date as is specified in the notice, or

(c)   if no date is specified in the notice, when the matter to which
the notice relates is no longer open to review.

(3)   A variation may be expressed to take effect immediately (or on a
specified date) only if the regulator concerned, having regard to the
ground on which it is exercising the power to vary, reasonably
considers that it is necessary for the variation to take effect
immediately (or on that date).

(4)   If either regulator proposes to vary an approval or varies an
approval with immediate effect, it must give each of the interested
parties written notice.

(5)   The notice must—

(a)   give details of the variation,

(b)   state the regulator’s reasons for the variation,

(c)   inform the interested parties that each of them may make
representations to the regulator within such period as may
be specified in the notice (whether or not any of the
interested parties has referred the matter to the Tribunal),

(d)   inform the interested parties of when the variation takes
effect, and

(e)   inform the interested parties of the right of each of them to
refer the matter to the Tribunal.

(6)   “The interested parties”, in relation to an approval, are—

(a)   the person on whose application it was given (“A”),

(b)   the person in respect of whom it was given (“B”), and

(c)   the person by whom B’s services are retained, if not A.

(7)   The regulator giving the notice may extend the period allowed
under the notice for making representations.

(8)   If having considered the representations made by the interested
parties, the regulator decides—

(a)   to vary the approval, or

(b)   if the variation has taken effect, not to rescind it,

it must give each of the interested parties written notice.

(9)   If having considered the representations made by the interested
parties, the regulator decides—

(a)   not to vary the approval,

(b)   to vary the approval in a different way, or

(c)   if the variation has taken effect, to rescind it,

it must give each of the interested parties written notice.

(10)   A notice under subsection (8) must inform the interested parties of
the right of each of them to refer the matter to the Tribunal.

(11)   A notice under subsection (9)(b) must comply with subsection (5).

(12)   If a notice informs the interested parties of the right to refer a matter
to the Tribunal, it must give an indication of the procedure on such
a reference.

(13)   For the purposes of subsection (2)(c), whether a matter is open to
review is to be determined in accordance with section 391(8).

(14)   “Approval” means an approval under section 59.””

51

Insert the following new Clause—

“Statement of policy

After section 63ZC of FSMA 2000 (inserted by section (Variation of approval)
above) insert—

“63ZD            Statement of policy relating to conditional approval and
variation

(1)   Each regulator must prepare and issue a statement of its policy with
respect to—

(a)   its giving of approval under section 59 subject to conditions
or for a limited period only, and

(b)   its variation under section 63ZA or 63ZB of an approval
given under section 59.

(2)   A regulator may at any time alter or replace a statement issued by
it under this section.

(3)   If a statement issued under this section is altered or replaced by a
regulator, the regulator must issue the altered or replacement
statement.

(4)   A statement issued under this section must be published by the
regulator concerned in the way appearing to the regulator to be best
calculated to bring it to the attention of the public.

(5)   A regulator may charge a reasonable fee for providing a person
with a copy of a statement published under this section.

(6)   A regulator must, without delay, give the Treasury a copy of any
statement which it publishes under this section.

63ZE       Statement of policy: procedure

(1)   Before issuing a statement of policy under section 63ZD, a regulator
(“the issuing regulator”) must—

(a)   consult the other regulator, and

(b)   publish a draft of the proposed statement in the way
appearing to the issuing regulator to be best calculated to
bring it to the attention of the public.

(2)   The duty of the FCA to consult the PRA under subsection (1)(a)
applies only in so far as the statement of policy applies to persons
whose approval under section 59 relates to the performance of a
function designated by the FCA as a senior management function
under section 59(6B) in relation to the carrying on by PRA-
authorised persons of regulated activities.

(3)   The draft must be accompanied by notice that representations
about the proposal may be made to the issuing regulator within a
specified time.

(4)   Before issuing the proposed statement, the issuing regulator must
have regard to any representations made to it in accordance with
subsection (3).

(5)   If the issuing regulator issues the proposed statement it must
publish an account, in general terms, of—

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

(b)   its response to them.

(6)   If the statement differs from the draft published under subsection
(1) in a way which is in the opinion of the issuing regulator
significant, the issuing regulator—

(a)   must before issuing it carry out any consultation required
by subsection (1)(a), and

(b)   must (in addition to complying with subsection (5)) publish
details of the difference.

(7)   The issuing regulator may charge a reasonable fee for providing a
person with a draft published under subsection (1)(b).

(8)   This section also applies to a proposal to alter or replace a
statement.””

52

Insert the following new Clause—

“Extension of limitation periods for imposing sanctions

(1)   Section 63A of FSMA 2000 (power to impose penalties) is amended as
follows.

(2)   In subsection (4), for “period of three years” substitute “relevant period”.

(3)   After subsection (5A) insert—

“(5B)    “The relevant period” is—

(a)   in relation to the performance of a controlled function
without approval before the day on which this subsection
comes into force, the period of 3 years, and

(b)   in relation to the performance of a controlled function
without approval on or after that day, the period of 6 years.”

(4)   Section 66 of FSMA 2000 (disciplinary powers) is amended as follows.

(5)   In subsection (4), for “period of three years” substitute “relevant period”.

(6)   After subsection (5) insert—

“(5ZA)   “The relevant period” is—

(a)   in relation to misconduct which occurs before the day on
which this subsection comes into force, the period of 3 years,
and

(b)   in relation to misconduct which occurs on or after that day,
the period of 6 years.””

53

Insert the following new Clause—

“Rules of conduct

(1)   Part 5 of FSMA 2000 (performance of regulated activities) is amended as
follows.

(2)   Omit sections 64 and 65 (and the italic cross-heading preceding them).

(3)   Before section 66 insert—

“Conduct of approved persons and others

64A          Rules of conduct

(1)   If it appears to the FCA to be necessary or expedient for the purpose
of advancing one or more of its operational objectives, the FCA may
make rules about the conduct of the following persons—

(a)   persons in relation to whom either regulator has given its
approval under section 59;


14

(b)   persons who are employees of banks.

(2)   If it appears to the PRA to be necessary or expedient for the purpose
of advancing any of its objectives, the PRA may make rules about
the conduct of the following persons—

(a)   persons in relation to whom it has given its approval under
section 59;

(b)   persons in relation to whom the FCA has given its approval
under section 59 in respect of the performance by them of a
relevant senior management function in relation to the
carrying on by a PRA-authorised person of a regulated
activity;


25

(c)   persons who are employees of PRA-authorised banks.

(3)   In subsection (2)—

“PRA-authorised bank” means a bank that is a PRA-
authorised person, and

“relevant senior management function” means a function
which the PRA is satisfied is a senior management function
as defined in section 59ZA (whether or not the function has
been designated as such by the FCA).

(4)   Rules made under this section must relate to the conduct of persons
in relation to the performance by them of qualifying functions.

(5)   In subsection (4) “qualifying function”, in relation to a person,
means a function relating to the carrying on of activities (whether
or not regulated activities) by—

(a)   in the case of an approved person, the person on whose
application approval was given, and

(b)   in any other case, the person’s employer.

(6)   In this section any reference to an employee of a person (“P”)
includes a reference to a person who—

(a)   personally provides, or is under an obligation personally to
provide, services to P under an arrangement made between
P and the person providing the services or another person,
and

(b)   is subject to (or to the right of) supervision, direction or
control by P as to the manner in which those services are
provided,

and “employer” is to be read accordingly.””

LORD BRENNAN

LORD MCFALL OF ALCLUITH

LORD WATSON OF INVERGOWRIE

[Amendments 53A and 53B are amendments to Amendment 53]

53A*


Line 14, at end insert—

  In subsection (1) “operational objectives” includes matters relevant
to or occasioned by sections 1B, 1C, 1D and/or 1E.

  The FCA must make rules about the conduct of all persons
responsible for compliance with the Fraud Act 2006, Part 7 of the
Proceeds of Crime Act 2002, and the Money Laundering
Regulations 2007 and such other conduct and in respect of such
minimum sums as will be specified in rules made by the FCA on
behalf of an authorised person and the conduct of all persons
responsible for management of persons responsible for compliance
with the Fraud Act 2006, Part 7 of the Proceeds of Crime Act 2002,
and the Money Laundering Regulations 2007 and such other
conduct and in respect of such minimum sums as will be specified
in rules made by the FCA on behalf of an authorised person.”

53B*


Line 25, at end insert—

  The PRA must make rules about the conduct of all persons
responsible for compliance with the Fraud Act 2006, Part 7 of the
Proceeds of Crime Act 2002, and the Money Laundering
Regulations 2007 and such other conduct and in respect of such
minimum sums as will be specified in rules made by the PRA on
behalf of an authorised person and the conduct of all persons
responsible for management of persons responsible for compliance
with the Fraud Act 2006, Part 7 of the Proceeds of Crime Act 2002,
and the Money Laundering Regulations 2007 and such other
conduct and in respect of such minimum sums as will be specified
in rules made by the PRA on behalf of an authorised person.”

LORD DEIGHTON

54

Insert the following new Clause—

“Definition of “misconduct”

(1)   In section 66 of FSMA 2000 (disciplinary powers)—

(a)   after subsection (1) insert—

“(1A)    For provision about when a person is guilty of misconduct
for the purposes of action by a regulator—

(a)   see section 66A, in the case of action by the FCA, and

(b)   see section 66B, in the case of action by the PRA.”;

(b)   omit subsections (2), (2A), (6) and (7).

(2)   After that section insert—

“66A          Misconduct: action by the FCA

(1)   For the purposes of action by the FCA under section 66, a person is
guilty of misconduct if any of conditions A to C is met in relation to
the person.

(2)   Condition A is that—

(a)   the person has at any time failed to comply with rules made
by the FCA under section 64A, and

(b)   at that time the person was—

(i)   an approved person, or

(ii)   an employee of a bank.

(3)   Condition B is that—

(a)   the person has at any time been knowingly concerned in a
contravention of a relevant requirement by an authorised
person, and

(b)   at that time the person was—

(i)   an approved person in relation to the authorised
person, or

(ii)   in the case of an authorised person that is a bank, an
employee of the bank.

(4)   In this section “relevant requirement” means a requirement—

(a)   imposed by or under this Act, or

(b)   imposed by any qualifying EU provision specified, or of a
description specified, for the purposes of this subsection by
the Treasury by order.

(5)   Condition C is that—

(a)   the person has at any time been a senior manager in relation
to an authorised person that is a bank,

(b)   there has at that time been (or continued to be) a
contravention of a relevant requirement by the bank, and

(c)   the senior manager was at that time responsible for the
management of any of the bank’s activities in relation to
which the contravention occurred.

(6)   But a person (“P”) is not guilty of misconduct by virtue of
subsection (5) if P satisfies the FCA that P had taken such steps as a
person in P’s position could reasonably be expected to take to avoid
the contravention occurring (or continuing).

(7)   For the purposes of subsection (5)—

“senior manager”, in relation to an authorised person that is a
bank, means a person who has approval under section 59 to
perform a designated senior management function in
relation to the carrying on by the bank of a regulated
activity;

“designated senior management function” means a function
designated as a senior management function under section
59(6B) or (6C).

(8)   In this section—

“approved person”—

(a)   means a person in relation to whom an approval is
given under section 59, and

(b)   in relation to an authorised person, means a person
in relation to whom such approval is given on the
62application of the authorised person;

“employee”, in relation to a person, has the same meaning as
in section 64A.

“66B          Misconduct: action by the PRA

(1)   For the purposes of action by the PRA under section 66, a person is
guilty of misconduct if any of conditions A to C is met in relation to
the person.

(2)   Condition A is that—

(a)   the person has at any time failed to comply with rules made
by the PRA under section 64A, and

(b)   at that time the person was—

(i)   an approved person, or

(ii)   an employee of a PRA-authorised bank.

(3)   Condition B is that—

(a)   the person has at any time been knowingly concerned in a
contravention of a relevant requirement by a PRA-
authorised person, and

(b)   at that time the person was—

(i)   an approved person in respect of the performance of
a relevant senior management function in relation to
the carrying on by the PRA-authorised person of a
regulated activity, or

(ii)   in the case of an authorised person that is a bank, an
employee of the bank.

(4)   In this section “relevant requirement” means a requirement—

(a)   imposed by or under this Act, or

(b)   imposed by any qualifying EU provision specified, or of a
description specified, for the purposes of this subsection by
the Treasury by order.

(5)   Condition C is that—

(a)   the person has at any time been a senior manager in relation
to a PRA-authorised bank,

(b)   there has at that time been (or continued to be) a
contravention of a relevant requirement by the bank, and

(c)   the senior manager was at that time responsible for the
management of any of the bank’s activities in relation to
which the contravention occurred.

(6)   But a person (“P”) is not guilty of misconduct by virtue of
subsection (5) if P satisfies the PRA that P had taken such steps as a
person in P’s position could reasonably be expected to take to avoid
the contravention occurring (or continuing).

(7)   For the purposes of subsection (5)—

“senior manager”, in relation to an authorised person that is a
bank, means a person who has approval under section 59 to
perform a designated senior management function in
relation to the carrying on by the bank of a regulated
activity;

“designated senior management function” means a function
designated as a senior management function under section
59(6B) or (6C).

(8)   In this section—

“approved person”—

(a)   means a person in relation to whom—

(a)   the PRA has given its approval under section
59, or

(b)   the FCA has given its approval under section
59 in respect of the performance by the
person of a relevant senior management
function in relation to the carrying on by a
PRA-authorised person of a regulated
activity, and

(b)   in relation to an authorised person, means a person
in relation to whom approval under section 59 is
given on the application of the authorised person;

“employee”, in relation to a person, has the same meaning as
in section 64A;

“PRA-authorised bank” means a bank that is a PRA-
authorised person;

“relevant senior management function” means a function
which the PRA is satisfied is a senior management function
as defined in section 59ZA (whether or not the function has
been designated as such by the FCA).””

LORD BRENNAN

LORD MCFALL OF ALCLUITH

LORD WATSON OF INVERGOWRIE

[Amendment 54A is an amendment to Amendment 54]

54A*


Line 62, at end insert “under section 60”

LORD DEIGHTON

55

Insert the following new Clause—

“Meaning of “bank”

(none)   In Part 5 of FSMA 2000 (performance of regulated activities), after section
71 insert—

““Bank”

71A          Meaning of “bank”

(1)   In this Part “bank” means a UK institution which has permission
under Part 4A to carry on the regulated activity of accepting
deposits.

(2)   But “bank” does not include an insurer.

(3)   In this section—

(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
this Act to carry on the regulated activity of effecting or
carrying out contracts of insurance as principal.

(4)   Subsections (1) and (3)(b) are to be read in accordance with section
22, taken with Schedule 2 and any order under section 22.””

56

Insert the following new Clause—

“Recording information about senior managers

(1)   Section 347 of FSMA 2000 (the record of authorised persons etc.) is
amended as follows.

(2)   In subsection (2)—

(a)   in paragraph (g), after sub-paragraph (iii) insert—

“(iv)   in a case where the relevant authorised
person is a bank, whether or not the person is
a senior manager;”;

(b)   after that paragraph insert—

“(h)   in the case of an approved person who is a senior
manager in relation to an authorised person that is a
bank—

(i)   whether a final notice has been given to the
person under section 390; and

(ii)   if so, any information about the matter to
which the notice relates which has been
published under section 391(4).”

(3)   After subsection (8) insert—

“(8A)    In this section—

“senior manager”, in relation to an authorised person that is a
bank, means a person who has approval under section 59 to
perform a designated senior management function in
relation to the carrying on by the bank of a regulated
activity,

“bank” has the same meaning as in Part 5 (see section 71A),
and

“designated senior management function” means a function
designated as a senior management function under section
59(6B) or (6C).””

57

Insert the following new Clause—

“Consequential amendments relating to Part 4

(none)   Schedule (Consequential amendments relating to Part 4) (which contains
further amendments relating to the provisions of this Part) has effect.”

58

Insert the following new Clause—

“Offence relating to decision that results in bank failure

(1)   A person (“S”) commits an offence if—

(a)   at a time when S is a senior manager in relation to a bank (“B”), S—

(i)   takes, or agrees to the taking of, a decision by or on behalf of
B as to the way in which the business of a group bank is to
be carried on, or

(ii)   fails to take steps that S could take to prevent such a decision
being taken,


10

(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
bank,

(c)   in all the circumstances, S’s conduct in relation to the taking of the
14decision falls far below what could reasonably be expected of a
15person in S’s position, and

(d)   the implementation of the decision causes the failure of the group
bank.

(2)   A “group bank”, in relation to a bank (“B”), means B or any other bank that
is a member of B’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.”

LORD BRENNAN

LORD MCFALL OF ALCLUITH

LORD WATSON OF INVERGOWRIE

[Amendments 58A to 58C are amendments to Amendment 58]

58A*


Line 10, after “aware” insert “or should have been aware”

58B*


Line 14, leave out “far”

58C*


Line 15, leave out “S’s position” and insert “a senior management position in
relation to a bank”

LORD DEIGHTON

59

Insert the following new Clause—

“Interpretation of terms used in offence

(1)   This section has effect for the interpretation of section (Offence relating to
decision that results in bank failure
).

(2)   “Bank” means a UK institution which has permission under Part 4A of
FSMA 2000 to carry on the regulated activity of accepting deposits.

(3)   But “bank” does not include—

(a)   an insurer, or

(b)   a credit union.

(4)   In subsections (2) and (3)—

(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.

(5)   Subsections (2) and (4)(b) are to be read in accordance with section 22 of
FSMA 2000, taken with Schedule 2 to that Act and any order under that
section.

(6)   A person is a “senior manager” in relation to a bank if, under an
arrangement entered into by the bank, or by a contractor of the bank, in
relation to the carrying on by the bank of a regulated activity, the person
performs a function that is designated as a senior management function—

(a)   by the FCA under subsection (6B) of section 59 of FSMA 2000
(approval for particular arrangements), or

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

(7)   A bank (“B”) is to be regarded as failing where—

(a)   B enters insolvency,

(b)   any of the stabilisation options in Part 1 of the Banking Act 2009 is
achieved in relation to B, or

(c)   B is taken for the purposes of the Financial Services Compensation
Scheme to be unable, or likely to be unable, to satisfy claims against
35B.

(8)   In subsection (7)(a) “insolvency” includes—

(a)   bankruptcy,

(b)   liquidation,

(c)   bank insolvency,

(d)   administration,

(e)   bank administration,

(f)   receivership,

(g)   a composition between B and B’s creditors, and

(h)   a scheme of arrangement of B’s affairs.”

LORD BRENNAN

LORD MCFALL OF ALCLUITH

LORD WATSON OF INVERGOWRIE

[Amendment 59A is an amendment to Amendment 59]

59A*


Line 35, at end insert “or

(d)   B has failed seriously or systematically to comply with the Fraud
Act 2006, Part 7 of the Proceeds of Crime Act 2002, or the Money
Laundering Regulations 2007 and such other financial compliance
obligations as may be specified in rules made by the FCA.”

LORD DEIGHTON

60

Insert the following new Clause—

“Institution of proceedings

(1)   In this section “an offence” means an offence under section (Offence relating
to decision that results in bank failure
).

(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.”

60A

Insert the following new Clause—

“PART 5

REGULATION OF PAYMENT SYSTEMS

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 (Revocation of designation orders) 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.

(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 (Reports) contain
supplementary powers.

(10)   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.

(11)   Sections (Regulator’s general duty to consult) to (Competition scrutiny) contain
provision about consultation, accountability and oversight.

(12)   Sections (Relationship with Part 8 of the Payment Services Regulations 2009) to
(Interpretation) contain miscellaneous and supplemental provision.”

60B

Insert the following new Clause—

“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.”

60C

Insert the following new Clause—

“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.”

60D

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.

(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.”

60E

Insert the following new Clause—

“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.”

60F

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.”

60G

Insert the following new Clause—

“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.”

60H

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.”

60J

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.”

60K

Insert the following new Clause—

“Regulator’s general duties in relation to payment systems

(1)   In discharging its general functions relating to payment systems the
Payment Systems Regulator must, so far as is reasonably possible, act in a
way which advances one or more of its payment systems objectives.

(2)   The payment systems objectives of the Payment Systems Regulator are—

(a)   the competition objective (see section (The competition objective)),

(b)   the innovation objective (see section (The innovation objective)), and

(c)   the service-user objective (see section (The service-user objective)).

(3)   In discharging its general functions relating to payment systems the
Payment Systems Regulator must have regard to—

(a)   the importance of maintaining the stability of, and confidence in,
the UK financial system,

(b)   the importance of payment systems in relation to the performance
of functions by the Bank of England in its capacity as a monetary
authority, and

(c)   the regulatory principles in section (Regulatory principles).

(4)   The general functions of the Payment Systems Regulator relating to
payment systems are—

(a)   its function of giving general directions under section (Directions)
(considered as a whole),

(b)   its functions in relation to the giving of general guidance under
section (Guidance) (considered as a whole), and

(c)   its function of determining the general policy and principles by
reference to which it performs particular functions.”

60L

Insert the following new Clause—

“The competition objective

(1)   The competition objective is to promote effective competition in—

(a)   the market for payment systems, and

(b)   the markets for services provided by payment systems,

in the interests of those who use, or are likely to use, services provided by
payment systems.

(2)   The reference in subsection (1) to promoting effective competition includes,
in particular, promoting effective competition—

(a)   between different operators of payment systems,

(b)   between different payment service providers, and

(c)   between different infrastructure providers.

(3)   The matters to which the Payment Systems Regulator may have regard in
considering the effectiveness of competition in a market mentioned in
subsection (1) include—

(a)   the needs of different persons who use, or may use, services
provided by payment systems,

(b)   the ease with which persons who may wish to use those services
can do so,

(c)   the ease with which persons who obtain those services can change
the person from whom they obtain them,

(d)   the needs of different payment service providers or persons who
wish to become payment service providers,

(e)   the ease with which payment service providers, or persons who
wish to become payment service providers, can provide services
using payment systems,

(f)   the ease with which payment service providers can change the
payment system they use to provide their services,

(g)   the needs of different infrastructure providers or persons who wish
to become infrastructure providers,

(h)   the ease with which infrastructure providers, or persons who wish
to become infrastructure providers, can provide infrastructure for
the purposes of operating payment systems,

(i)   the needs of different operators of payment systems,

(j)   the ease with which operators of payment systems can change the
infrastructure used to operate the payment systems,

(k)   the level and structure of fees, charges or other costs associated with
participation in payment systems,

(l)   the ease with which new entrants can enter the market,

(m)   how far competition is contributing to the development of efficient
and effective infrastructure for the purposes of operating payment
systems,

(n)   how far competition is encouraging innovation.”

60M

Insert the following new Clause—

“The innovation objective

(1)   The innovation objective is to promote the development of, and innovation
in, payment systems in the interests of those who use, or are likely to use,
services provided by payment systems, with a view to improving the
quality, efficiency and economy of payment systems.

(2)   The reference in subsection (1) to promoting the development of, and
innovation in, payment systems includes, in particular, a reference to
promoting the development of, and innovation in, infrastructure to be used
for the purposes of operating payment systems.”

60N

Insert the following new Clause—

“The service-user objective

The service-user objective is to ensure that payment systems are operated
and developed in a way that takes account of, and promotes, the interests
of those who use, or are likely to use, services provided by payment
systems.”

60P

Insert the following new Clause—

“Regulatory principles

(none)   The regulatory principles referred to in section (Regulator’s general duties in
relation to payment systems
)(3)(c) are as follows—

(a)   the need to use the resources of the Payment Systems Regulator in
the most efficient and economic way;

(b)   the principle that a burden or restriction which is imposed on a
person, or on the carrying on of an activity, should be proportionate
to the benefits, considered in general terms, which are expected to
result from the imposition of that burden or restriction;

(c)   the desirability of sustainable growth in the economy of the United
Kingdom in the medium or long term;

(d)   the general principle that those who use services provided by
payment systems should take responsibility for their decisions;

(e)   the responsibilities of the senior management of persons subject to
requirements imposed by or under this Part, including those
affecting persons who use services provided by payment systems,
in relation to compliance with those requirements;

(f)   the desirability where appropriate of the Payment Systems
Regulator exercising its functions in a way that recognises
differences in the nature of, and objectives of, businesses carried on
by different persons subject to requirements imposed by or under
this Part;

(g)   the desirability in appropriate cases of the Payment Systems
Regulator publishing information relating to persons on whom
requirements are imposed by or under this Part, or requiring such
persons to publish information, as a means of contributing to the
advancement by the Payment Systems Regulator of its payment
systems objectives;

(h)   the principle that the Payment Systems Regulator should exercise
its functions as transparently as possible.”

60Q

Insert the following new Clause—

“Directions

(1)   The Payment Systems Regulator may give directions in writing to
participants in regulated payment systems.

(2)   A direction given to a participant in a regulated payment system may—

(a)   require or prohibit the taking of specified action in relation to the
system;

(b)   set standards to be met in relation to the system.

(3)   A direction under this section may apply—

(a)   generally,

(b)   in relation to all operators, all infrastructure providers or all
payment service providers, or

(c)   in relation to specified persons or persons of a specified description.

(4)   The Payment Systems Regulator must publish any direction given under
this section that applies as mentioned in subsection (3)(a) or (b).

(5)   A direction under this section that applies as mentioned in subsection (3)(a)
is referred to in this Part as a “general direction”.”

60R

Insert the following new Clause—

“System rules

(1)   The Payment Systems Regulator may require the operator of a regulated
payment system—

(a)   to establish rules for the operation of the system;

(b)   to change the rules in a specified way or so as to achieve a specified
purpose;

(c)   to notify the Payment Systems Regulator of any proposed change to
the rules;

(d)   not to change the rules without the approval of the Payment
Systems Regulator.

(2)   A requirement under subsection (1)(c) or (d) may be general or specific.”

60S

Insert the following new Clause—

“Power to require access to payment systems

(1)   This section applies where a person (“the applicant”) applies for an order
under this section.

(2)   The Payment Systems Regulator may by order require the operator of a
regulated payment system to enable the applicant to become a payment
service provider in relation to the system.

(3)   The Payment Systems Regulator may by order require any payment
service provider with direct access to a regulated payment system to enter
into an agreement with the applicant to enable the applicant to become a
payment service provider in relation to the system.

(4)   An order under this section may provide for the applicant to become a
payment service provider in relation to a payment system—

(a)   for a period specified in the order;

(b)   on terms and conditions specified in the order.”

60T

Insert the following new Clause—

“Variation of agreements relating to payment systems

(1)   This section applies to the following agreements—

(a)   any agreement made between the operator of a regulated payment
system and a payment service provider;

(b)   any agreement made between a payment service provider with
direct access to a regulated payment system and another person for
the purpose of enabling that other person to become a payment
service provider in relation to the system;

(c)   any agreement concerning fees or charges payable in connection
with—

(i)   participation in a regulated payment system, or

(ii)   the use of services provided by a regulated payment system.

(2)   The Payment Systems Regulator may, on the application of a party to an
agreement to which this section applies, vary the agreement by—

(a)   varying any of the fees or charges payable under the agreement, or

(b)   in the case of an agreement within subsection (1)(a) or (b), varying
any other terms and conditions relating to the payment service
provider’s participation in the payment system.

(3)   In the case of an agreement within subsection (1)(b), the reference in
subsection (2)(b) to the payment service provider is to the payment service
provider which does not have direct access to the payment system.

(4)   The power under this section to vary any fee or charge includes power to
specify a maximum fee or charge.

(5)   If the Payment Systems Regulator varies an agreement under this section,
the agreement has effect subject to the variation.”

60U

Insert the following new Clause—

“Power to require disposal of interest in payment system

(1)   The Payment Systems Regulator may require a person who has an interest
in the operator of a regulated payment system to dispose of all or part of
that interest.

(2)   The power conferred by subsection (1) may be exercised only if the
Payment Systems Regulator is satisfied that, if the power is not exercised,
there is likely to be a restriction or distortion of competition in—

(a)   the market for payment systems, or

(b)   a market for services provided by payment systems.

(3)   The Payment Systems Regulator may not exercise the power conferred by
subsection (1) without the consent of the Treasury.

(4)   If the Payment Systems Regulator decides to exercise the power conferred
by subsection (1) in relation to a person who has an interest in the operator
of a regulated payment system—

(a)   the Payment Systems Regulator must notify the relevant
competition authorities (see subsection (5)), and

(b)   the relevant competition authorities may not take any action in
relation to the person that would require the person to dispose of all
or part of that interest.

(5)   The relevant competition authorities are—

(a)   the Secretary of State,

(b)   the Competition and Markets Authority, and

(c)   the FCA.”

60V

Insert the following new Clause—

“The Regulator’s functions under Part 4 of the Enterprise Act 2002

(1)   The functions to which this subsection applies (“the concurrent functions”)
are to be concurrent functions of the Payment Systems Regulator and the
Competition and Markets Authority (“the CMA”).

(2)   Subsection (1) applies to the functions of the CMA under Part 4 of the
Enterprise Act 2002 (market investigations), so far as those functions—

(a)   are exercisable by the CMA Board (within the meaning of Schedule
4 to the Enterprise and Regulatory Reform Act 2013), and

(b)   relate to participation in payment systems.

(3)   But subsection (1) does not apply to functions under the following sections
of the Enterprise Act 2002—

  section 166 (duty to maintain register of undertakings and orders);

  section 171 (duty to publish guidance).

(4)   So far as is necessary for the purposes of, or in connection with, subsections
(1) and (2)—

(a)   references in Part 4 of the Enterprise Act 2002 to the CMA
(including references in provisions of that Act applied by that Part)
are to be read as including references to the Payment Systems
Regulator,

(b)   references in that Part to section 5 of that Act are to be read as
including references to section (Information relating to Regulator’s
competition functions
) of this Act, and

(c)   references in that Part to consumers are to be read as including
references to any person who uses, or is likely to use, services
provided by payment systems in the course of a business carried on
by the person.

(5)   But subsection (4) does not apply—

(a)   in relation to section 166 or 171 of that Act, or

(b)   where the context otherwise requires.

(6)   Section 130A of the Enterprise Act 2002 is to have effect in relation to the
Payment Systems Regulator by virtue of subsections (1) and (2) as if—

(a)   in subsection (2)(a) of that section, the reference to the acquisition
or supply of goods or services of one or more than one description
in the United Kingdom were a reference to the participation in
payment systems used to provide services in the United Kingdom,
and

(b)   in subsection (2)(b) of that section, the reference to the extent to
which steps can and should be taken were a reference to the extent
to which steps that might include steps under Part 4 of that Act can
and should be taken.”

60W

Insert the following new Clause—

“Restrictions on exercise of functions under Part 4 of the Enterprise Act 2002

(1)   Before the CMA or the Payment Systems Regulator first exercises any of the
concurrent functions in relation to any matter, it must consult the other.

(2)   Neither the CMA nor the Payment Systems Regulator may exercise any of
the concurrent functions in relation to any matter if any of those functions
have been exercised in relation to that matter by the other.

(3)   In subsections (1) and (2) “the concurrent functions” has the same meaning
as in section (The Regulator’s functions under Part 4 of the Enterprise Act 2002).

(4)   Before the FCA or the Payment Systems Regulator first exercises any of the
concurrent functions in relation to any matter, it must consult the other.

(5)   Neither the FCA nor the Payment Systems Regulator may exercise any of
the concurrent functions in relation to any matter if any of those functions
have been exercised in relation to that matter by the other.

(6)   In subsections (4) and (5) “the concurrent functions”—

(a)   in relation to the Payment Systems Regulator, has the same
meaning as in section (The Regulator’s functions under Part 4 of the
Enterprise Act 2002
), and

(b)   in relation to the FCA, means the functions which by virtue of
section 234J of FSMA 2000 are concurrent functions of the FCA and
the CMA.

(7)   In this section “the CMA” means the Competition and Markets Authority.”

60X

Insert the following new Clause—

“The Regulator’s functions under the Competition Act 1998

(1)   The functions to which this subsection applies (“the concurrent functions”)
are to be concurrent functions of the Payment Systems Regulator and the
Competition and Markets Authority (“the CMA”).

(2)   Subsection (1) applies to the functions of the CMA under the provisions of
Part 1 of the Competition Act 1998, so far as relating to any of the following
that relate to participation in payment systems—

(a)   agreements, decisions or concerted practices of the kind mentioned
in section 2(1) of that Act,

(b)   conduct of the kind mentioned in section 18(1) of that Act,

(c)   agreements, decisions or concerted practices of the kind mentioned
in Article 101(1) of the Treaty on the Functioning of the European
Union, and

(d)   conduct which amounts to abuse of the kind mentioned in Article
102 of the Treaty on the Functioning of the European Union.

(3)   But subsection (1) does not apply to functions under the following sections
of that Act—

  section 31D(1) to (6) (duty to publish guidance);

  section 38(1) to (6) (duty to publish guidance about penalties);

  section 40B(1) to (4) (duty to publish statement of policy on
penalties);

  section 51 (rules).

(4)   So far as necessary for the purposes of, or in connection with, the
provisions of subsections (1) and (2), references to the CMA in Part 1 of the
Competition Act 1998 are to be read as including references to the Payment
Systems Regulator.

(5)   But subsection (4) does not apply—

(a)   in relation to sections 31D(1) to (6), 38(1) to (6), 40B(1) to (4), 51, 52(6)
and (8) and 54 of that Act, or

(b)   where the context otherwise requires.”

60Y

Insert the following new Clause—

“Duty to consider exercise of powers under Competition Act 1998

(1)   Before exercising any powers within subsection (2), the Payment Systems
Regulator must consider whether it would be more appropriate to proceed
under the Competition Act 1998.

(2)   The powers referred to in subsection (1) are—

(a)   its power to give a direction under section (Directions) (apart from
the power to give a general direction);

(b)   its power to impose a requirement under section (System rules)
(apart from the power to impose a requirement on all operators of
regulated payment systems);

(c)   its powers under sections (Power to require access to payment systems),
(Variation of agreements relating to payment systems) and (Power to
require disposal of interest in payment system
).

(3)   The Payment Systems Regulator must not exercise the power if it considers
that it would be more appropriate to proceed under the Competition Act
1998.”

60YA

Insert the following new Clause—

“Provision of information and assistance to a CMA group

(1)   For the purpose of assisting a CMA group in carrying out a relevant
investigation, the Payment Systems Regulator must give the CMA group—

(a)   any relevant information which it has in its possession, and

(b)   any other assistance which the CMA group may reasonably require
in relation to any matters falling within the scope of the
investigation.

(2)   A “relevant investigation” is an investigation carried out on a reference
made by the Payment Systems Regulator under section 131 of the
Enterprise Act 2002 by virtue of section (The Regulator’s functions under Part
4 of the Enterprise Act 2002
).

(3)   “Relevant information”, in relation to a relevant investigation, is
information—

(a)   which relates to matters falling within the scope of the
investigation, and

(b)   which—

(i)   is requested by the CMA group for the purpose of the
investigation, or

(ii)   in the opinion of the Payment Systems Regulator, it would
be appropriate to give to the CMA group for that purpose.

(4)   A CMA group, in carrying out a relevant investigation, must take into
account any information given to it under this section.

(5)   In this section “CMA group” has the same meaning as in Schedule 4 to the
Enterprise and Regulatory Reform Act 2013.”

60YB

Insert the following new Clause—

“Information relating to Regulator’s competition functions

(1)   For the purpose of the functions conferred on it by sections (Power to require
disposal of interest in payment system
) to (Provision of information and assistance
to a CMA group
) the Payment Systems Regulator is to have the function of
keeping under review—

(a)   the market for payment systems, and

(b)   the markets for services provided by payment systems.

(2)   The function conferred by subsection (1) is to be carried out with a view to
(among other things) ensuring that the Payment Systems Regulator has
sufficient information to take informed decisions and to carry out its other
functions effectively.”

60YC

Insert the following new Clause—

“Exclusion of general duties

(1)   Section (Regulator’s general duties in relation to payment systems) (the
Payment Systems Regulator’s general duties) does not apply in relation to
anything done by the Payment Systems Regulator in the carrying out of its
functions by virtue of sections (The Regulator’s functions under Part 4 of the
Enterprise Act 2002
) to (Provision of information and assistance to a CMA
group
).

(2)   But in the carrying out of any functions by virtue of sections (The
Regulator’s functions under Part 4 of the Enterprise Act 2002
) to (Provision of
information and assistance to a CMA group
), the Payment Systems Regulator
may have regard to any of the matters in respect of which a duty is imposed
by section (Regulator’s general duties in relation to payment systems) if it is a
matter to which the Competition and Markets Authority is entitled to have
regard in the carrying out of those functions.”

60YD

Insert the following new Clause—

“Supplementary provision

(1)   If any question arises as to whether, by virtue of sections (The Regulator’s
functions under Part 4 of the Enterprise Act 2002
) and (The Regulator’s functions
under the Competition Act 1998
), any functions fall to be, or are capable of
being, carried out by the Payment Systems Regulator in relation to any
particular case, that question is to be referred to, and determined by, the
Treasury.

(2)   No objection is to be taken to anything done under the Competition Act
1998 or Part 4 of the Enterprise Act 2002 by or in relation to the Payment
Systems Regulator on the ground that it should have been done by or in
relation to the Competition and Markets Authority.”

60YE

Insert the following new Clause—

“Amendments relating to Regulator’s competition powers

(1)   In section 9E of the Company Directors Disqualification Act 1986
(interpretation of sections 9A to 9D), in subsection (2), after paragraph (f)
insert—

“(g)   the Payment Systems Regulator established under section
(The Payment Systems Regulator) of the Financial Services
(Banking Reform) Act 2013.”

(2)   In section 54 of the Competition Act 1998 (regulators), in subsection (1),
omit the “and” at the end of paragraph (g) and after paragraph (h) insert—

“(i)   the Payment Systems Regulator established under section
(The Payment Systems Regulator) of the Financial Services
(Banking Reform) Act 2013.”

(3)   In section 136 of the Enterprise Act 2002 (investigations and reports on
market investigation references)—

(a)   in subsection (7), at the end insert—

“(j)   in relation to the Payment Systems Regulator,
section (The Regulator’s functions under Part 4 of the
Enterprise Act 2002
) of the Financial Services
(Banking Reform) Act 2013.”;

(b)   in subsection (8), for “or Monitor” substitute “, Monitor or the
Payment Systems Regulator.”;

(c)   at the end insert—

“(10)   In this section “the Payment Systems Regulator” means the
body established under section (The Payment Systems
Regulator
) of the Financial Services (Banking Reform) Act
2013.”

(4)   In section 52(4) of the Enterprise and Regulatory Reform Act 2013 (power
to remove concurrent competition functions of sectoral regulators), after
paragraph (f) insert—

“(g)   the Payment Systems Regulator established under section
(The Payment Systems Regulator) of the Financial Services
(Banking Reform) Act 2013.”

(5)   In Schedule 4 to the Enterprise and Regulatory Reform Act 2013 (the
Competition and Markets Authority), in paragraph 16 (concurrency
report), at the end of sub-paragraph (7) insert—

“(h)   the Payment Systems Regulator established under
section (The Payment Systems Regulator) of the Financial
Services (Banking Reform) Act 2013.””

60YF

Insert the following new Clause—

“Complaints by representative bodies

(1)   A designated representative body may make a complaint to the Payment
Systems Regulator that a feature, or combination of features, of a market in
the United Kingdom for services provided by payment systems is, or
appears to be, significantly damaging the interests of those who use, or are
likely to use, those services (“service-users”).

(2)   “Designated representative body” means a body designated by the
Treasury by order.

(3)   The Treasury—

(a)   may designate a body only if it appears to them to represent the
interests of service-users of any description, and

(b)   must publish in such manner as they think fit (and may from time
to time vary) criteria to be applied by them in determining whether
to make or revoke a designation.

(4)   The reference in subsection (1) to a feature of a market in the United
Kingdom for services provided by payment systems is a reference to—

(a)   the structure of the market concerned or any aspect of that
structure,

(b)   any conduct (whether or not in the market concerned) of one or
more than one person who supplies or acquires services in the
market concerned, or

(c)   any conduct relating to the market concerned of customers of any
person who supplies or acquires services,

and “conduct” includes any failure to act (whether or not intentional) and
any other unintentional conduct.

(5)   In this section “market in the United Kingdom” includes a market which
operates only in a part of the United Kingdom.

(6)   In section 234C of FSMA 2000 (complaints by consumer bodies), after
subsection (1) insert—

“(1A)    But a complaint may not be made to the FCA under this section if it
is a complaint which could be made to the Payment Systems
Regulator by a designated representative body under section
(Complaints by representative bodies) of the Financial Services
(Banking Reform) Act 2013 (complaints by representative bodies).

“Designated representative body” and “the Payment Systems
Regulator” have the same meaning in this subsection as they have
in that section.””

60YG

Insert the following new Clause—

“Response by Regulator

(1)   The Payment Systems Regulator must within 90 days after the day on
which it receives a complaint under section (Complaints by representative
bodies
) publish a response stating how it proposes to deal with the
complaint, and in particular—

(a)   whether it has decided to take any action, or to take no action, and

(b)   if it has decided to take action, what action it proposes to take.

(2)   The response must—

(a)   include a copy of the complaint, and

(b)   state the Payment Systems Regulator’s reasons for its proposals.

(3)   The Treasury may by order amend subsection (1) by substituting any
period for the period for the time being specified there.”

60YH

Insert the following new Clause—

“Complaints: guidance

(1)   The guidance given by the Payment Systems Regulator under section
(Guidance)—

(a)   must include guidance about the presentation of a reasoned case for
a complaint under section (Complaints by representative bodies), and

(b)   may include guidance about any other matters that appear to the
Payment Systems Regulator to be appropriate for the purposes of
that section.

(2)   Guidance given in accordance with subsection (1) is to be treated as general
guidance for the purposes of this Part.”

60YJ

Insert the following new Clause—

“Meaning of “compliance failure”

In this Part “compliance failure” means a failure by a participant in a
regulated payment system to—

(a)   comply with a direction given under section (Directions), or

(b)   comply with a requirement imposed under section (System rules) or
(Power to require access to payment systems).”

60YK

Insert the following new Clause—

“Publication of compliance failures etc

(1)   The Payment Systems Regulator may publish details of a compliance
failure by a participant in a regulated payment system.

(2)   The Payment Systems Regulator may publish details of a sanction imposed
under section (Penalties).”

60YL

Insert the following new Clause—

“Penalties

(1)   The Payment Systems Regulator may require a participant in a regulated
payment system to pay a penalty in respect of a compliance failure.

(2)   A penalty—

(a)   must be paid to the Payment Systems Regulator, and

(b)   may be enforced by the Payment Systems Regulator as a debt.

(3)   The Payment Systems Regulator must prepare a statement of the principles
which it will apply in determining—

(a)   whether to impose a penalty, and

(b)   the amount of a penalty.

(4)   The Payment Systems Regulator must—

(a)   publish the statement on its website,

(b)   send a copy to the Treasury,

(c)   review the statement from time to time and revise it if necessary
(and paragraphs (a) and (b) apply to a revision), and

(d)   in applying the statement to a compliance failure, apply the version
in force when the compliance failure occurred.”

60YM

Insert the following new Clause—

“Warning notices

(1)   Before imposing a sanction on any person the Payment Systems Regulator
must—

(a)   give the person a notice in writing (a “warning notice”),

(b)   give the person at least 21 days to make representations,

(c)   consider any representations made, and

(d)   as soon as is reasonably practicable, give the person a notice in
writing stating whether or not it intends to impose the sanction.

(2)   In subsection (1) any reference to imposing a sanction is a reference to—

(a)   publishing details under section (Publication of compliance failures
etc
)(1), or

(b)   requiring the payment of a penalty under section (Penalties).”

60YN

Insert the following new Clause—

“Injunctions

(1)   If, on the application of the Payment Systems Regulator, the court is
satisfied—

(a)   that there is a reasonable likelihood that there will be a compliance
failure, or

(b)   that there has been a compliance failure and there is a reasonable
likelihood that it will continue or be repeated,

the court may make an order restraining the conduct constituting the
failure.

(2)   If, on the application of the Payment Systems Regulator, the court is
satisfied—

(a)   that there has been a compliance failure by a participant in a
regulated payment system, and

(b)   that there are steps which could be taken for remedying the failure,

the court may make an order requiring the participant, and anyone else
who appears to have been knowingly concerned in the failure, to take such
steps as the court may direct to remedy it.

(3)   If, on the application of the Payment Systems Regulator, the court is
satisfied—

(a)   that there may have been a compliance failure by a participant in a
regulated payment system, or

(b)   that a person may have been knowingly concerned in a compliance
failure,

the court may make an order restraining the participant or the person (as
the case may be) from dealing with any assets which it is satisfied the
participant or person is reasonably likely to deal with.

(4)   The jurisdiction conferred by this section is exercisable—

(a)   in England and Wales and Northern Ireland, by the High Court,
and

(b)   in Scotland, by the Court of Session.

(5)   In this section—

(a)   references to an order restraining anything are, in Scotland, to be
read as references to an interdict prohibiting that thing,

(b)   references to remedying a failure include mitigating its effect, and

(c)   references to dealing with assets include disposing of them.”

60YP

Insert the following new Clause—

“Appeals: general

(1)   A person who is affected by any of the following decisions of the Payment
Systems Regulator may appeal against the decision—

(a)   a decision to give a direction under section (Directions) (other than
a general direction),

(b)   a decision to impose a requirement under section (System rules)
(other than a requirement imposed on all operators of regulated
payment systems),

(c)   a decision to exercise its power under section (Power to require access
to payment systems
), (Variation of agreements relating to payment
systems
) or (Power to require disposal of interest in payment system),

(d)   a decision to impose a sanction.

(2)   In subsection (1) the reference to imposing a sanction is a reference to—

(a)   publishing details under section (Publication of compliance failures
etc
)(1), or

(b)   requiring the payment of a penalty under section (Penalties).

(3)   If the decision is a CAT-appealable decision, the appeal must be made to
the Competition Appeal Tribunal in accordance with section (Appeals to
Competition Appeal Tribunal
).

(4)   A “CAT-appealable decision” means—

(a)   a decision to give a direction under section (Directions),

(b)   a decision to impose a requirement under section (System rules), or

(c)   a decision to publish details under section (Publication of compliance
failures etc
)(1).

(5)   If the decision is a decision to impose a penalty on the person under section
(Penalties), the appeal must be made to the Competition Appeal Tribunal in
accordance with section (Appeals in relation to penalties).

(6)   If the decision is a CMA-appealable decision, the appeal must be made to
the Competition and Markets Authority (“the CMA”) in accordance with
section (Appeals to Competition and Markets Authority).

(7)   A “CMA-appealable decision” means—

(a)   a decision to impose a requirement under section (Power to require
access to payment systems
),

(b)   a decision to vary an agreement under section (Variation of
agreements relating to payment systems
), or

(c)   a decision to impose a requirement under section (Power to require
disposal of interest in payment system
).

(8)   The permission of the CMA is required for an appeal to be made in
accordance with section (Appeals to Competition and Markets Authority).

(9)   The CMA may refuse permission for an appeal only if—

(a)   the appeal is made for reasons that are trivial or vexatious, or

(b)   the appeal has no reasonable prospect of success.”

60YQ

Insert the following new Clause—

“Appeals to Competition Appeal Tribunal

(1)   This section applies where a person is appealing to the Competition Appeal
Tribunal (“the Tribunal”) against a CAT-appealable decision.

(2)   The means of making an appeal is by sending the Tribunal a notice of
appeal in accordance with Tribunal rules.

(3)   The notice of appeal must be sent within the period specified, in relation to
the decision appealed against, in those rules.

(4)   In determining an appeal made in accordance with this section, the
Tribunal must apply the same principles as would be applied by a court on
an application for judicial review.

(5)   The Tribunal must either—

(a)   dismiss the appeal, or

(b)   quash the whole or part of the decision to which the appeal relates.

(6)   If the Tribunal quashes the whole or part of a decision, it may refer the
matter back to the Payment Systems Regulator with a direction to
reconsider and make a new decision in accordance with its ruling.

(7)   The Tribunal may not direct the Payment Systems Regulator to take any
action which it would not otherwise have the power to take in relation to
the decision.

(8)   The effect of a decision to publish details under section (Publication of
compliance failures etc
)(1) is suspended by the making of an appeal against
the decision (and the details may not be published until the appeal has been
determined).

(9)   The effect of any other CAT-appealable decision is not suspended by the
making of an appeal against the decision.

(10)   In this section and section (Appeals in relation to penalties) “Tribunal rules”
means rules under section 15 of the Enterprise Act 2002.”

60YR

Insert the following new Clause—

“Appeals in relation to penalties

(1)   This section applies where a person is appealing to the Competition Appeal
Tribunal (“the Tribunal”) against a decision to impose a penalty under
section (Penalties).

(2)   The person may appeal against—

(a)   the imposition of the penalty,

(b)   the amount of the penalty, or

(c)   any date by which the penalty, or any part of it, is required to be
paid.

(3)   The means of making an appeal is by sending the Tribunal a notice of
appeal in accordance with Tribunal rules.

(4)   The notice of appeal must be sent within the period specified, in relation to
the decision appealed against, in those rules.

(5)   The Tribunal may do any of the following—

(a)   uphold the penalty;

(b)   set aside the penalty;

(c)   substitute for the penalty a penalty of an amount decided by the
Tribunal;

(d)   vary any date by which the penalty, or any part of it, is required to
be paid.

(6)   If an appeal is made in accordance with this section, the penalty is not
required to be paid until the appeal has been determined.

(7)   Subsections (2), (5) and (6) do not restrict the power to make Tribunal rules;
and those subsections are subject to Tribunal rules.

(8)   Except as provided by this section, the validity of the penalty may not be
questioned by any legal proceedings whatever.

(9)   In the case of an appeal made in accordance with this section, a decision of
the Tribunal has the same effect as, and may be enforced in the same
manner as, a decision of the Payment Systems Regulator.”

60YS

Insert the following new Clause—

“Appeals to Competition and Markets Authority

(1)   This section applies where a person is appealing to the Competition and
Markets Authority (“the CMA”) against a CMA-appealable decision.

(2)   In determining the appeal the CMA must have regard, to the same extent
as is required of the Payment Systems Regulator, to the matters to which
the Payment Systems Regulator must have regard in discharging its
functions under this Part.

(3)   In determining the appeal the CMA—

(a)   may have regard to any matter to which the Payment Systems
Regulator was not able to have regard in relation to the decision,
but

(b)   must not, in the exercise of that power, have regard to any matter to
which the Payment Systems Regulator would not have been
entitled to have regard in reaching its decision had it had the
opportunity of doing so.

(4)   The CMA must either—

(a)   dismiss the appeal, or

(b)   quash the whole or part of the decision to which the appeal relates.

(5)   The CMA may act as mentioned in subsection (4)(b) only to the extent that
it is satisfied that the decision was wrong on one or more of the following
grounds—

(a)   that the Payment Systems Regulator failed properly to have regard
to any matter mentioned in subsection (2);

(b)   that the Payment Systems Regulator failed to give the appropriate
weight to any matter mentioned in subsection (2);

(c)   that the decision was based, wholly or partly, on an error of fact;

(d)   that the decision was wrong in law.

(6)   If the CMA quashes the whole or part of a decision, it may either—

(a)   refer the matter back to the Payment Systems Regulator with a
direction to reconsider and make a new decision in accordance with
its ruling, or

(b)   substitute its own decision for that of the Payment Systems
Regulator.

(7)   The CMA may not direct the Payment Systems Regulator to take any action
which it would not otherwise have the power to take in relation to the
decision.

(8)   Schedule (Procedure for appeals to the CMA) contains further provision about
the making of appeals in accordance with this section.”

60YT

Insert the following new Clause—

“Enforcement of requirement to dispose of interest in payment system

(1)   A requirement imposed under section (Power to require disposal of interest in
payment system
) is enforceable by civil proceedings brought by the Payment
Systems Regulator for an injunction or for interdict or for any other
appropriate relief or remedy.

(2)   Civil proceedings may not be brought to enforce a requirement imposed
under that section unless—

(a)   the time for bringing an appeal against the decision to impose the
requirement has expired and no appeal has been brought within
that time, or

(b)   the person on whom the requirement was imposed has within that
time brought such an appeal and the appeal has been dismissed or
withdrawn.”

60YU

Insert the following new Clause—

“Power to obtain information or documents

(1)   The Payment Systems Regulator may by notice in writing require a person
to provide information or documents—

(a)   which the Payment Systems Regulator thinks will help the
Treasury in determining whether to make a designation order, or

(b)   which the Payment Systems Regulator otherwise requires in
connection with its functions under this Part.

(2)   In particular, a notice under subsection (1) may require a participant in a
regulated payment system to notify the Payment Systems Regulator if
events of a specified kind occur.

(3)   A notice under subsection (1) may require information or documents to be
provided—

(a)   in a specified form or manner;

(b)   at a specified time;

(c)   in respect of a specified period.

(4)   The Payment Systems Regulator may disclose information obtained by
virtue of this section to—

(a)   the Treasury;

(b)   the Bank of England;

(c)   the FCA;

(d)   the PRA;

(e)   the Office of Communications;

(f)   an authority in a country or territory outside the United Kingdom
that exercises functions similar to those of the Treasury, the Bank of
England, the FCA, the PRA or the Payment Systems Regulator in
relation to payment systems;

(g)   the European Commission;

(h)   the European Central Bank;

(i)   the Bank for International Settlements.

(5)   Subsection (4)—

(a)   overrides any requirement to keep information in confidence, and

(b)   is without prejudice to any other power to disclose information.

(6)   The Treasury may by regulations permit the disclosure of information
obtained by virtue of this section to a specified person.

(7)   The Payment Systems Regulator may publish information obtained by
virtue of this section.

(8)   The Treasury may make regulations about the manner and extent of
publication under subsection (7).

(9)   In subsection (4)(f) the reference to payment systems is to be read as if
subsection (2)(b) of section (Meaning of “payment system”) were omitted.”

60YV

Insert the following new Clause—

“Reports by skilled persons

(1)   The Payment Systems Regulator may—

(a)   require a person who is a participant in a regulated payment system
(“the relevant participant”) to provide the Payment Systems
Regulator with a report on any matter relating to the system (“the
matter concerned”), or

(b)   appoint a person to provide the Payment Systems Regulator with a
report on the matter concerned.

(2)   The power conferred by subsection (1)(a) is exercisable by giving the
relevant participant a notice in writing.

(3)   When acting under subsection (1)(a), the Payment Systems Regulator may
require the report to be in a form specified in the notice.

(4)   The Payment Systems Regulator must give written notice of an
appointment under subsection (1)(b) to the relevant participant.

(5)   A person appointed to make a report under this section—

(a)   must be a person appearing to the Payment Systems Regulator to
have the skills necessary to make a report on the matter concerned,
and

(b)   where the appointment is to be made by the relevant participant,
must be a person nominated or approved by the Payment Systems
Regulator.

(6)   It is the duty of—

(a)   the relevant participant, and

(b)   any person who is providing (or who has at any time provided)
services to the relevant participant in relation to the matter
concerned,

to give the person appointed to prepare a report all such assistance as the
appointed person may reasonably require.

(7)   The obligation imposed by subsection (6) is enforceable, on the application
of the Payment Systems Regulator, by an injunction or, in Scotland, by an
order for specific performance under section 45 of the Court of Session Act
1988.

(8)   The Payment Systems Regulator may direct the relevant participant to pay
any expenses incurred by the Payment Systems Regulator in relation to an
appointment under subsection (1)(b).”

60YW

Insert the following new Clause—

“Appointment of persons to conduct investigations

(1)   If it considers that it is desirable to do so in order to advance any of its
payment systems objectives, the Payment Systems Regulator may appoint
one or more competent persons to conduct an investigation on its behalf
into the nature, conduct or state of the business of any participant in a
regulated payment system.

(2)   If it appears to the Payment Systems Regulator that there are circumstances
suggesting that there may have been a compliance failure, the Payment
Systems Regulator may appoint one or more competent persons to conduct
an investigation on its behalf.”

60YX

Insert the following new Clause—

“Investigations: general

(1)   This section applies if the Payment Systems Regulator appoints one or
more competent persons (“investigators”) under section (Appointment of
persons to conduct investigations
) to conduct an investigation on its behalf.

(2)   The Payment Systems Regulator must give written notice of the
appointment of an investigator to the person who is the subject of the
investigation.

(3)   Subsections (2) and (9) do not apply if—

(a)   the Payment Systems Regulator believes that the notice required by
subsection (2) or (9) would be likely to result in the investigation
being frustrated, or

(b)   the investigator is appointed under subsection (2) of section
(Appointment of persons to conduct investigations).

(4)   A notice under subsection (2) must—

(a)   specify the provision under which the investigator was appointed,
and

(b)   state the reason for the appointment.

(5)   Nothing prevents the Payment Systems Regulator from appointing as an
investigator—

(a)   a member of its staff, or

(b)   a member of staff of the FCA.

(6)   An investigator who conducts an investigation must make a report of the
investigation to the Payment Systems Regulator.

(7)   The Payment Systems Regulator may, by a direction to an investigator,
control—

(a)   the scope of the investigation,

(b)   the period during which the investigation is to be conducted,

(c)   the conduct of the investigation, and

(d)   the reporting of the investigation.

(8)   A direction may, in particular—

(a)   confine the investigation to particular matters;

(b)   extend the investigation to additional matters;

(c)   require the investigator to discontinue the investigation or to take
only those steps that are specified in the direction;

(d)   require the investigator to make such interim reports as are so
specified.

(9)   If there is a change in the scope or conduct of the investigation and, in the
opinion of the Payment Systems Regulator, the person who is the subject of
the investigation is likely to be significantly prejudiced by not being made
aware of it, that person must be given written notice of the change.”

60YY

Insert the following new Clause—

“Powers of persons appointed under section (Appointment of persons to
conduct investigations)

(1)   An investigator may require any person within subsection (2) —

(a)   to attend before the investigator at a specified time and place and
answer questions, or

(b)   otherwise to provide any information which the investigator
requires.

(2)   The persons referred to in subsection (1) are—

(a)   the person who is the subject of the investigation (“the person under
investigation”);

(b)   any person connected with the person under investigation;

(c)   in the case of an investigation into whether there has been a
compliance failure, any person who in the investigator’s opinion is
or may be able to give information which is or may be relevant to
the investigation.

(3)   An investigator may also require any person to produce at a specified time
and place any specified documents or documents of a specified
description.

(4)   A requirement under subsection (1) or (3) may be imposed only so far as
the investigator concerned reasonably considers the question, provision of
information or production of the document to be relevant to the purposes
of the investigation.

(5)   In the case of an investigation into whether there has been a compliance
failure, the investigator may also require any person falling within
subsection (2)(c) to give the investigator all assistance in connection with
the investigation which the person is reasonably able to give.

(6)   For the purposes of this section, a person is connected with the person
under investigation (“A”) if the person is or has at any relevant time been—

(a)   a member of A’s group,

(b)   a controller of A, or

(c)   a partnership of which A is a member.

(7)   In this section—

“controller” has the same meaning as in FSMA 2000 (see section 422 of
that Act);

“group” has the same meaning as in FSMA 2000 (see section 421 of
that Act);

“investigator” means a person conducting an investigation under
section (Appointment of persons to conduct investigations);

“specified” means specified in a notice in writing.”

60YYA

Insert the following new Clause—

“Information and documents: supplemental provisions

(1)   In this section “relevant document” means a document produced in
response to a requirement imposed under section (Power to obtain
information or documents
) or (Powers of persons appointed under section
(Appointment of persons to conduct investigations)
).

(2)   In a case where—

(a)   the Payment Systems Regulator has power under section (Power to
obtain information or documents
), or an investigator has power under
section (Powers of persons appointed under section (Appointment of
persons to conduct investigations)
), to require a person to produce a
document, but

(b)   it appears that the document is in the possession of another person,

the power may be exercised in relation to that other person.

(3)   Any person to whom a relevant document is produced may—

(a)   take copies or extracts from the document, or

(b)   require the person producing the document, or any relevant person
(see subsection (4)), to provide an explanation of the document.

(4)   “Relevant person”, in relation to a person who is required to produce a
document, means a person who—

(a)   has been or is or is proposed to be a director or controller of that
person,

(b)   has been or is an auditor of that person,

(c)   has been or is an actuary, accountant or lawyer appointed or
instructed by that person, or

(d)   has been or is an employee of that person.

(5)   A relevant document may be retained for so long as the person to whom it
is produced considers that it is necessary to retain it (rather than copies of
it) for the purposes for which the document was requested.

(6)   If the person to whom a relevant document is produced has reasonable
grounds for believing—

(a)   that the document may have to be produced for the purposes of any
legal proceedings, and

(b)   that it might otherwise be unavailable for those purposes,

it may be retained until the proceedings are concluded.

(7)   If a person who is required under section (Power to obtain information or
documents
) or (Powers of persons appointed under section (Appointment of
persons to conduct investigations)
) to produce a document fails to do so, the
Payment Systems Regulator or an investigator may require the person to
state, to the best of the person’s knowledge and belief, where the document
is.

(8)   A lawyer may be required under section (Power to obtain information or
documents
), (Powers of persons appointed under section (Appointment of persons
to conduct investigations)
) or this section to provide the name and address of
a client.

(9)   A person may not be required under section (Power to obtain information or
documents
), (Powers of persons appointed under section (Appointment of persons
to conduct investigations)
) or this section to disclose information or produce
a document in respect of which the person owes an obligation of
confidence as a result of carrying on the business of banking unless—

(a)   the person is the person under investigation or a member of that
person’s group;

(b)   the person to whom the obligation of confidence is owed is the
person under investigation or a member of that person’s group;

(c)   the person to whom the obligation of confidence is owed consents
to the disclosure or production, or

(d)   the imposing on the person of a requirement with respect to such
information or document has been specifically authorised by the
Payment Systems Regulator.

(10)   If a person claims a lien on a document, its production under section (Power
to obtain information or documents
) or (Powers of persons appointed under
section (Appointment of persons to conduct investigations)
) does not affect the
lien.

(11)   In this section—

“controller” has the same meaning as in FSMA 2000 (see section 422 of
that Act);

“group” has the same meaning as in FSMA 2000 (see section 421 of
that Act);

“investigator” means a person appointed under section (Appointment
of persons to conduct investigations
).”

60YYB

Insert the following new Clause—

“Admissibility of statements made to investigators

(1)   A statement made to an investigator by a person in compliance with an
information requirement is admissible in evidence in any proceedings, so
long as it also complies with any requirements governing the admissibility
of evidence in the circumstances in question.

(2)   But in criminal proceedings in which that person is charged with an offence
to which this subsection applies—

(a)   no evidence relating to the statement may be adduced by or on
behalf of the prosecution, and

(b)   no question relating to the statement may be asked by or on behalf
of the prosecution,

unless evidence relating to the statement is adduced, or a question relating
to it is asked, in the proceedings by or on behalf of that person.

(3)   Subsection (2) applies to any offence other than—

(a)   an offence under section (Enforcement of information and investigation
powers
)(6);

(b)   an offence under section 5 of the Perjury Act 1911 (false statements
made otherwise than on oath);

(c)   an offence under section 44(2) of the Criminal Law (Consolidation)
(Scotland) Act 1995 (false statements made otherwise than on oath);

(d)   an offence under Article 10 of the Perjury (Northern Ireland) Order
1979.

(4)   In this section—

“information requirement” means a requirement imposed by an
investigator under section (Powers of persons appointed under section
(Appointment of persons to conduct investigations)
) or (Information and
documents: supplemental provisions
);

“investigator” means a person appointed under section (Appointment
of persons to conduct investigations
).”

60YYC

Insert the following new Clause—

“Entry of premises under warrant

(1)   A justice of the peace may issue a warrant under this section if satisfied on
information on oath given by or on behalf of the Payment Systems
Regulator or an investigator that there are reasonable grounds for believing
that the first or second set of conditions is satisfied.

(2)   The first set of conditions is—

(a)   that a person on whom an information requirement has been
imposed has failed (wholly or in part) to comply with it, and

(b)   that on the premises specified in the warrant—

(i)   there are documents which have been required, or

(ii)   there is information which has been required.

(3)   In this section “information requirement” means—

(a)   a requirement imposed by the Payment Systems Regulator under
section (Power to obtain information or documents) or (Information and
documents: supplemental provision
), or

(b)   a requirement imposed by an investigator under section (Powers of
persons appointed under section (Appointment of persons to conduct
investigations)
) or (Information and documents: supplemental
provisions
).

(4)   The second set of conditions is—

(a)   that the premises specified in the warrant are premises of a
participant in a regulated payment system,

(b)   that there are on the premises documents or information in relation
to which an information requirement could be imposed, and

(c)   that if such a requirement were to be imposed—

(i)   it would not be complied with, or

(ii)   the documents or information to which it related would be
removed, tampered with or destroyed.

(5)   A warrant under this section authorises a constable—

(a)   to enter the premises specified in the warrant,

(b)   to search the premises and take possession of any documents or
information appearing to be documents or information of a kind in
respect of which a warrant under this section was issued (“the
relevant kind”) or to take, in relation to any such documents or
information, any other steps which may appear to be necessary for
preserving them or preventing interference with them,

(c)   to take copies of, or extracts from, any documents or information
appearing to be of the relevant kind,

(d)   to require any person on the premises to provide an explanation of
any document or information appearing to be of the relevant kind
or to state where it may be found, and

(e)   to use such force as may be reasonably necessary.

(6)   A warrant under this section may be executed by any constable.

(7)   The warrant may authorise persons to accompany any constable who is
executing it.

(8)   The powers in subsection (5) may be exercised by a person who—

(a)   is authorised by the warrant to accompany a constable, and

(b)   exercises those powers in the company of, and under the
supervision of, a constable.

(9)   In England and Wales, sections 15(5) to (8) and 16(3) to (12) of the Police
and Criminal Evidence Act 1984 (execution of search warrants and
safeguards) apply to warrants issued under this section.

(10)   In Northern Ireland, Articles 17(5) to (8) and 18(3) to (12) of the Police and
Criminal Evidence (Northern Ireland) Order 1989 apply to warrants issued
under this section.

(11)   This section has effect in relation to Scotland as if—

(a)   for any reference to a justice of the peace there were substituted a
reference to a justice of the peace or a sheriff, and

(b)   for any reference to information on oath there were substituted a
reference to evidence on oath.

(12)   In this section “investigator” means a person appointed under section
(Appointment of persons to conduct investigations).”

60YYD

Insert the following new Clause—

“Retention of documents taken under section (Entry of premises under warrant)

(1)   Any document of which possession is taken under section (Entry of premises
under warrant
) (“a seized document”) may be retained so long as it is
necessary to retain it (rather than copies of it) in the circumstances.

(2)   A person claiming to be the owner of a seized document may apply to a
magistrates’ court or (in Scotland) the sheriff for an order for the delivery
of the document to the person appearing to the court or sheriff to be the
owner.

(3)   If on an application under subsection (2) the court or (in Scotland) the
sheriff cannot ascertain who is the owner of the seized document the court
or sheriff (as the case may be) may make such order as the court or sheriff
thinks fit.

(4)   An order under subsection (2) or (3) does not affect the right of any person
to take legal proceedings against any person in possession of a seized
document for the recovery of the document.

(5)   Any right to bring proceedings (as described in subsection (4)) may only be
exercised within 6 months of the date of the order made under subsection
(2) or (3).”

60YYE

Insert the following new Clause—

“Enforcement of information and investigation powers

(1)   If a person other than an investigator (“the defaulter”) fails to comply with
a requirement imposed under any of sections (Power to obtain information or
documents
) to (Entry of premises under warrant), the person imposing the
requirement may certify that fact in writing to the court.

(2)   If the court is satisfied that the defaulter failed without reasonable excuse
to comply with the requirement, it may deal with the defaulter (and in the
case of a body corporate, any director or other officer of the body) as if that
person were in contempt.

(3)   In subsection (2) “officer”, in relation to a limited liability partnership,
means a member of the limited liability partnership.

(4)   A person who knows or suspects that an investigation is being or is likely
to be conducted under section (Appointment of persons to conduct
investigations
) is guilty of an offence if the person—

(a)   falsifies, conceals, destroys or otherwise disposes of a document
which the person knows or suspects is or would be relevant to such
an investigation, or

(b)   causes or permits the falsification, concealment, destruction or
disposal of such a document.

(5)   It is a defence for a person charged with an offence under subsection (4) to
show that the person had no intention of concealing facts disclosed by the
documents from the investigator.

(6)   A person is guilty of an offence if the person, in purported compliance with
a requirement imposed under any of sections (Power to obtain information or
documents
) to (Entry of premises under warrant)—

(a)   provides information which the person knows to be false or
misleading in a material particular, or

(b)   recklessly provides information which is false or misleading in a
material particular.

(7)   A person guilty of an offence under subsection (4) or (6) 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 2 years or a fine, or both.

(8)   Any person who intentionally obstructs the exercise of any rights conferred
by a warrant under section (Entry of premises under warrant) is guilty of an
offence and liable on summary conviction—

(a)   in England and Wales, to imprisonment for a term not exceeding 51
weeks (or 3 months, if the offence was committed before the
commencement of section 280(2) of the Criminal Justice Act 2003) or
a fine, or both;

(b)   in Scotland, to imprisonment for a term not exceeding 3 months or
a fine not exceeding level 5 on the standard scale, or both;

(c)   in Northern Ireland, to imprisonment for a term not exceeding 3
months or a fine not exceeding level 5 on the standard scale, or both.

(9)   In this section—

“court” means the High Court or, in Scotland, the Court of Session;

“investigator” means a person appointed under section (Appointment
of persons to conduct investigations
).”

60YYF

Insert the following new Clause—

“Guidance

(1)   The Payment Systems Regulator may give guidance consisting of such
information and advice as it considers appropriate—

(a)   with respect to the operation of specified provisions of this Part;

(b)   with respect to any other matter relating to its functions under this
Part;

(c)   with respect to any other matters about which it appears to the
Payment Systems Regulator to be desirable to give information or
advice.

(2)   Guidance given by the Payment Systems Regulator under this section must
include guidance about how it intends to advance its payment systems
objectives in discharging its functions under this Part in relation to
different categories of payment system or participants in payment systems.

(3)   In this Part “general guidance” means guidance given by the Payment
Systems Regulator under this section which—

(a)   is given—

(i)   to persons generally,

(ii)   to participants in payment systems, or regulated payment
systems, generally, or

(iii)   to a class of participant in a payment system or regulated
payment system,

(b)   is intended to have continuing effect, and

(c)   is given in writing or other legible form.

(4)   The Payment Systems Regulator may give financial or other assistance to
persons giving information or advice of a kind which the Payment Systems
Regulator could give under this section.

(5)   The Payment Systems Regulator may—

(a)   publish its guidance,

(b)   offer copies of its published guidance for sale at a reasonable price,
and

(c)   if it gives guidance in response to a request made by any person,
make a reasonable charge for that guidance.”

60YYG

Insert the following new Clause—

“Reports

(none)   If it considers that it is desirable to do so in order to advance any of its
payment systems objectives, the Payment Systems Regulator may prepare
and publish a report into any matter which it considers relevant to the
exercise of its functions under this Part.”

60YYH

Insert the following new Clause—

“Duty of regulators to ensure co-ordinated exercise of functions

(1)   The following are regulators for the purposes of this section—

(a)   the Payment Systems Regulator;

(b)   the Bank of England;

(c)   the FCA;

(d)   the PRA.

(2)   The regulators must co-ordinate the exercise of their relevant functions (see
subsection (5)) with a view to ensuring—

(a)   that each regulator consults every other regulator (where not
otherwise required to do so) in connection with any proposed
exercise of a relevant function in a way that may have a material
adverse effect on the advancement by that other regulator of any of
its objectives;

(b)   that where appropriate each regulator obtains information and
advice from every other regulator in connection with the exercise of
its relevant functions in relation to matters of common regulatory
interest in cases where the other regulator may be expected to have
relevant information or relevant expertise.

(3)   The duty in subsection (2) applies only to the extent that compliance with
the duty—

(a)   is compatible with the advancement by each regulator of any of its
objectives, and

(b)   does not impose a burden on the regulators that is disproportionate
to the benefits of compliance.

(4)   A function conferred on a regulator relates to matters of common
regulatory interest if—

(a)   another regulator exercises similar or related functions in relation
to the same persons,

(b)   another regulator exercises functions which relate to different
persons but relate to similar subject-matter, or

(c)   its exercise could affect the advancement by another regulator of
any of its objectives.

(5)   “Relevant functions” means—

(a)   in relation to the Payment Systems Regulator, its functions under
this Part;

(b)   in relation to the Bank of England, its functions under Part 5 of the
Banking Act 2009 (inter-bank payment systems);

(c)   in relation to the FCA, the functions conferred on it by or under
FSMA 2000 (see section 1A(6) of that Act);

(d)   in relation to the PRA, the functions conferred on it by or under
FSMA 2000 (see section 2A(6) of that Act).

(6)   “Objectives” means—

(a)   in relation to the Payment Systems Regulator, its payment systems
objectives;

(b)   in relation to the Bank of England, its Financial Stability Objective
under section 2A of the Bank of England Act 1998;

(c)   in relation to the FCA, its strategic objective and operational
objectives under section 1B of FSMA 2000;

(d)   in relation to the PRA, its general objective under section 2B of that
Act.”

60YYJ

Insert the following new Clause—

“Memorandum of understanding

(1)   The following are regulators for the purposes of this section—

(a)   the Payment Systems Regulator;

(b)   the Bank of England;

(c)   the FCA;

(d)   the PRA.

(2)   The regulators must prepare and maintain a memorandum which
describes in general terms—

(a)   the role of each regulator in relation to the exercise of relevant
functions which relate to matters of common regulatory interest,
and

(b)   how the regulators intend to comply with section (Duty of regulators
to ensure co-ordinated exercise of functions
) in relation to the exercise
of such functions.

(3)   The regulators must review the memorandum at least once in each
calendar year.

(4)   The regulators must give the Treasury a copy of the memorandum and any
revised memorandum.

(5)   The Treasury must lay before Parliament a copy of any document received
by them under this section.

(6)   The regulators must ensure that the memorandum as currently in force is
published in the way appearing to them to be best calculated to bring it to
the attention of the public.

(7)   The memorandum need not relate to any aspect of compliance with section
(Duty of regulators to ensure co-ordinated exercise of functions) if the regulators
consider—

(a)   that publication of information about that aspect would be against
the public interest, or

(b)   that that aspect is a technical or operational matter not affecting the
public.

(8)   In this section—

(a)   the reference in subsection (2)(a) to matters of common regulatory
interest is to be read in accordance with section (Duty of regulators to
ensure co-ordinated exercise of functions
)(4), and

(b)   references to relevant functions are to be read in accordance with
section (Duty of regulators to ensure co-ordinated exercise of
functions
)(5).”

60YYK

Insert the following new Clause—

“Power of Bank to require Regulator to refrain from specified action

(1)   Where the first, second and third conditions are met, the Bank of England
may give a direction under this section to the Payment Systems Regulator.

(2)   The first condition is that the Payment Systems Regulator is proposing to
exercise any of its powers under this Part in relation to a participant in a
regulated payment system.

(3)   The second condition is that the Bank of England is of the opinion that the
exercise of the power in the manner proposed may—

(a)   threaten the stability of the UK financial system,

(b)   have serious consequences for business or other interests in the
United Kingdom, or

(c)   have an adverse effect on the Bank’s ability to act in its capacity as
a monetary authority.

(4)   The third condition is that the Bank of England is of the opinion that the
giving of the direction is necessary in order to avoid the possible
consequence falling within subsection (3).

(5)   A direction under this section is a direction requiring the Payment Systems
Regulator not to exercise the power or not to exercise it in a specified
manner.

(6)   The direction may be expressed to have effect during a specified period or
until revoked.

(7)   The Payment Systems Regulator is not required to comply with a direction
under this section if or to the extent that in the opinion of the Payment
Systems Regulator compliance would be incompatible with any EU
obligation or any other international obligation of the United Kingdom.”

60YYL

Insert the following new Clause—

“Power of FCA to require Regulator to refrain from specified action

(1)   Where the first, second and third conditions are met, the FCA may give a
direction under this section to the Payment Systems Regulator.

(2)   The first condition is that the Payment Systems Regulator is proposing to
exercise any of its powers under this Part in relation to a participant in a
regulated payment system.

(3)   The second condition is that the FCA is of the opinion that the exercise of
the power in the manner proposed may have an adverse effect on the
ability of the FCA to comply with its duty under section 1B(1) of FSMA
2000 (FCA’s general duties).

(4)   The third condition is that the FCA is of the opinion that the giving of the
direction is necessary in order to avoid the possible consequence falling
within subsection (3).

(5)   A direction under this section is a direction requiring the Payment Systems
Regulator not to exercise the power or not to exercise it in a specified
manner.

(6)   The direction may be expressed to have effect during a specified period or
until revoked.

(7)   The Payment Systems Regulator is not required to comply with a direction
under this section if or to the extent that in the opinion of the Payment
Systems Regulator compliance would be incompatible with any EU
obligation or any other international obligation of the United Kingdom.”

60YYM

Insert the following new Clause—

“Power of PRA to require Regulator to refrain from specified action

(1)   Where the first, second and third conditions are met, the PRA may give a
direction under this section to the Payment Systems Regulator.

(2)   The first condition is that the Payment Systems Regulator is proposing to
exercise any of its powers under this Part in relation to—

(a)   a class of PRA-authorised persons, or

(b)   a particular PRA-authorised person.

(3)   The second condition is that the PRA is of the opinion that the exercise of
the power in the manner proposed may—

(a)   threaten the stability of the UK financial system,

(b)   result in the failure of a PRA-authorised person in a way that would
have an adverse effect on the stability of the UK financial system, or

(c)   have an adverse effect on the ability of the PRA to comply with its
duty under section 2B(1) of FSMA 2000 (the PRA’s general
objective).

(4)   The third condition is that the PRA is of the opinion that the giving of the
direction is necessary in order to avoid the possible consequence falling
within subsection (3).

(5)   A direction under this section is a direction requiring the Payment Systems
Regulator not to exercise the power or not to exercise it in a specified
manner.

(6)   The direction may be expressed to have effect during a specified period or
until revoked.

(7)   The Payment Systems Regulator is not required to comply with a direction
under this section if or to the extent that in the opinion of the Payment
Systems Regulator compliance would be incompatible with any EU
obligation or any other international obligation of the United Kingdom.

(8)   The reference in subsection (3)(b) to the “failure” of a PRA-authorised
person is to be read in accordance with section 2J(3) and (4) of FSMA 2000.

(9)   In this section “PRA-authorised person” has the same meaning as in FSMA
2000 (see section 2B(5) of that Act).”

60YYN

Insert the following new Clause—

“Regulator’s general duty to consult

(1)   The Payment Systems Regulator must make and maintain effective
arrangements for consulting relevant persons on—

(a)   the extent to which its general policies and practices are consistent
with its general duties under section (Regulator’s general duties in
relation to payment systems
), and

(b)   how its payment systems objectives may best be achieved.

(2)   The following are “relevant persons” for the purposes of this section—

(a)   participants in regulated payment systems, and

(b)   those who use, or are likely to use, services provided by regulated
payment systems.

(3)   Arrangements under this section must include the establishment and
maintenance of one or more panels of persons to represent the interests of
relevant persons.

(4)   Where the Payment Systems Regulator establishes a panel under
subsection (3), it must appoint one of the members of the panel to be its
chair.

(5)   The Treasury’s approval is required for the appointment or dismissal of the
chair of a panel established under subsection (3).

(6)   The Payment Systems Regulator must—

(a)   consider representations that are made to it in accordance with
arrangements made under this section, and

(b)   from time to time publish, in such manner as it thinks fit, responses
to the representations.”

60YYP

Insert the following new Clause—

“Consultation by the Regulator in relation to generally applicable requirements

(1)   In this section references to imposing a generally applicable requirement
are to—

(a)   giving a general direction, or

(b)   imposing a requirement under section (System rules) that applies to
all operators of regulated payment systems,

and references to the requirement are to be read accordingly.

(2)   Before imposing a generally applicable requirement, the Payment Systems
Regulator must—

(a)   consult the Bank of England, the FCA and the PRA, and

(b)   after doing so, publish a draft of the proposed requirement in the
way appearing to the Payment Systems Regulator to be best
calculated to bring it to the attention of the public.

(3)   The draft must be accompanied by—

(a)   a cost benefit analysis,

(b)   an explanation of the purpose of the proposed requirement,

(c)   an explanation of the Payment Systems Regulator’s reasons for
believing that imposing the requirement is compatible with its
duties under section (Regulator’s general duties in relation to payment
systems
), and

(d)   notice that representations about the proposed requirement may be
made to the Payment Systems Regulator within a specified time.

(4)   Before imposing the proposed requirement the Payment Systems
Regulator must have regard to any representations made to it in
accordance with subsection (3)(d).

(5)   If the Payment Systems Regulator proposes to impose the requirement, it
must publish an account, in general terms, of—

(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.”

60YYQ

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”.

(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);”.”

60YYR

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.

(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”.”

60YYS

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);

(ii)   any requirements imposed under section (System rules) on
all operators of regulated payment systems;

(iii)   any guidance given under section (Guidance).”

60YYT

Insert the following new Clause—

“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.”

60YYU

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.”

60YYV

Insert the following new Clause—

“Interpretation

(1)   In this Part—

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

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

“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);

“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.”

61

Insert the following new Clause—

“PART 6

SPECIAL ADMINISTRATION FOR OPERATORS OF CERTAIN INFRASTRUCTURE SYSTEMS

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.”

62

Insert the following new Clause—

“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.”

63

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—

(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.”

64

Insert the following new Clause—

“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).”

65

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.

(2)   Where an FMI administrator is appointed in relation to a company
designated under subsection (4) of section (Interpretation: infrastructure
companies
), the objective of the FMI administration is—

(a)   to ensure that services falling within that subsection continue to be
provided, and

(b)   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.

(3)   The protected activities referred to in subsection (1)(b) are such activities as
the Bank of England may from time to time direct, which must be—

(a)   regulated activities falling within section 285(3)(a) or (b) of FSMA
2000, or

(b)   related activities which are necessary for the efficient carrying on of
any of those regulated activities.

(4)   The specified means are—

(a)   the rescue as a going concern of the company subject to the FMI
administration order, and

(b)   transfers falling within subsection (5).

(5)   A transfer falls within this subsection if it is a transfer as a going concern—

(a)   to another company, or

(b)   as respects different parts of the undertaking of the company
subject to the FMI administration order, to two or more different
companies,

of so much of that undertaking as it is appropriate to transfer for the
purpose of achieving the objective of the FMI administration.

(6)   The means by which transfers falling within subsection (5) may be effected
include, in particular—

(a)   a transfer of the undertaking of the company subject to the FMI
administration order, or of part of its undertaking, to a wholly-
owned subsidiary of that company, and

(b)   the transfer to a company of securities of a wholly-owned
subsidiary to which there has been a transfer falling within
paragraph (a).

(7)   The objective of the FMI administration may be achieved by transfers
falling within subsection (5) only to the extent that—

(a)   the rescue as a going concern of the company subject to the FMI
administration order is not reasonably practicable or is not
reasonably practicable without such transfers,

(b)   the rescue of that company as a going concern will not achieve that
objective or will not do so without such transfers, or

(c)   such transfers would produce a result for the company’s creditors
as a whole that is better than the result that would be produced
without them.”

66

Insert the following new Clause—

“Application for FMI administration order

(1)   An application for an FMI administration order may be made to the court
by the Bank of England.

(2)   An application must nominate a person to be appointed as the FMI
administrator.

(3)   The infrastructure company must be given notice of an application, in
accordance with rules under section 411 of the 1986 Act (as applied in
relation to FMI administration).”

67

Insert the following new Clause—

“Powers of court

(1)   The court may make an FMI administration order in relation to an
infrastructure company if satisfied—

(a)   that the company is unable to pay its debts,

(b)   that the company is likely to be unable to pay its debts, or

(c)   that, on a petition presented by the Secretary of State under section
124A of the 1986 Act (petition for winding up on grounds of public
interest), it would be just and equitable (disregarding the objective
of the FMI administration) to wind up the company.

(2)   The court may not make an FMI administration order on the ground set out
in subsection (1)(c) unless the Secretary of State has certified to the court
that the case is one in which the Secretary of State considers (disregarding
the objective of the FMI administration) that it would be appropriate to
petition under section 124A of the 1986 Act.

(3)   On an application for an FMI administration order, the court may—

(a)   grant the application;

(b)   dismiss the application;

(c)   adjourn the application (generally or to a specified date);

(d)   make an interim order;

(e)   treat the application as a winding-up petition and make any order
which the court could make under section 125 of the 1986 Act;

(f)   make any other order which the court thinks appropriate.

(4)   An interim order under subsection (3)(d) may, in particular—

(a)   restrict the exercise of a power of the company or of its directors;

(b)   make provision conferring a discretion on the court or on a person
qualified to act as an insolvency practitioner in relation to the
company.

(5)   For the purposes of this section a company is unable to pay its debts if it is
treated as being so unable under section 123 of the 1986 Act (definition of
inability to pay debts).”

68

Insert the following new Clause—

“FMI administrators

(1)   The FMI administrator of a company—

(a)   is an officer of the court, and

(b)   in exercising and performing powers and duties in relation to the
company, is the company’s agent.

(2)   The management by the FMI administrator of a company of any of its
affairs, business or property must be carried out for the purpose of
achieving the objective of the FMI administration as quickly and efficiently
as is reasonably practicable.

(3)   The FMI administrator of a company must exercise and perform powers
and duties in the way which, so far as it is consistent with the objective of
the FMI administration to do so, best protects—

(a)   the interests of the company’s creditors as a whole, and

(b)   subject to those interests, the interests of the company’s members as
a whole.”

69

Insert the following new Clause—

“Continuity of supply

(1)   This section applies where, before the commencement of FMI
administration, the infrastructure company had entered into arrangements
with a supplier for the provision of a supply to the infrastructure company.

(2)   After the commencement of FMI administration, the supplier—

(a)   must not terminate a supply unless—

(i)   any charges in respect of the supply which relate to a supply
given after the commencement of FMI administration
remain unpaid for more than 28 days,

(ii)   the FMI administrator consents to the termination, or

(iii)   the supplier has the permission of the court, which may be
given if the supplier can show that the continued provision
of the supply would cause the supplier to suffer hardship,

(b)   must not make it a condition of a supply that any charges in respect
of the supply which relate to a supply given before the
commencement of FMI administration are paid, and

(c)   must not do anything which has the effect of making it a condition
of the giving of a supply that any charges within paragraph (b) are
paid.

(3)   Where, before the commencement of FMI administration, a contractual
right to terminate a supply has arisen but has not been exercised, then, for
the purposes of this section, the commencement of FMI administration
causes that right to lapse and the supply is only to be terminated if a
ground in subsection (2)(a) applies.

(4)   Any provision in a contract between the infrastructure company and the
supplier that purports to terminate the agreement if any action is taken to
put the infrastructure company in FMI administration is void.

(5)   Any expenses incurred by the infrastructure company on the provision of
a supply after the commencement of FMI administration are to be treated
as necessary disbursements in the course of the FMI administration.

(6)   In this section—

“commencement of FMI administration” means the making of the FMI
administration order;

“supplier” means the person controlling the provision of a supply to
the infrastructure company, and includes a company that is a group
undertaking (as defined by section 1161(5) of the Companies Act
2006) in respect of the infrastructure company;

“supply” means a supply of any of the following—

(a)   computer hardware or software used by the infrastructure
company in connection with the operation of the relevant
system;

(b)   financial data;

(c)   infrastructure permitting electronic communication
services;

(d)   data processing;

(e)   access to secure data networks used by the infrastructure
company in connection with the operation of the relevant
system.”

70

Insert the following new Clause—

“Power to direct FMI administrator

(1)   If the Bank of England considers it necessary to do so for the purpose of
achieving the objective of an FMI administration, the Bank may direct the
FMI administrator to take, or refrain from taking, specified action.

(2)   In deciding whether to give a direction under this section, the Bank of
England must have regard to the public interest in—

(a)   the protection and enhancement of the stability of the financial
system of the United Kingdom, and

(b)   the maintenance of public confidence in that system.

(3)   A direction under this section must not be incompatible with a direction of
the court that is in force under Schedule B1 to the 1986 Act.

(4)   The Bank of England must, within a reasonable time of giving the direction,
give the FMI administrator a statement of its reasons for giving the
direction.

(5)   A person listed in subsection (6) has immunity from liability in damages in
respect of action or inaction in accordance with a direction under this
section.

(6)   Those persons are—

(a)   the FMI administrator;

(b)   the company in FMI administration;

(c)   the officers or staff of the company.

(7)   Immunity conferred by this section does not extend to action or inaction—

(a)   in bad faith, or

(b)   in contravention of section 6(1) of the Human Rights Act 1998.

(8)   This section does not limit the powers conferred on the Bank of England by
section 191 of the Banking Act 2009 (directions) in relation to a recognised
inter-bank payment system.”

71

Insert the following new Clause—

“Conduct of administration, transfer schemes etc.

(1)   Schedule (Conduct of FMI administration) (which applies the provisions of
Schedule B1 to the 1986 Act about ordinary administration orders and
certain other enactments to FMI administration orders) has effect.

(2)   Schedule (Financial market infrastructure transfer schemes) (which makes
provision for transfer schemes to achieve the objective of an FMI
administration) has effect.

(3)   The power to make rules conferred by section 411(1B) of the 1986 Act (rules
relating to bank administration) is to apply for the purpose of giving effect
to this Part as it applies for the purposes of giving effect to Part 3 of the
Banking Act 2009 (and, accordingly, as if the reference in section 411(1B) to
that Part included a reference to this Part).”

72

Insert the following new Clause—

“Restriction on winding-up orders and voluntary winding up

(1)   A petition by a person other than the Bank of England for a winding up
order in respect of an infrastructure company may not be determined
unless—

(a)   the petitioner has notified the Bank of England that the petition has
been presented, and

(b)   the period of 14 days beginning with the day on which the notice is
received by the Bank has ended.

(2)   A resolution for the voluntary winding up of an infrastructure company
may not be made unless—

(a)   the infrastructure company has applied to the court under this
section,

(b)   the company has notified the Bank of England that the application
has been made, and

(c)   after the end of the period of 14 days beginning with the day on
which the notice is received by the Bank, the court gives permission
for the resolution to be made.”

73

Insert the following new Clause—

“Restriction on making of ordinary administration orders

(1)   This section applies where an ordinary administration application is made
in relation to an infrastructure company by a person other than the Bank of
England.

(2)   The court must dismiss the application if—

(a)   an FMI administration order is in force in relation to the company,
or

(b)   an FMI administration order has been made in relation to the
company but is not yet in force.

(3)   Where subsection (2) does not apply, the court, on hearing the application,
must not exercise its powers under paragraph 13 of Schedule B1 to the 1986
Act (other than its power of adjournment) unless—

(a)   the applicant has notified the Bank of England that the application
has been made, and

(b)   the period of 14 days beginning with the day on which the notice is
received by the Bank has ended.

(4)   On the making of an FMI administration order in relation to an
infrastructure company, the court must dismiss any ordinary
administration application made in relation to the company which is
outstanding.

(5)   “Ordinary administration application” means an application under
paragraph 12 of Schedule B1 to the 1986 Act.”

74

Insert the following new Clause—

“Restriction on enforcement of security

A person may not take any step to enforce a security over property of an
infrastructure company unless—

(a)   notice of the intention to do so has been given to the Bank of
England, and

(b)   the period of 14 days beginning with the day on which the notice
was received by the Bank has ended.”

75

Insert the following new Clause—

“Loans

(1)   This section applies where an FMI administration order has been made in
relation to an infrastructure company.

(2)   The Treasury may, out of money provided by Parliament, make loans to
the company for achieving the objective in section (Objective of FMI
administration
).

(3)   A loan under this section may be made on such terms as the Treasury think
fit.

(4)   The Treasury must pay into the Consolidated Fund sums received by them
as a result of this section.”

76

Insert the following new Clause—

“Indemnities

(1)   This section applies where an FMI administration order has been made in
relation to an infrastructure company.

(2)   The Treasury may agree to indemnify persons in respect of one or both of
the following—

(a)   liabilities incurred in connection with the exercise of powers and
duties by the FMI administrator;

(b)   loss or damage sustained in that connection.

(3)   The agreement may be made in whatever manner, and on whatever terms,
the Treasury think fit.

(4)   As soon as practicable after agreeing to indemnify persons under this
section, the Treasury must lay before Parliament a statement of the
agreement.

(5)   If sums are paid by the Treasury in consequence of an indemnity agreed to
under this section, the infrastructure company must pay the Treasury—

(a)   such amounts in or towards the repayment to them of those sums
as the Treasury may direct, and

(b)   interest, at such rates as they may direct, on amounts outstanding
under this subsection.

(6)   Subsection (5) does not apply in the case of a sum paid by the Treasury for
indemnifying a person in respect of a liability to the infrastructure
company.

(7)   Where a sum has been paid out by the Treasury in consequence of an
indemnity agreed to under this section, the Treasury must lay a statement
relating to that sum before Parliament—

(a)   as soon as practicable after the end of the financial year in which
that sum is paid out, and�

(b)   (except where subsection (5) does not apply in the case of the sum)
as soon as practicable after the end of each subsequent relevant
financial year.

(8)   In relation to a sum paid out in consequence of an indemnity, a financial
year is a relevant financial year for the purposes of subsection (7) unless—

(a)   before the beginning of that year, the whole of that sum has been
repaid to the Treasury under subsection (5), and

(b)   the infrastructure company is not at any time during that year
subject to liability to pay interest on amounts that became due
under that subsection in respect of that sum.

(9)   The power of the Treasury to agree to indemnify persons—

(a)   is confined to a power to agree to indemnify persons in respect of
liabilities, loss and damage incurred or sustained by them as
relevant persons, but

(b)   �includes power to agree to indemnify persons (whether or not they
are identified or identifiable at the time of the agreement) who
subsequently become relevant persons.�

(10)   For the purposes of this section each of the following is a relevant person—

(a)   the FMI administrator;

(b)   an employee of the FMI administrator;

(c)   a member or employee of a firm of which the FMI administrator is
a member;

(d)   a member or employee of a firm of which the FMI administrator is
an employee;

(e)   a member or employee of a firm of which the FMI administrator
was an employee or member at a time when the order was in force;

(f)   a body corporate which is the employer of the FMI administrator;

(g)   an officer, employee or member of such a body corporate.

(11)   For the purposes of subsection (10)—

(a)   the references to the FMI administrator are to be read, where two or
more persons are appointed to act as the FMI administrator, as
references to any one or more of them, and

(b)   the references to a firm of which a person was a member or
employee at a particular time include references to a firm which
holds itself out to be the successor of a firm of which the person was
a member or employee at that time.�

(12)   The Treasury must pay into the Consolidated Fund sums received by them
as a result of subsection (5).”

77

Insert the following new Clause—

“Interpretation: general

(1)   In this Part—

“the 1986 Act” means the Insolvency Act 1986;

“business”, “member”, “property” and “security” have the same
meaning as in the 1986 Act;

“company” has the meaning given by section (Interpretation: other
expressions
);

“the court” means—

(a)   in England and Wales and Northern Ireland, the High
Court;

(b)   in Scotland, the Court of Session;

“FMI administration order” and “FMI administrator” are to be read in
accordance with section (FMI administration orders);

“infrastructure company” has the meaning given by section
(Interpretation: infrastructure companies);

“operator”, in relation to a recognised inter-bank payment system, has
the meaning given by section (Interpretation: other expressions);

“recognised inter-bank payment system” has the meaning given by
section (Interpretation: other expressions);

“regulated activity” has the same meaning as in FSMA 2000;

“the relevant system” has the meaning given by section (Interpretation:
other expressions
);

“securities settlement system” has the meaning given by section
(Interpretation: other expressions).

(2)   In this Part references to the FMI administrator of a company include a
person appointed under paragraph 91 or 103 of Schedule B1 to the 1986
Act, as applied by Schedule (Conduct of FMI administration) to this Act, to be
the FMI administrator of a company.

(3)   In this Part references to a person qualified to act as an insolvency
practitioner in relation to a company are to be read in accordance with Part
13 of the 1986 Act, but as if references in that Part to a company included a
company registered under the Companies Act 2006 in Northern Ireland.”

78

Insert the following new Clause—

“Northern Ireland

(1)   This section makes provision about this Part in its application to Northern
Ireland.

(2)   Any reference to any provision of the 1986 Act is to have effect as a
reference to the corresponding provision of the Insolvency (Northern
Ireland) Order 1989.

(3)   Section (Interpretation: general)(3) is to have effect as if the reference to
Northern Ireland were a reference to England and Wales or Scotland.”

Before Clause 13

LORD DEIGHTON

79

Insert the following new Clause—

“PART 7

MISCELLANEOUS

Functions of FCA under competition legislation

Schedule (Functions of FCA under competition legislation) (which contains
provision conferring on the FCA functions under competition legislation)
has effect.”

80

Insert the following new Clause—

“Competition as a secondary objective of the PRA

(1)   For section 2H of FSMA 2000 substitute—

“2H Secondary competition objective and duty to have regard to
regulatory principles

(1)   When discharging its general functions in a way that advances its
objectives (see section 2F), the PRA must so far as is reasonably
possible act in a way which, as a secondary objective, facilitates
effective competition in the markets for services provided by PRA-
authorised persons in carrying on regulated activities.

(2)   In discharging its general functions, the PRA must also have regard
to the regulatory principles in section 3B.”

(2)   In section 3B (regulatory principles to be applied by both regulators), in
subsection (1), for “2H(1)(a)” substitute “2H(2)”.

(3)   In Schedule 1ZB to FSMA 2000 (the Prudential Regulation Authority)—

(a)   in paragraph 19 (annual report), in sub-paragraph (1)—

(i)   after paragraph (b) insert—

“(ba)   how it has complied with section 2H(1),”, and

(ii)   in paragraph (c), omit the words from “and of” onwards,
and

(b)   in paragraph 20 (consultation about annual report), in sub-
paragraph (1)(c), for the words from “and the PRA” onwards
substitute “and the PRA has facilitated effective competition in
accordance with section 2H and has considered the regulatory
principles in section 3B”.”

81

Insert the following new Clause—

“Power of FCA and PRA to make rules applying to parent undertakings

(1)   After section 192J of FSMA 2000 insert—

“Rules applying to parent undertakings of ring-fenced bodies

192JA        Rules applying to parent undertakings of ring-fenced bodies

(1)   The appropriate regulator may make such rules applying to bodies
corporate falling within subsection (2) as appear to the regulator to
be necessary or expedient for the group ring-fencing purposes.

(2)   A body corporate falls within this subsection if—

(a)   it is incorporated in the United Kingdom or has a place of
business in the United Kingdom,

(b)   it is a parent undertaking of a ring-fenced body, and

(c)   it is not itself an authorised person.

(3)   The “group ring-fencing purposes” are the purposes set out in
section 142H(4).

(4)   “The appropriate regulator” means—

(a)   in relation to the parent undertaking of a ring-fenced body
that is a PRA-authorised person, the PRA;

(b)   in any other case, the FCA.

Rules requiring parent undertakings to facilitate resolution

192JB        Rules requiring parent undertakings to facilitate resolution

(1)   The appropriate regulator may make rules requiring a qualifying
parent undertaking to make arrangements that would in the
opinion of the regulator allow or facilitate the exercise of the
resolution powers in relation to the qualifying parent undertaking
or any of its subsidiary undertakings in the event of a situation
arising where all or part of the business of the parent undertaking
or the subsidiary undertaking encounters or is likely to encounter
financial difficulties.

(2)   The “resolution powers” are—

(a)   the powers conferred on the Treasury and the Bank of
England by or under Parts 1 to 3 of the Banking Act 2009,
and

(b)   any similar powers exercisable by an authority outside the
United Kingdom.

(3)   The arrangements that may be required include arrangements
relating to—

(a)   the issue of debt instruments by the parent undertaking;

(b)   the provision to a subsidiary undertaking (“S”) or a
transferee by the parent undertaking, or by any other
subsidiary undertaking of the parent undertaking, of such
services and facilities as would be required to enable S or the
transferee to operate the business, or part of the business,
effectively.

(4)   In subsection (3)(b) “transferee” means a person to whom all or part
of the business of the parent undertaking or the subsidiary
undertaking could be transferred as a result of the exercise of the
resolution powers.

(5)   “Debt instrument” has the same meaning as in section 142Y.

(6)   “The appropriate regulator” means—

(a)   where the subsidiary undertakings of the qualifying parent
undertaking include a ring-fenced body that is a PRA-
authorised person, the PRA;

(b)   where the subsidiary undertakings of the qualifying parent
undertaking include one or more PRA-authorised persons
but do not include any authorised person that is not a PRA-
authorised person, the PRA;

(c)   where the subsidiary undertakings of the qualifying parent
undertaking do not include any PRA-authorised person, the
FCA;

(d)   in any other case, the PRA or the FCA.”

(2)   In section 192K of FSMA 2000 (power to impose penalty or issue censure)—

(a)   in subsection (1), after “section 192J” insert “or 192JB”, and

(b)   after that subsection insert—

“(1A)    This section also applies if a regulator is satisfied that a
person (“P”) who is or has been a parent undertaking of a
ring-fenced body has contravened a provision of rules made
by that regulator under section 192JA.””

Clause 14

LORD DEIGHTON

82

Page 27, line 11, at end insert “and

(b)   after “213(1A),” insert “234I(2),”.”

Before Clause 15

LORD TURNBULL

LORD MCFALL OF ALCLUITH

LORD LAWSON OF BLABY

83

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
read as (as appropriate) being or including a reference to the board.”

LORD TURNBULL

LORD LAWSON OF BLABY

84

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”.”

85

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

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 determined by the Speaker of the House of Commons.””
86

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”.

87

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.””

After Clause 15

LORD DEIGHTON

88

Insert the following new Clause—

“Building societies

Schedule (Building societies) (which contains provision about building
societies) has effect.”

LORD TURNBULL

LORD MCFALL OF ALCLUITH

LORD LAWSON OF BLABY

89

Insert the following new Clause—

“Other provisions about the FCA and the PRA

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”.”

90

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).”

91

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.”

LORD LAWSON OF BLABY

91A

Insert the following new Clause—

“Excessive lobbying by banks

(1)   If the Governor thinks that the way in which banks are lobbying about
regulation or policy is creating a risk to the stability or effective regulation
of the banking sector, the Governor must lay a report before Parliament.

(2)   In subsection (1) “lobbying” means activities designed to influence Her
Majesty’s Government, the FCA or the Bank of England.

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

LORD PHILLIPS OF SUDBURY

91B*

Insert the following new Clause—

“Review of the exemption of certain business gaming contracts from the
Gaming Acts

(1)   The Treasury must institute a review of the effects of certain business
gaming contracts having been made enforceable by the repeal of certain
provisions of the Gaming Acts pursuant to the Financial Services Act 1986
(as amended).

(2)   “Effect” shall include the social, cultural and ethical effects.

(3)   The Treasury may appoint one or more persons to undertake the review
after consultation with the Bank of England, the PRA, the FCA and such
others as it decides on such terms as it shall think fit.

(4)   The review shall culminate in a report to the Treasury within two years of
the coming into force of this Act.

(5)   The Treasury must lay the report before Parliament and thereafter publish
the same.”

Before Clause 16

LORD TURNBULL

LORD MCFALL OF ALCLUITH

LORD LAWSON OF BLABY

92

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.”

93

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.”

94

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
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.”

95

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 who have approval under
section 59 of FSMA 2000 to perform a function in relation to the carrying on
by a bank of a regulated activity which is designated under subsection (6B)
or (6C) of that section as a senior management function.

(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.”

96

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.”

97

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.”

98

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.””

99

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.”

LORD EATWELL

LORD TUNNICLIFFE

100

Insert the following new Clause—

“Professional standards

After section 65 of FSMA 2000 insert—

“65A          Professional standards

(1)   The regulator will raise standards of professionalism in financial
services by mandating a licensing regime based on training and
competence.

(2)   This licensing regime must—

(a)   apply to all approved persons exercising controlled
functions, regardless of financial sector;

(b)   specify minimum thresholds of competence including
integrity, professional qualifications, continuous
professional development and adherence to a recognised
code of conduct and revised Banking Standards Rules;

(c)   make provisions in connection with—

(i)   the granting of a licence;

(ii)   the refusal of a licence;

(iii)   the withdrawal of a licence; and

(iv)   the revalidation of a licensed person of a prescribed
description whenever the appropriate regulator sees
fit, either as a condition of the person continuing to
hold a licence or of the person’s licence being
restored;

(d)   be evidenced by individuals holding an annual validation
of competence;

(e)   include specific provision for a Senior Persons Regime in
relation to activities involving the exercise of a significant
influence over a controlled function under section 59 of the
Act.

(3)   In section 59, for “authorised” substitute “licensed” throughout the
section.””

LORD EATWELL

LORD TUNNICLIFFE

LORD MCFALL OF ALCLUITH

101

Insert the following new Clause—

“Duty of care

At all times when carrying out core activities, a ring-fenced body shall—

(a)   be subject to a fiduciary duty towards its customers in the operation
of core services; and

(b)   be subject to a duty of care towards its customers across the
financial services sector.”

LORD EATWELL

LORD TUNNICLIFFE

102

Insert the following new Clause—

“Competition and Markets Authority review into competitiveness

(1)   The Chancellor of the Exchequer shall instruct the Competition and
Markets Authority to begin a full market study, according to its powers
under the Enterprise Act 2002, into UK financial services institutions
involved in the provision of core services.

(2)   The full market study will consider—

(a)   the level of competition among UK institutions involved in the
provision of core services;

(b)   the obstacles to increasing competition for UK institutions involved
in the provision of core services; and

(c)   possible actions that could be taken to facilitate new UK institutions
being competitive in the provision of core services.”

103

Insert the following new Clause—

“Sale of state-owned banking assets

(1)   Before any sale of banking assets in the ownership of HM Treasury, the
Treasury shall lay before Parliament a report setting out—

(a)   the manner in which the best interests of the taxpayer are to be
protected in connection with such sale;

(b)   the expected impact that any sale might have on competition for the
provision of core services, customer choice and the rate of economic
growth; and

(c)   an appraisal of the options for potential structural changes in the
bank concerned including—

(i)   the separation of the provision of core services from the
provision of investment activities,

(ii)   the retention of a class of assets in the ownership of HM
Treasury,

(iii)   the impact of any sale on the creation of a regional banking
network.

(2)   A copy of the report in subsection (1) shall be laid before Parliament and
sufficient time shall be given for the appropriate committees of both
Houses of Parliament to consider its findings before any sale decision.”

104

Insert the following new Clause—

“Portable account numbers

(1)   Within 12 months of the passing of this Act, the Treasury shall lay before
Parliament a report considering—

(a)   the adequacy of voluntary arrangements made by UK ring-fenced
bodies to facilitate easier customer switching of bank account
services; and

(b)   legislative options for the introduction of portable account numbers
and sort codes for retail bank accounts provided by UK ring-fenced
bodies.

(2)   The Chancellor of the Exchequer may, by affirmative resolution procedure,
confer powers upon the appropriate regulator to require UK ring-fenced
bodies to comply with any specified scheme to establish the use of portable
account numbers and sort codes.”

LORD SHARKEY

104A*

Insert the following new Clause—

“High-cost credit agreements

(1)   The Secretary of State shall by order provide for each local authority in
England and Wales to regulate high cost credit agreements entered into by
any person whose registered address for the purpose of obtaining credit is
within the area of that authority.

(2)   An order under this section shall—

(a)   set a maximum level for—

(i)   the amount of any loan;

(ii)   the rate of interest that may be charged; and

(iii)   the associated fees that may be levied

  as part of any such agreement;

(b)   limit the number of times and specify the terms on which such an
agreement can be rolled over for any individual to whom this
section applies; and

(c)   require the lender to demonstrate that the borrower has no
outstanding high-cost loans.

(3)   Any local authority choosing not to exercise its powers of regulation once
an order is made under this section shall publish a report setting out its
reasons for not doing so, and shall make a similar report in each subsequent
year in which it chooses not to exercise its powers of regulation.

(4)   For the purposes of this section—

(a)   “high-cost credit agreement” means a regulated credit agreement as
defined by section 137C of the Financial Services and Markets Act
2000 (as inserted by the Financial Services Act 2012) that provides
for—

(i)   the payment by the borrower of charges of a description
from time to time specified by the FCA; or

(ii)   the payment by the borrower over the duration of the
agreement of charges that, taken with the charges paid
under one or more other agreements which are treated by
the FCA’s rules as being connected with it, exceed, or are
capable of exceeding, an amount specified by the FCA;

(b)   “charges” means charges payable, by way of interest or otherwise,
in connection with the provision of credit under the regulated
credit agreement, whether or not the agreement itself makes
provision for them and whether or not the person to whom they are
payable is a party to the regulated credit agreement or an
authorised person;

(c)   “authorised person” has the same meaning as in the Financial
Services and Markets Act 2000.

(5)   An order under this section shall be made by statutory instrument subject
to approval by resolution of each House of Parliament.”

Before Schedule 2

LORD DEIGHTON

105

Insert the following new Schedule—

“SCHEDULE

BAIL-IN STABILISATION OPTION

PART 1

AMENDMENTS OF BANKING ACT 2009

1 The Banking Act 2009 is amended as follows.

New stabilisation option: bail-in

2 After section 12 insert—

“12A          Bail-in option

(1)   The third stabilisation option is exercised by the use of the power
in subsection (2).

(2)   The Bank of England may make one or more resolution
instruments (which may contain provision or proposals of any
kind mentioned in subsections (3) to (6)).

(3)   A resolution instrument may—

(a)   make special bail-in provision with respect to a specified
bank;

(b)   make other provision for the purposes of, or in
connection with, any special bail-in provision made by
that or another instrument.

(4)   A resolution instrument may—

(a)   provide for securities issued by a specified bank to be
transferred to a bail-in administrator (see section 12B) or
another person;

(b)   make other provision for the purposes of, or in
connection with, the transfer of securities issued by a
specified bank (whether or not the transfer has been or is
to be effected by that instrument, by another resolution
instrument or otherwise).

(5)   A resolution instrument may set out proposals with regard to the
future ownership of a specified bank or of the business of a
specified bank, and any other proposals (for example, proposals
about making special bail-in provision) that the Bank of England
may think appropriate.

(6)   A resolution instrument may make any other provision the Bank
of England may think it appropriate to make in exercise of
specific powers under this Part.

(7)   Provision made in accordance with subsection (4) may relate to—

(a)   specified securities, or

(b)   securities of a specified description.

(8)   Where the Bank of England has exercised the power in
subsection (4) to transfer securities to a bail-in administrator, the
Bank of England must exercise its functions under this Part (see,
in particular, section 48V) with a view to ensuring that any
securities held by a person in the capacity of a bail-in
administrator are so held only for so long as is, in the Bank of
England’s opinion, appropriate having regard to the special
resolution objectives.

(9)   References in this Part to “special bail-in provision” are to
provision made in reliance on section 48B.

12B          Bail-in administrators

(1)   The Bank of England may, in a resolution instrument, appoint an
individual or body corporate as a bail-in administrator.

(2)   A bail-in administrator is appointed—

(a)   to hold any securities that may be transferred or issued to
that person in the capacity of bail-in administrator;

(b)   to perform any other functions that may be conferred
under any provision of this Part.

(3)   The Bank of England may appoint more than one bail-in
administrator to perform functions in relation to a bank (but no
more than one of them may at any one time be authorised to hold
securities as mentioned in subsection (2)(a)).

(4)   Securities held by a bail-in administrator (in that capacity, and
whether as a result of a resolution instrument or otherwise) are
to be held in accordance with the terms of a resolution
instrument that transfers those, or other, securities to the bail-in
administrator.

(5)   For example, the following provision may be made by virtue of
subsection (4)—

(a)   provision that specified rights of a bail-in administrator
with respect to all or any of the securities are to be
exercisable only as directed by the Bank of England;

(b)   provision specifying rights or obligations that the bail-in
administrator is, or is not, to have in relation to some or
all of the securities.

(6)   A bail-in administrator must have regard, in performing any
functions of the office, to any objectives that may be specified in
a resolution instrument.

(7)   Where one or more objectives are specified in accordance with
subsection (6), the objectives are to be taken to have equal status
with each other, unless the contrary is stated in the resolution
instrument.

(8)   See sections 48I to 48K for further provision about bail-in
administrators.”

3 After section 8 insert—

“8A Specific condition: bail-in

(1)   The Bank of England may exercise a stabilisation power in
respect of a bank in accordance with section 12A(2) only if
satisfied that the condition in subsection (2) is met.

(2)   The condition is that the exercise of the power 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 systems,

(c)   the protection of depositors, or

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

(3)   Before determining whether that condition is met, and if so how
to react, the Bank of England must consult—

(a)   the PRA,

(b)   the FCA, and

(c)   the Treasury.

(4)   The condition in this section is in addition to the conditions in
section 7.”

Further provision about the bail-in option

4 After section 48A insert—

“Bail-in option

48B          Special bail-in provision

(1)   “Special bail-in provision”, in relation to a bank, means any of the
following (or any combination of the following)—

(a)   provision cancelling a liability owed by the bank;

(b)   provision modifying, or changing the form of, a liability
owed by the bank;

(c)   provision that a contract under which the bank has a
liability is to have effect as if a specified right had been
exercised under it.

(2)   A power to make special bail-in provision—

(a)   may be exercised only for the purpose of, or in connection
with, reducing, deferring or cancelling a liability of the
bank;

(b)   may not be exercised so as to affect any excluded liability.

(3)   The following rules apply to the interpretation of subsection (1).

1. The reference to cancelling a liability owed by the bank
includes a reference to cancelling a contract under which
the bank has a liability.

2. The reference to modifying a liability owed by the bank
includes a reference to modifying the terms (or the effect
of the terms) of a contract under which the bank has a
liability.

3. The reference to changing the form of a liability owed by
the bank, includes, for example—

(a)   converting an instrument under which the bank
owes a liability from one form or class to another,

(b)   replacing such an instrument with another
instrument of a different form or class, or

(c)   creating a new security (of any form or class) in
connection with the modification of such an
instrument.

(4)   Examples of special bail-in provision include—

(a)   provision that transactions or events of any specified kind
have or do not have (directly or indirectly) specified
consequences or are to be treated in a specified manner
for specified purposes;

(b)   provision discharging persons from further performance
of obligations under a contract and dealing with the
consequences of persons being so discharged.

(5)   The form and class of the instrument (“the resulting instrument”)
into which an instrument is converted, or with which it is
replaced, do not matter for the purposes of paragraphs (a) and (b)
of rule 3 in subsection (3); for instance, the resulting instrument
may (if it is a security) fall within Class 1 or any other Class in
section 14.

(6)   The following liabilities of the bank are “excluded liabilities”—

(a)   liabilities representing protected deposits;

(b)   any liability, so far as it is secured;

(c)   liabilities that the bank has by virtue of holding client
assets;

(d)   liabilities with an original maturity of less than 7 days
owed by the bank to a credit institution or investment
firm;

(e)   liabilities arising from participation in designated
settlement systems and owed to such systems or to
operators of, or participants in, such systems;

(f)   liabilities owed to central counterparties recognised by
the European Securities and Markets Authority in
accordance with Article 25 of Regulation (EU) 648/2012
of the European Parliament and the Council;

(g)   liabilities owed to an employee or former employee in
relation to salary or other remuneration, except variable
remuneration;

(h)   liabilities owed to an employee or former employee in
relation to rights under a pension scheme, except rights to
discretionary benefits;

(i)   liabilities owed to creditors arising from the provision to
the bank of goods or services (other than financial
services) that are critical to the daily functioning of the
bank’s operations.

(7)   The following special rules apply in cases involving banking
group companies—

(a)   a liability mentioned in subsection (6)(d) is not an
excluded liability if the credit institution or investment
firm to which the liability is owed is a banking group
company in relation to the bank (see section 81D);

(b)   in subsection (6)(i) the reference to creditors does not
include companies which are banking group companies
in relation to the bank.

48C          Meaning of “protected deposit”

(1)   A deposit is “protected” so far as it is covered by the Financial
Services Compensation Scheme.

(2)   A deposit is “protected” so far as it is covered by a scheme
which—

(a)   operates outside the United Kingdom, and

(b)   is comparable to the Financial Services Compensation
Scheme.

(3)   If one or both of subsections (1) and (2) apply to a deposit, the
amount of the deposit “protected” is the highest amount which
results from either of those subsections.

(4)   In subsections (1) and (2) and section 48B(6)(a), “deposit” has the
meaning given by article 5(2) of the Financial Services and
Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/
544), but ignoring the exclusions in article 6.

48D          General interpretation of section 48B

(1)   In section 48B—

“client assets” means assets which the bank has undertaken
to hold on trust for, or on behalf of, a client;

“contract” includes any instrument;

“credit institution” means any credit institution as defined
in Article 4.1(1) of Regulation (EU) No 575/2013 of the
European Parliament and of the Council, other than an
entity mentioned in Article 2.5(2) to (23) of Directive
2013/36/EU of the European Parliament and of the
Council;

“designated settlement system” means a system designated
in accordance with Directive 98/26/EC of the European
Parliament and of the Council (as amended by Directives
2009/44/EC and 2010/78/EU);

“employee” includes the holder of an office;

“investment firm” means an investment firm as defined in
Article 4.1(2) of Regulation (EU) No 575/2013 of the
European Parliament and of the Council that is subject to
the initial capital requirement specified in Article 28(2) of
Directive 2013/36/EU of the European Parliament and of
the Council;

“pension scheme” includes any arrangement for the
payment of pensions, allowances and gratuities;

“secured” means secured against property or rights, or
otherwise covered by collateral arrangements.

(2)   In subsection (1)—

“assets” has the same meaning as in section 232(4) (ignoring
for these purposes section 232(5A)(b));

“collateral arrangements” includes arrangements which are
title transfer collateral arrangements for the purposes of
section 48.

(3)   For the purposes of section 48B(6)(h), a benefit under a pension
scheme is discretionary so far as the employee’s right to the
benefit was a result of the exercise of a discretion.

48E          Report on special bail-in provision

(1)   This section applies where the Bank of England makes a
resolution instrument containing special bail-in provision (see
section 48B(1)).

(2)   The Bank of England must report to the Chancellor of the
Exchequer stating the reasons why that provision has been made
in the case of the liabilities concerned.

(3)   If the provision departs from the insolvency treatment principles,
the report must state the reasons why it does so.

(4)   The insolvency treatment principles are that where an
instrument includes special bail-in provision—

(a)   the provision made by the instrument must be consistent
with treating all the liabilities of the bank in accordance
with the priority they would enjoy on a liquidation, and

(b)   any creditors who would have equal priority on a
liquidation are to bear losses on an equal footing with
each other.

(5)   A report must comply with any other requirements as to content
that may be specified by the Treasury.

(6)   A report must be made as soon as reasonably practicable after the
making of the resolution instrument to which it relates.

(7)   The Chancellor of the Exchequer must lay a copy of each report
under subsection (2) before Parliament.

48F          Power to amend definition of “excluded liabilities”

(1)   The Treasury may by order amend section 48B(6) by—


The Treasury may by order amend section 48C or 48D.

(a)   adding to the list of excluded liabilities;

(b)   amending or omitting any paragraph of that subsection,
other than paragraphs (a) to (c).

(3)   The powers conferred by subsections (1) and (2) include power
to make consequential and transitional provision.

(4)   An order under this section—

(a)   must 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.

(5)   The Treasury must consult before laying a draft order under this
section before Parliament.

48G          Priority between creditors

(1)   The Treasury may, for the purpose of ensuring that the treatment
of liabilities in any instrument that contains special bail-in
provision is aligned to an appropriate degree with the treatment
of liabilities on an insolvency, by order specify matters or
principles to which the Bank of England is to be required to have
regard in making any such instrument.

(2)   An order may, for example, specify the insolvency treatment
principles (as defined in section 48E(4)) or alternative principles.

(3)   An order may specify the meaning of “insolvency” for one or
more purposes of the order.

(4)   An order may amend sections 44C(4) and 48E(4).

(5)   An order —

(a)   is 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.

48H          Business reorganisation plans

(1)   A resolution instrument may require a bail-in administrator, or
one or more directors of the bank, to—

(a)   draw up a business reorganisation plan with respect to
the bank, and

(b)   submit it to the Bank of England within the period
allowed by (or under) the instrument.

(2)   “Business reorganisation plan” means a plan that includes—

(a)   an assessment of the factors that caused Condition 1 in
section 7 to be met in the case of the bank,

(b)   a description of the measures to be adopted with a view
to restoring the viability of the bank, and

(c)   a timetable for the implementation of those measures.

(3)   Where a person has submitted a business reorganisation plan to
the Bank of England under subsection (1) (or has re-submitted a
plan under subsection (4)), the Bank of England—

(a)   must approve the plan if satisfied that the plan is
appropriately designed for meeting the objective
mentioned in subsection (2)(b);

(b)   must otherwise require the person to amend the plan in a
specified manner.

(4)   Where the Bank of England has required a person to amend a
business re-organisation plan, the person must re-submit the
amended plan within the period allowed by (or under) the
resolution instrument.

(5)   Before deciding what action to take under subsection (3) the Bank
of England must (for each submission or re-submission of a plan)
consult—

(a)   the PRA, and

(b)   the FCA.

(6)   A business reorganisation plan may include recommendations
by the person submitting the plan as to the exercise by the Bank
of England of any of its powers under this Part in relation to the
bank.

(7)   Where a resolution instrument contains provision under
subsection (1), the instrument may—

(a)   specify further matters (in addition to those mentioned in
subsection (2)) that must be dealt with in the business
reorganisation plan;

(b)   make provision about the timing of actions to be taken in
connection with the making and approval of the plan;

(c)   enable any provision that the Bank of England has power
under paragraph (a) or (b) to make in the instrument to be
made instead in an agreement between the Bank of
England and the bail-in administrator.

(8)   For the purposes of subsection (2)(b) the viability of a bank is to
be assessed by reference to whether the bank satisfies, and (if so)
for how long it may be expected to continue to satisfy, the
threshold conditions (as define in section 55B of the Financial
Services and Markets Act 2000).

48I          Bail-in administrator: further functions

(1)   A resolution instrument may—

(a)   authorise a bail-in administrator to manage the bank’s
business (or confer on a bail-in administrator any other
power with respect to the management of the bank’s
business);

(b)   authorise a bail-in administrator to exercise any other
powers of the bank;

(c)   confer on a bail-in administrator any other power the
Bank of England may consider appropriate;

(d)   provide that the exercise of any power conferred by the
instrument in accordance with this section is to be subject
to conditions specified in the instrument.

(2)   A resolution instrument may require a bail-in administrator to
make reports to the Bank of England—

(a)   on any matter specified in the instrument, and

(b)   at the times or intervals specified in the instrument.

(3)   If a resolution instrument specifies a matter in accordance with
subsection (2)(a), it may provide for further requirements as to
the contents of the report on that matter to be specified in an
agreement between the Bank of England and the bail-in
administrator.

(4)   A resolution instrument may—

(a)   require a bail-in administrator to consult specified
persons before exercising specified functions (and may
specify particular matters on which the specified person
must be consulted);

(b)   provide that a bail-in administrator is not to exercise
specified functions without the consent of a specified
person.

48J          Bail-in administrator: supplementary

(1)   A bail-in administrator may do anything necessary or desirable
for the purposes of or in connection with the performance of the
functions of the office.

(2)   A bail-in administrator is not a servant or agent of the Crown
(and, in particular, is not a civil servant).

(3)   Where a bail-in administrator is appointed under this Part, the
Bank of England—

(a)   must make provision in a resolution instrument for
resignation and replacement of the bail-in administrator;

(b)   may remove the bail-in administrator from office only (i)
on the ground of incapacity or misconduct, or (ii) on the
ground that there is no further need for a person to
perform the functions conferred on the bail-in
administrator.

48K          Bail-in administrator: money

(1)   A resolution instrument may provide for the payment of
remuneration and allowances to a bail-in administrator.

(2)   Provision made under subsection (1) may provide that the
amounts are—

(a)   to be paid by the Bank of England, or

(b)   to be determined by the Bank of England and paid by the
bank.

(3)   A bail-in administrator is not liable for damages in respect of
anything done in good faith for the purposes of or in connection
with the functions of the office (subject to section 8 of the Human
Rights Act 1998).

48L          Powers in relation to securities

(1)   A resolution instrument may—

(a)   cancel or modify any securities to which this subsection
applies;

(b)   convert any such securities from one form or class into
another.

(2)   Subsection (1) applies to securities issued by the bank that fall
within Class 1 in section 14.

(3)   A resolution instrument may—

(a)   make provision with respect to rights attaching to
securities issued by the bank;

(b)   provide for the listing of securities issued by the bank to
be discontinued.

(4)   The reference in subsection (1)(b) to converting securities from
one form or class into another includes creating a new security in
connection with the modification of an existing security.

(5)   The provision that may be made under subsection (3)(a)
includes, for example—

(a)   provision that specified rights attaching to securities are
to be treated as having been exercised;

(b)   provision that the Bank of England, or a bail-in
administrator, is to be treated as authorised to exercise
specified rights attaching to securities;

(c)   provision that specified rights attaching to securities may
not be exercised for a period specified in the instrument.

(6)   In subsection (3)(b) the reference to “listing” is to listing under
section 74 of the Financial Services and Markets Act 2000.

(7)   The provision that may be made under this section in relation to
any securities is in addition to any provision that the Bank of
England may have power to make in relation to them under
section 48B.

48M          Termination rights, etc

(1)   In this section “default event provision” has the same meaning as
in section 22.

(2)   A resolution instrument may provide for subsection (3) or (4) to
apply (but need not apply either).

(3)   If this subsection applies, the resolution instrument is to be
disregarded in determining whether a default event provision
applies.

(4)   If this subsection applies, the resolution instrument is to be
disregarded in determining whether a default event provision
applies except so far as the instrument provides otherwise.

(5)   In subsections (3) and (4) a reference to the resolution instrument
is a reference to—

(a)   the making of the instrument,

(b)   anything that is done by the instrument or is to be, or may
be, done under or by virtue of the instrument, and

(c)   any action or decision taken or made under this or
another enactment in so far as it resulted in, or was
connected to, the making of the instrument.

(6)   Provision under subsection (2) may apply subsection (3) or (4)—

(a)   generally or only for specified purposes, cases or
circumstances, or

(b)   differently for different purposes, cases or circumstances.

(7)   A thing is not done by virtue of a resolution instrument for the
purposes of subsection (5)(b) merely by virtue of being done
under a contract or other agreement rights or obligations under
which have been affected by the instrument.

48N          Directors

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

(a)   to 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)   Subsection (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.

48O          Directions in or under resolution instrument

(1)   A resolution instrument may—

(a)   require one or more directors of the bank to comply with
any general or specific directions that may be set out in
the instrument;

(b)   enable the Bank of England to give written directions
(whether general or specific) to one or more directors of
the bank.

(2)   A director—

(a)   is not to be regarded as failing to comply with any duty
owed to any person (for example, a shareholder, creditor
or employee of the bank) by virtue of any action or
inaction in compliance with a direction given under
subsection (1)(a) or (b);

(b)   is to be immune from liability in damages in respect of
action or inaction in accordance with a direction.

(3)   A director must comply with a direction within the period of
time specified in the direction, or if no period of time is specified,
as soon as reasonably practicable.

(4)   A direction under subsection (1)(a) or (b) is enforceable on an
application made by the Bank of England, by injunction or, in
Scotland, by an order for specific performance under section 45
of the Court of Session Act 1988.

48P          Orders for safeguarding certain financial arrangements

(1)   In this section “protected arrangements” means security
interests, title transfer collateral arrangements, set-off
arrangements and netting arrangements.

(2)   In subsection (1)—

“netting arrangements” means arrangements under which a
number of claims or obligations can be converted into a
net claim or obligation, and includes, in particular, “close-
out” netting arrangements, under which actual or
theoretical debts are calculated during the course of a
contract for the purpose of enabling them to be set off
against each other or to be converted into a net debt;

“security interests” means arrangements under which one
person acquires, by way of security, an actual or
contingent interest in the property of another;

“set-off arrangements” means arrangements under which
two or more debts, claims or obligations can be set off
against each other;

“title transfer collateral arrangements” means arrangements
under which Person 1 transfers assets to Person 2 on
terms providing for Person 2 to transfer assets if specified
obligations are discharged.

(3)   The Treasury may by order—

(a)   restrict the exercise of any power within the scope of this
paragraph in cases that involve, or where the exercise of
the power might affect, protected arrangements;

(b)   impose conditions on the exercise of any power within
the scope of this paragraph in cases that involve, or where
the exercise of the power might affect, protected
arrangements;

(c)   require any instrument that makes special bail-in
provision to include specified provision, or provision to a
specified effect, in respect of or for purposes connected
with protected arrangements;

(d)   provide for an instrument to be void or voidable, or for
other consequences to arise, if or in so far as the
instrument is made or purported to be made in
contravention of a provision of the order (or of another
order under this section);

(e)   specify principles to which the Bank of England is to be
required to have regard in exercising specified powers—

(i)   that involve protected arrangements, or

(ii)   where the exercise of the powers might affect
protected arrangements.

(4)   References to exercising a power within the scope of paragraph
(a) or (b) of subsection (3) are to making an instrument containing
provision made in reliance on section 12A(3)(a) or 44B (special
bail-in provision).

(5)   An order may apply to protected arrangements generally or only
to arrangements—

(a)   of a specified kind, or

(b)   made or applying in specified circumstances.

(6)   An order may include provision for determining which
arrangements are to be, or not to be, treated as protected
arrangements; in particular, an order may provide for
arrangements to be classified not according to their description
by the parties but according to one or more indications of how
they are treated, or are intended to be treated, in commercial
practice.

(7)   In this section “arrangements” includes arrangements which—

(a)   are formed wholly or partly by one or more contracts or
trusts;

(b)   arise under or are wholly or partly governed by the law
of a country or territory outside the United Kingdom;

(c)   wholly or partly arise automatically as a matter of law;

(d)   involve any number of parties;

(e)   operate partly by reference to other arrangements
between parties.

(8)   An order—

(a)   is 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.

48Q          Continuity

(1)   A resolution instrument may provide for anything (including
legal proceedings) that relates to anything affected by the
instrument and is in the process of being done immediately
before the instrument takes effect to be continued from the time
the instrument takes effect.

(2)   A resolution instrument may modify references (express or
implied) in an instrument or document.

(3)   A resolution instrument may require or permit any person to
provide information and assistance to the Bank of England or
another person, for the purposes of or in connection with
provision made or to be made in that or another resolution
instrument.

48R          Execution and registration of instruments etc

(1)   A resolution instrument (other than an instrument that provides
for securities to be transferred) may permit or require the
execution, issue or delivery of an instrument.

(2)   A resolution instrument may provide for any provision in the
instrument to have effect irrespective of—

(a)   whether an instrument has been produced, delivered,
transferred or otherwise dealt with;

(b)   registration.

(3)   A resolution instrument may provide for the effect of an
instrument executed, issued or delivered in accordance with the
resolution instrument.

(4)   A resolution instrument may—

(a)   entitle a person to be registered in respect of a security;

(b)   require a person to effect registration.

48S          Resolution instruments: general matters

(1)   Provision made in a resolution instrument takes effect despite
any restriction arising by virtue of contract or legislation or in
any other way.

(2)   A resolution instrument may include incidental, consequential
or transitional provision.

(3)   In relying on subsection (2) a resolution instrument—

(a)   may make provision generally or only for specified
purposes, cases or circumstances, and

(b)   may make different provision for different purposes,
cases or circumstances.

48T          Procedure

(1)   As soon as is reasonably practicable after making a resolution
instrument in respect of a bank the Bank of England must send a
copy to—

(a)   the bank,

(b)   the Treasury,

(c)   the PRA,

(d)   the FCA, and

(e)   any other person specified in the code of practice under
section 5.

(2)   As soon as is reasonably practicable after making a resolution
instrument the Bank of England must publish a copy—

(a)   on the Bank’s internet website, and

(b)   in two newspapers, chosen by the Bank of England to
maximise the likelihood of the instrument coming to the
attention of persons likely to be affected.

(3)   Where the Treasury receive a copy of a resolution instrument
under subsection (1) they must lay a copy before Parliament.

48U          Supplemental resolution instruments

(1)   This section applies where the Bank of England has made a
resolution instrument (“the original instrument”) with respect to
a bank.

(2)   The Bank of England may make, with respect to the bank, one or
more resolution instruments designated by the Bank of England
as supplemental resolution instruments.

(3)   Sections 7 and 8A do not apply to a supplemental resolution
instrument (but it is to be treated in the same way as a resolution
instrument for all other purposes, including for the purposes of
the application of a power under this Part).

(4)   Before making a supplemental resolution instrument the Bank of
England must consult—

(a)   the PRA,

(b)   the FCA, and

(c)   the Treasury.

(5)   The possibility of making a supplemental resolution instrument
in reliance on subsection (2) is without prejudice to the possibility
of making a new instrument in accordance with section 12A(2)
(and not in reliance on subsection (2) above).

48V           Onward transfer

(1)   This section applies where the Bank of England has made a
resolution instrument (“the original instrument”) providing for
securities issued by a specified bank to be transferred to any
person.

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

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

(a)   provides for the transfer of—

(i)   securities which were issued by the bank before
the original instrument and have been transferred
by the original instrument or a supplemental
resolution instrument, or

(ii)   securities which were issued by the bank after the
original instrument;

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

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

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

(6)   Before making an onward transfer resolution instrument the
Bank of England must consult—

(a)   the PRA,

(b)   the FCA, and

(c)   the Treasury.

(7)   Section 48U applies where the Bank of England has made an
onward transfer resolution instrument.

48W          Reverse transfer

(1)   This section applies where the Bank of England has made an
instrument (“the original instrument”) that is either—

(a)   a resolution instrument providing for the transfer of
securities issued by a bank to a person (“the transferee”),
or

(b)   an onward transfer resolution instrument (see section
48V) providing for the transfer of securities issued by a
bank to a person (“the onward transferee”).

(2)   In a case falling within subsection (1)(a) the Bank of England may
make one or more reverse transfer resolution instruments in
respect of securities issued by the bank and held by the transferee
(whether or not they were transferred by the original
instrument).

(3)   In a case falling within subsection (1)(b), the Bank of England
may make one or more reverse transfer resolution instruments in
respect of securities issued by the bank and held by the onward
transferee.

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

(a)   provides for transfer to the transferor under the original
instrument;

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

(5)   Except where subsection (6) applies, the Bank of England may
make a reverse transfer resolution instrument under subsection
(2) only with the written consent of the transferee.

(6)   This subsection applies where the transferee is—

(a)   a bail-in administrator, or

(b)   a person who is not to be authorised to exercise any rights
attaching to the securities except on the Bank of
England’s instructions.

(7)   The Bank of England may make a reverse transfer resolution
instrument under subsection (3) only with the written consent of
the onward transferee.

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

(9)   Before making a reverse transfer resolution instrument the Bank
of England must consult—

(a)   the PRA,

(b)   the FCA, and

(c)   the Treasury.

(10)   Section 48U applies where the Bank of England has made a
reverse transfer resolution instrument.”

Transfers of property

5    (1)   After section 41 insert—

“41A          Transfer of property subsequent to resolution instrument

(1)   This section applies where the Bank of England has made a
resolution instrument.

(2)   The Bank of England may make one or more property transfer
instruments in respect of property, rights or liabilities of the
bank.

(3)   Sections 7 and 8A do not apply to a property transfer instrument
under subsection (2).

(4)   Before making a property transfer instrument under subsection
(2) the Bank of England must consult—

(a)   the PRA,

(b)   the FCA, and

(c)   the Treasury.”

(2)   In section 42 (supplemental property transfer instruments)—

(a)   in subsection (1) for “12(2)” substitute “12(2) or 41A(2)”;

(b)   in subsection (4) for “and 8” substitute “, 8 and 8A”;

(c)   in subsection (6) for “or 12(2)” substitute “, 12(2) or 41A(2)”.

(3)   After section 44 insert—

“44A          Bail in: reverse property transfer

(1)   This section applies where the Bank of England has made a
property transfer instrument in accordance with section 41A(2)
(“the original instrument”).

(2)   The Bank of England may make one or more bail-in reverse
property transfer instruments in respect of property, rights or
liabilities of the transferee under the original instrument.

(3)   A bail-in reverse property transfer instrument is a property
transfer instrument which—

(a)   provides for a transfer to the transferor under the original
instrument;

(b)   makes other provision for the purposes of, or in
connection with, the transfer of property, rights or
liabilities which are, or could be or could have been,
transferred under paragraph (a) (whether the transfer has
been or is to be effected by that instrument or otherwise).

(4)   The Bank of England may make a bail-in reverse property
transfer instrument only with the written consent of the
transferee under the original instrument.

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

(6)   Before making a bail-in reverse property transfer instrument the
Bank of England must consult—

(a)   the PRA,

(b)   the FCA, and

(c)   the Treasury.

(7)   Section 42 (supplemental instruments) applies where the Bank of
England has made a bail-in reverse property transfer instrument.

44B          Property transfer instruments: special bail-in provision

(1)   A property transfer instrument under section 12(2) or 41A(2)
may make special bail-in provision with respect to the bank (see
section 48B).

(2)   In the case of a property transfer instrument under section 12(2),
the power under subsection (1) to make the provision described
in section in section 48B(1)(b) (see also rule 3(a) and (b) of section
48B(3)) includes power to make provision replacing a liability (of
any form) of the bank mentioned in subsection (1) with a security
(of any form or class) of the bridge bank mentioned in section
12(1).

(3)   Where securities of the bridge bank (“B”) are, as a result of
subsection (2), held by a person other than the Bank of England,
that does not prevent B from being regarded for the purposes of
this Part (see particularly section 12(1)) as being wholly owned
by the Bank of England, as long as the Bank of England continues
to hold all the ordinary shares issued by B.

44C          Report on special bail-in provision

(1)   This section applies where the Bank of England makes a property
transfer instrument containing provision made in reliance on
section 44B.

(2)   The Bank of England must report to the Chancellor of the
Exchequer stating the reasons why that provision was made in
the case of the liabilities concerned.

(3)   If the provision departs from the insolvency treatment principles,
the report must state the reasons why it does so.

(4)   The insolvency treatment principles are that where an
instrument includes special bail-in provision—

(a)   the provision made by the instrument must be consistent
with treating all the liabilities of the bank in accordance
with the priority they would enjoy on a liquidation, and

(b)   any creditors who would have equal priority on a
liquidation are to bear losses on an equal footing with
each other.

(5)   A report must comply with any other requirements as to content
that may be specified by the Treasury.

(6)   A report must be made as soon as reasonably practicable after the
making of the property transfer instrument to which it relates.

(7)   The Chancellor of the Exchequer must lay a copy of each report
under subsection (2) before Parliament.”

(4)   In section 48A (creation of liabilities), in subsection (1), after “44(4)(c)”
insert “, 44A(3)(b)”.

Compensation

6    (1)   In section 49 (orders)—

(a)   in subsection (1), for “three” substitute “four” and for “and
property transfer instruments” substitute “, property transfer
instruments and orders and resolution instruments”;

(b)   after subsection (2) insert—

“(2A)    A “bail-in compensation order” is an order establishing a
scheme for determining, in accordance with section 52A,
whether any transferors or others should be paid
compensation.”

(2)   After section 52 insert—

“52A          Bail-in option

(1)   Subsection (2) applies if the Bank of England makes—

(a)   a resolution instrument under section 12A(2),

(b)   a property transfer instrument under section 41A(2), or

(c)   a supplemental resolution instrument under section
48U(2).

(2)   The Treasury must make a bail-in compensation order (see
section 49(2A)).

(3)   A bail-in compensation order may include provision for—

(a)   an independent valuer (in which case sections 54 to 56 are
to apply);

(b)   valuation principles (in which case section 57(2) to (5) is
to apply).”

(3)   In section 53 (onward and reverse transfers), in subsection (1)—

(a)   after paragraph (f) insert—

“(fa)   the Bank of England makes a reverse property
transfer instrument under section 44A(2),

(fb)   the Bank of England makes a supplemental
property transfer instrument by virtue of section
44A(7),”;

(b)   omit the “or” after paragraph (g);

(c)   after paragraph (h) insert—

“(i)   the Bank of England makes an onward transfer
resolution instrument under section 48V(2),

(j)   the Bank of England makes a reverse transfer
resolution instrument under section 48W(2) or (3),
or

(k)   the Bank of England makes a supplemental
resolution instrument by virtue of section 48V(7)
or 48W(10).”

(4)   In section 54 (independent valuer)—

(a)   in subsection (1), after “compensation scheme order” insert “or
bail-in compensation order”;

(b)   in subsection (4)(b), after “order” insert “or bail-in compensation
order”.

(5)   In section 56 (independent valuer: money), in subsection (2)(b) for “or
third party compensation order” substitute “, third party compensation
order or bail-in compensation order”.

(6)   In section 57 (valuation principles), in subsection (1), after “order” insert
“or bail-in compensation order”.

(7)   After section 60 insert—

“60A          Further mandatory provision: bail-in provision

(1)   The Treasury may make regulations about compensation
arrangements in the case of—

(a)   resolution instruments under section 12A(2) and
supplemental resolution instruments under section
48U(2), and

(b)   instruments (made under any provision) that include
special bail-in provision.

(2)   Regulations may—

(a)   require a compensation scheme order, a third party
compensation order or a bail-in compensation order to
include provision of a specified kind or to specified effect;

(b)   make provision that is to be treated as forming part of any
such order (whether (i) generally, (ii) only if applied, (iii)
unless disapplied, or (iv) subject to express modification).

(3)   Regulations may provide for whether compensation is to be
paid, and if so what amount is to be paid, to be determined by
reference to any factors or combination of factors; in particular,
the regulations may provide for entitlement—

(a)   to be contingent upon the occurrence or non-occurrence
of specified events;

(b)   to be determined wholly or partly by an independent
valuer (within the meaning of sections 54 to 56)
appointed in accordance with a compensation scheme
order or bail-in compensation order.

(4)   Regulations may make provision about payment including, in
particular, provision for payments—

(a)   on account subject to terms and conditions;

(b)   by instalment.

(5)   Regulations—

(a)   are 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.

60B          Principle of no less favourable treatment

(1)   In making regulations under section 60A the Treasury must, in
particular, have regard to the desirability of ensuring that pre-
resolution shareholders and creditors of a bank do not receive
less favourable treatment than they would have received had the
bank entered insolvency immediately before the coming into
effect of the initial instrument.

(2)   References in this section to the initial instrument are—

(a)   in relation to compensation arrangements in the case of
property transfer instruments under section 12(2), to the
first instrument to be made under that provision with
respect to the bank;

(b)   in relation to compensation arrangements in other cases,
to the first resolution instrument to be made under
section 12A with respect to the bank.

(3)   The “pre-resolution shareholders and creditors” of a bank are the
persons who held securities issued by the bank, or were creditors
of the bank, immediately before the coming into effect of the
initial instrument.

(4)   References in this section to insolvency include a reference to (i)
liquidation, (ii) bank insolvency, (iii) administration, (iv) bank
administration, (v) receivership, (vi) composition with creditors,
and (vii) a scheme of arrangement.”

(8)   In section 61(1) (sources of compensation),—

(a)   omit the “and” at the end of paragraph (c);

(b)   after paragraph (c) insert—

“(ca)   bail-in compensation orders,”;

(c)   after paragraph (d) insert, “, and

(e)   regulations under section 60A.”

(9)   In section 62(1) (procedure), omit the “and” at the end of paragraph (b),
and after that paragraph insert—

“(ba)   bail-in compensation orders, and”.

Groups

7    (1)   After section 81B insert—

“81BA            Bail-in option

(1)   The Bank of England may exercise a stabilisation power in
respect of a banking group company in accordance with section
12A(2) if the following 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 is that the 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 systems,

(c)   the protection of depositors, or

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

(4)   Condition 3 is that the banking group company is an
undertaking incorporated in, or formed under the law of any
part of, the United Kingdom.

(5)   Before determining whether Condition 2 is met, and if so how to
react, the Bank of England must consult—

(a)   the Treasury,

(b)   the PRA, and

(c)   the FCA.

(6)   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 exercise of the power on other undertakings in the
same group.”

(2)   After section 81C insert—

“81CA            Section 81BA: supplemental

(1)   This section applies where the Bank of England has power under
section 81BA to exercise a stabilisation power in respect of a
banking group company.

(2)   The provisions relating to the stabilisation powers and the bank
administration procedure contained in this Act (except sections 7
and 8A) and any other enactment apply (with any necessary
modifications) as if the banking group company were a bank.

(3)   Where the banking group company mentioned in subsection (1)
is a parent undertaking of the bank mentioned in section 81BA(2)
(“the bank”)—

(a)   the provisions in this Act relating to resolution
instruments are to be read in accordance with the general
rule in subsection (4), but

(b)   that is subject to the modifications in subsection (5);

and provisions in this Act and any other enactment are to be read
with any modifications that may be necessary as a result of
paragraphs (a) and (b).

(4)   The general rule is that the provisions in this Act relating to
resolution instruments (including supplemental resolution
instruments) are to be read (so far as the context permits)—

(a)   as applying in relation to the bank as they apply in
relation to the parent undertaking, and

(b)   so, in particular, as allowing any provision that may be
made in a resolution instrument in relation to the parent
undertaking to be made (also or instead) in relation to the
bank.

(5)   Where the banking group company mentioned in subsection (1)
is a parent undertaking of the bank mentioned in section 81BA(2)
(“the bank”)—

(a)   section 41A (transfer of property subsequent to resolution
instrument) applies as if the reference in subsection (2) to
the bank were to the parent undertaking, the bank and
any other bank which is or was in the same group;

(b)   section 48V (onward transfer)—

(i)   applies as if the references in subsection (3) to “the
bank” included the bank, the parent undertaking
and any other bank which is or was in the same
group, and with the omission of subsection (4) of
that section, and

(ii)   is to be read as permitting the transfer of securities
only if they are held by (or for the benefit of) the
parent undertaking or a subsidiary company of
the parent undertaking;

(c)   section 48W (reverse transfer) applies as if the references
in subsections (2) and (3) to “the bank” included the bank,
the parent undertaking and any other bank which is or
was in the same group.

(6)   Where section 48B (special bail-in provision) applies in
accordance with subsection (4) (so that section 48B applies in
relation to the bank mentioned in section 81BA(2) as it applies in
relation to the parent undertaking mentioned in subsection (3)),
the provision that may be made in accordance with section
48B(1)(b) (see also rule 3(a) and (b) of section 48B(3)) includes
provision replacing a liability (of any form) of that bank with a
security (of any form or class) of the parent undertaking.

(7)   Where the banking group company mentioned in subsection (1)
is a parent undertaking of the bank mentioned in section
81BA(2)—

(a)   section 214B of the Financial Services and Markets Act
2000 (contribution to costs of special resolution regime)
applies, and

(b)   the reference in subsection (1)(b) of that section to the
bank, and later references in that section, are treated as
including references to any other bank which is a
subsidiary undertaking of the parent undertaking (but
not the parent undertaking itself).”

(3)   In section 81D (interpretation: “banking group company” etc)—

(a)   in subsection (6), for “, 81C” substitute “to 81CA”;

(b)   in subsection (7) for “section 81B” substitute “sections 81B to
81CA”.

Banks regulated by the Financial Conduct Authority

8 In section 83A (modifications of Part 1 as it applies to banks not
regulated by the Prudential Regulation Authority), in the table in
subsection (2) insert the following entries at the appropriate places—

 
“Section 8A

Subsection (3)(a) does not
apply unless the bank has as a
member of its immediate group
a PRA-authorised person.”
 
“Section 41A

Subsection (4)(a) does not
apply unless the bank has as a
member of its immediate group
a PRA-authorised person.”
 
“Section 44A

Subsection (6)(a) does not
apply unless the bank has as a
member of its immediate group
a PRA-authorised person.”
 
“Section 48H

Subsection (5)(a) does not
apply unless the bank has as a
member of its immediate group
a PRA-authorised person.
 
Section 48U

Subsection (4)(a) does not
apply unless the bank has as a
member of its immediate group
a PRA-authorised person.
 
Section 48V

Subsection (6)(a) does not
apply unless the bank has as a
member of its immediate group
a PRA-authorised person.
 
Section 48W

Subsection (9)(a) does not
apply unless the bank has as a
member of its immediate group
a PRA-authorised person.”
 
“Section 81BA

Subsection (5)(b) does not
apply unless the bank has as a
member of its immediate group
a PRA-authorised person.”

RECOGNISED CENTRAL COUNTERPARTIES

9 In section 89B (application of Part 1 of the Act to recognised central
counterparties)—

(a)   in subsection (1), before paragraph (a) insert—

“(za)   subsection (1A),”;

(b)   after subsection (1) insert—

“(1A)    The provisions relating to the third stabilisation option
(bail-in) are to be disregarded in the application of this
Part to recognised central counterparties.”;

(c)   in subsection (2), in the substituted section 13(1), for “third”
substitute “fourth”.

Insolvency proceedings

10 In section 120 (notice to Prudential Regulation Authority of preliminary
steps to certain insolvency proceedings)—

(a)   in subsection (7)(b)(ii), after “Part 1” insert “(and Condition 5 has
been met, if applicable)”;

(b)   after subsection (8) insert—

“(8A)    Condition 5—

(a)   applies only if a resolution instrument has been
made under section 12A with respect to the bank
in the 3 months ending with the date on which the
PRA receives the notification under Condition 1,
and

(b)   is that the Bank of England has informed the
person who gave the notice that it consents to the
insolvency procedure to which the notice relates
going ahead.”

(c)   in subsection (10), omit the “and” at the end of paragraph (b), and
after paragraph (c) insert “, and

(d)   if Condition 5 applies, the Bank of England must,
within the period in Condition 3(a), inform the
person who gave the notice whether or not it
consents to the insolvency procedure to which the
notice relates going ahead.”;

(d)   After subsection (10) insert—

“(11)   References in this section to the insolvency procedure to
which the notice relates are to the procedure for the
determination, resolution or appointment in question
(see subsections (1) to (4)).”

State aid

11 After section 256 insert—

“State aid

256A           State aid

(1)   This section applies where—

(a)   the Treasury are of the opinion that anything done, or
proposed to be done, in connection with the exercise in
relation to an institution of one or more of the
stabilisation powers may constitute the granting of aid to
which any of the provisions of Article 107 or 108 of the
Treaty on the Functioning of the European Union applies
(“State aid”), and

(b)   section 145A (power to direct bank administrator) does
not apply.

(2)   The Treasury may, in writing, direct any bail-in administrator, or
any director of the institution, to take specified action to enable
the United Kingdom to pursue any of the purposes specified in
subsection (3) of section 145A (read with subsection (9) of that
section).

(3)   Before giving a direction under this section the Treasury must
consult the person to whom the direction is to be given.

(4)   The person must comply with the direction within the period of
time specified in the direction, or, if no period of time is specified,
as soon as is reasonably practicable.

(5)   A direction under this section is enforceable on an application
made by the Treasury, by injunction or, in Scotland, by an order
for specific performance under section 45 of the Court of Session
Act 1988.”

Other amendments of the Act

12    (1)   Section 1 (overview) is amended as follows.

(2)   In subsection (2)(a), for “three” substitute “four”.

(3)   For subsection (3) substitute—

“(3)   The four “stabilisation options” are—

(a)   transfer to a private sector purchaser (section 11),

(b)   transfer to a bridge bank (section 12),

(c)   the bail-in option (section 12A), and

(d)   transfer to temporary public ownership (section 13).”

(4)   In subsection (4)—

(a)   for “three” substitute “four”;

(b)   before paragraph (a) insert—

“(za)   the resolution instrument powers (sections 12A(2)
and 48U to 48W),”;

(c)   in paragraph (b), after “33” insert “, 41A”.

13 In section 13 (temporary public ownership), in subsection (1), for “third”
substitute “fourth”.

14 In section 17 (share transfers: effect)—

(a)   in subsection (1), after “order” insert, “or by a resolution
instrument”;

(b)   in subsection (5), after “order” insert “or a resolution
instrument”;

(c)   in subsection (6), after “order” insert “or a resolution
instrument”.

15 In section 18 (share transfers: continuity), after subsection (5) insert—

“(6)   This section applies to a resolution instrument that provides for
a transfer of securities as it applies to a share transfer instrument
(and references to transfers, transferors and transferees are to be
read accordingly).”

16 In section 21 (ancillary instruments: production, registration etc), after
subsection (5) insert—

“(6)   This section applies to a resolution instrument that provides for
a transfer of securities as it applies to a share transfer
instrument.”

17 In section 44 (reverse property transfer)—

(a)   in subsection (2), after “more” insert “bridge bank”;

(b)   in subsection (3), after “more” insert “bridge bank”;

(c)   in subsection (4), for “A reverse” substitute “A bridge bank
reverse”;

(d)   in subsection (4A)—

(i)   after “make a” insert “bridge bank”, and

(ii)   in paragraph (b), for “the reverse” substitute “the bridge
bank reverse”;

(e)   in subsection (5), for “a reverse” substitute “a bridge bank
reverse”;

(f)   in subsection (6), for “a reverse” substitute “a bridge bank
reverse”;

(g)   in subsection (7), for “a reverse” substitute “a bridge bank
reverse”;

(h)   in the heading, for “Reverse” substitute “Bridge bank: reverse”.

18 In section 63 (general continuity obligation: property transfers), in
subsection (1)(a), for “or 12(2)” substitute “, 12(2) or 41A(2)”.

19 In section 66 (general continuity obligation: share transfers)—

(a)   in subsection (1)(a), after “13(2)” insert “, or which falls within
subsection (1A)”;

(b)   in subsection (1)(d)(i), after “11(2)(a)” insert “, or in a case falling
within subsection (1A)”;

(c)   after subsection (1) insert—

“(1A)    A bank falls within this subsection if a resolution
instrument (or supplemental resolution instrument) has
changed the ownership of the bank (wholly or partly) by
providing for the transfer, cancellation or conversion
from one form or class to another of securities issued by
the bank (and the reference in subsection (1)(b) to “the
transfer” includes such a cancellation or conversion).”

20 In section 67 (special continuity obligation: share transfers), in
subsection (4)(c), after “order” insert “or resolution instrument”.

21 In section 68 (continuity obligations: onward share transfers), in
subsection (1)(a), after “transferred by” insert “a resolution instrument
under section 12A(2) or supplemental resolution instrument under
section 48U(2) or a”.

22 In section 71 (pensions), in subsection (1)—

(a)   omit the “and” at the end of paragraph (b);

(b)   after paragraph (c) insert “, and

(d)   resolution instruments.”

23 In section 72 (enforcement), in subsection (1)—

(a)   omit the “or” at the end of paragraph (b);

(b)   after paragraph (c) insert “, or

(d)   a resolution instrument.”

24 In section 73 (disputes), in subsection (1)—

(a)   omit the “and” at the end of paragraph (b);

(b)   after paragraph (c) insert “, and

(d)   resolution instruments.”

25 In section 74 (tax), in subsection (6), for “or 45” substitute “, 45, 48U or
48V”.

26 After section 80 insert—

“80A          Transfer for bail-in purposes: report

(1)   This section applies where the Bank of England makes one or
more resolution instruments under section 12A(2) in respect of a
bank.

(2)   The Bank of England must, on request by the Treasury, report to
the Chancellor of the Exchequer about—

(a)   the exercise of the power to make a resolution instrument
under section 12A(2),

(b)   the activities of the bank, and

(c)   any other matters in relation to the bank that the Treasury
may specify.

(3)   In relation to the matters in subsection (2)(a) and (b), the report
must comply with any requirements that the Treasury may
specify.

(4)   The Chancellor of the Exchequer must lay a copy of each report
under subsection (2) before Parliament.”

27 In section 81A (accounting information to be included in reports under
sections 80 and 81)—

(a)   in subsection (1), for “or 81” substitute “, 80A(2)(b) or 81”;

(b)   in the heading, for “and 81” substitute “, 80A(2)(b) and 81”.

28 In section 85 (temporary public ownership), in subsection (1), for “third”
substitute “fourth”.

29 In section 136 (overview), in the Table in subsection (3), for “152”
substitute “152A”.

30 After section 152 insert—

“152A            Property transfer from transferred institution

(1)   This section applies where the Bank of England—

(a)   makes a resolution instrument that transfers securities
issued by a bank (or a bank’s parent undertaking), in
accordance with section 12A(2), and

(b)   later makes a property transfer instrument from the bank
or from another bank which is or was in the same group
as the bank, in accordance with section 41A(2).

(2)   This Part applies to the transferor under the property transfer
instrument made in accordance with section 41A(2) as to the
transferor under a property transfer instrument made in
accordance with section 12(2).

(3)   For that purpose this Part applies with any modifications
specified by the Treasury in regulations; and any regulations—

(a)   are 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.”

31 In section 220 (insolvency etc), after subsection (4) insert—

“(4A)    The fact that ownership of an authorised bank is transferred or
otherwise changed as a result of a resolution instrument (or an
instrument treated as a resolution instrument) does not itself
prevent the bank from relying on section 213.”

32 In section 259 (statutory instruments)—

(a)   in the Table in subsection (3), in Part 1, in the entry relating to
section 60 for “Third party compensation” substitute “Third
party compensation: partial property transfers”;

(b)   in the Table in subsection (3), in Part 1, at the appropriate places
insert—

 
“48F(1)
and (2)

Power to amend
definition of
“excluded liabilities”

Draft
affirmative
resolution
 
48G

Insolvency treatment
principles

Draft
affirmative
resolution
 
48P

Safeguarding of
certain financial
arrangements

Draft
affirmative
resolution
 
52A

Bail-in compensation
orders

Draft
affirmative
resolution”
 
“60A

Third party
compensation:
instruments
containing special
bail-in provision

Draft
affirmative
resolution”;

(c)   in the Table in subsection (3), in Part 3, at the appropriate place
insert—

 
“152A

Property transfer
from transferred
institution

Draft
affirmative
resolution”;

(d)   in subsection (5), after paragraph (d) insert—

“(da)   section 60A (special resolution regime:
instruments containing special bail-in
provision),”;

(e)   in subsection (5), after paragraph (k) insert—

“(ka)   section 152A (bank administration: property
transfer from transferred institution),”.

33 In section 261 (index of defined terms), in the Table, at the appropriate
places insert—

 
“Bail-in
compensation
order

49”
 
“Resolution
instrument

12A”
 
“Special bail-
in provision

48B”.

PART 2

MODIFICATION OF INVESTMENT BANK SPECIAL ADMINISTRATION REGULATIONS 2011

34    (1)   This section modifies the application of the Investment Bank Special
Administration Regulations 2011 (S.I. 2011/245) (“the regulations”) in
cases where a resolution instrument has been made under section 12A of
the Banking Act 2009 with respect to the investment bank in the relevant
3-month period.

(2)   In subsection (1) “the relevant 3-month period” means the 3 months
ending with the date on which the FCA receives the notification under
Condition 1 in regulation 8 of the regulations.

(3)   In their application to those cases, the regulations have effect with the
modifications in sub-paragraph (4); and any enactment that refers to the
regulations is to be read accordingly.

(4)   In regulation 8 (in its application to those cases)—

(a)   in paragraph (5)(c)(ii), for “appropriate regulator” substitute
“Bank of England” and after “notice” insert “and the appropriate
regulator”;

(b)   in paragraph (6), omit sub-paragraph (a) (but continue to read
“that” in sub-paragraph (b) as a reference to the insolvency
procedure to which the notice relates);

(c)   after paragraph (6) insert—

“(6A)    Where the FCA receives notice under Condition 1, it must
also inform the Bank of England of the contents of the
notice.

(6B)   Where the Bank of England receives notice under
subsection (6A), it must, within the period in Condition 3,
inform the person who gave the notice and the
appropriate regulator whether or not it consents to the
insolvency procedure to which the notice relates going
ahead.””

106

Insert the following new Schedule—

“SCHEDULE

CONSEQUENTIAL AMENDMENTS RELATING TO PART 4

Financial Services and Markets Act 2000

1    (1)   Section 59 of FSMA 2000 (approval for particular arrangements) is
amended as follows.

(2)   In subsection (1), for the words from “the appropriate regulator” to the
end substitute “that person is acting in accordance with an approval
given by the appropriate regulator under this section.”

(3)   In subsection (2), for the words from “the appropriate regulator” to the
end substitute “that person is acting in accordance with an approval
given by the appropriate regulator under this section.”

2    (1)   Section 59A of FSMA 2000 (specifying functions as controlled functions:
supplementary) is amended as follows.

(2)   In subsection (1)(a) and (b), for “significant-influence” substitute “senior
management”.

(3)   After subsection (3) insert—

“(3A)    “Senior management function” has the meaning given by section
59ZA.””

3    (1)   Section 63 of FSMA 2000 (withdrawal of approval) is amended as
follows.

(2)   In subsection (1A)(a), for “significant-influence function” substitute
“relevant senior management function”.

(3)   For subsection (1B) substitute—

“(1B)    In subsection (1A) “relevant senior management function”
means a function which the PRA is satisfied is a senior
management function as defined in section 59ZA (whether or not
the function has been designated as such by the FCA).”

4 In section 63A of FSMA 2000 (power to impose penalties), in subsection
(2), for paragraph (b) substitute—

“(b)   P, when performing the function, is not acting in
accordance with an approval given under section 59.”

5    (1)   Section 66 of FSMA 2000 (disciplinary powers) is amended as follows.

(2)   In subsection (3), for paragraph (ab) (and the “or” following it)
substitute—

“(ab)   impose, for such period as it considers appropriate, any
conditions in relation to any such approval which it
considers appropriate;

(ac)   limit the period for which any such approval is to have
effect;”.

(3)   In subsection (3A), for “restriction” substitute “condition”.

(4)   In subsection (3B), for “or restriction” substitute “, condition or
limitation”.

(5)   In subsection (3C), for “restriction” substitute “condition”.

(6)   In subsection (3D)—

(a)   in paragraph (a), for “or restriction” substitute “, condition or
limitation”,

(b)   omit the “or” at the end of paragraph (a),

(c)   in paragraph (b), for “restriction” substitute “condition”, and

(d)   after that paragraph insert—

“(c)   vary a limitation so as to increase the period for
which the approval is to have effect.”

(7)   In subsection (9), for “restriction” substitute “condition”.

6    (1)   Section 67 of FSMA 2000 (disciplinary measures: procedure and right to
refer to Tribunal) is amended as follows.

(2)   In subsection (1), for “or (ab)” substitute “, (ab) or (ac)”.

(3)   In subsection (2A), for “restriction” (in both places) substitute
“condition”.

(4)   After subsection (2A) insert—

“(2B)    A warning notice about a proposal to limit the period for which
an approval is to have effect must state the length of that period.”

(5)   In subsection (4), for “or (ab)” substitute “, (ab) or (ac)”.

(6)   In subsection (5A), for “restriction” (in both places) substitute
“condition”.

(7)   After subsection (5A) insert—

“(5B)    A decision notice about limiting the period for which an
approval is to have effect must state the length of that period.”

(8)   In subsection (7), for “or (ab)” substitute “, (ab) or (ac)”.

7 In section 69 of FSMA 2000 (statement of policy), in subsection (1)—

(a)   in paragraph (a), for “or restrictions” substitute “, conditions or
limitations”;

(b)   omit the “and” at the end of paragraph (b);

(c)   in paragraph (c), for “restrictions” substitute “conditions”;

(d)   at the end of paragraph (c) insert “; and

(d)   the period for which approvals under section 59
are to have effect as a result of a limitation under
section 66.”

8 In section 138A of FSMA 2000 (modification or waiver of rules), in
subsection (2), before paragraph (a) insert—

“(za)   rules made by either regulator under section 64A (rules of
conduct);”.

9 In section 138D of FSMA 2000 (actions for damages), in subsection (5),
before paragraph (a) insert—

“(za)   rules under section 64A (rules of conduct);”.

10 In section 140A of FSMA 2000 (interpretation), in the definition of
“regulating provisions”—

(a)   in paragraph (a)—

(i)   omit sub-paragraph (iii), and

(ii)   in sub-paragraph (iv), omit “64 or”;

(b)   in paragraph (b), omit sub-paragraphs (ii) and (iii).

11 In section 347 of FSMA 2000 (the record of authorised persons etc.), for
subsection (9) substitute—

“(9)   “Relevant authorised person”, in relation to an approved person,
means the person on whose application approval was given.”

12 In section 387 of FSMA 2000 (warning notices), in subsection (1A), for “or
55I(8)” substitute “, 55I(8) or 61(2D)”.

13 In section 388 of FSMA 2000 (decision notices), in subsection (1A), for “or
55I(8)” substitute “, 55I(8) or 61(2D)”.

14 In section 395 of FSMA 2000 (supervisory notices), in subsection (13),
after paragraph (a) insert—

“(aa)   63ZC(4), (8) or (9)(b);”.

15    (1)   Section 415B of FSMA 2000 (consultation in relation to taking certain
enforcement action) is amended as follows.

(2)   In subsection (4)—

(a)   in paragraph (b), for “significant-influence” substitute “relevant
senior management”, and

(b)   omit the definitions appearing after that paragraph.

(3)   After subsection (4) insert—

“(5)   In subsection (4)—

“arrangement” has the same meaning as in section 59;

“relevant senior management function” means a function
which the FCA is satisfied is a senior management
function as defined in section 59ZA (whether or not it has
been designated as such under section 59(6B) or (6C)).”

16 In Schedule 1ZA to FSMA 2000 (the Financial Conduct Authority), in
paragraph 8(3)—

(a)   in paragraph (b), omit “64 or”;

(b)   in paragraph (c)(i)—

(i)   after “section” insert “63ZD,”, and

(ii)   omit “64,”.

17 In Schedule 1ZB to FSMA 2000 (the Prudential Regulation Authority), in
paragraph 16(3)—

(a)   omit paragraph (b);

(b)   in paragraph (c)(i)—

(i)    after “section” insert “63ZD,”, and

(ii)   omit “64,”.

Financial Services Act 2012

18 In section 14 of the Financial Services Act 2012, omit subsection (4).

19    (1)   Section 85 of the Financial Services Act 2012 (relevant functions in
relation to complaints scheme) is amended as follows.

(2)   In subsection (4)—

(a)   in paragraph (b), omit “64 or”;

(b)   in paragraph (c)(i)—

(i)   after “section” insert “63ZD,”, and

(ii)   omit “64,”.

(3)   In subsection (5)—

(a)   omit paragraph (b);

(b)   in paragraph (c)(i)—

(i)   after “section” insert “63ZD,”, and

(ii)   omit “64,”.”

106A

Insert the following new Schedule—

“SCHEDULE

THE PAYMENT SYSTEMS REGULATOR

Introductory

1 In this Schedule—

(a)   “the Regulator” means the Payment Systems Regulator;

(b)   references to the functions of the Regulator are to functions
conferred on it by or under this Part.

Constitution

2    (1)   The constitution of the Regulator must provide for it to have a board
whose members are the directors of the Regulator.

(2)   The board is to consist of the following members—

(a)   a member to chair it, appointed by the FCA with the approval of
the Treasury;

(b)   a member to be the Managing Director, appointed by the FCA
with the approval of the Treasury;

(c)   one or more other members appointed by the FCA.

(3)   The persons who may be appointed under sub-paragraph (2) include
persons who are members of the FCA’s governing body.

(4)   A person may be appointed under sub-paragraph (2) only if the person
has knowledge or experience which is likely to be relevant to the exercise
by the Regulator of its functions.

(5)   A person appointed under sub-paragraph (2)(a) or (b) is liable to
removal from office by the FCA (acting with the approval of the
Treasury).

(6)   A person appointed under sub-paragraph (2)(c) is liable to removal from
office by the FCA.

Status

3    (1)   The Regulator is not to be regarded as exercising functions on behalf of
the Crown.

(2)   The officers and staff of the Regulator are not to be regarded as Crown
servants.

Budget

4    (1)   The Regulator must adopt an annual budget which has been approved
by the FCA.

(2)   The budget must be adopted—

(a)   in the case of the Regulator’s first financial year, as soon as
reasonably practicable after it is established, and

(b)   in the case of each subsequent financial year, before the start of
the financial year.

(3)   The Regulator may, with the approval of the FCA, vary the budget for a
financial year at any time after its adoption.

(4)   Before adopting or varying a budget, the Regulator must consult—

(a)   the Treasury, and

(b)   such other persons (if any) as the Regulator considers
appropriate.

(5)   The Regulator must publish each budget, and each variation of a budget,
in the way it considers appropriate.

Arrangements for discharging functions

5    (1)   The Regulator may make arrangements for any of its functions to be
discharged by—

(a)   a committee, sub-committee, officer or member of staff of the
Regulator;

(b)   an officer or member of staff of the FCA.

This is subject to sub-paragraphs (2) to (4).

(2)   In exercising any functions within sub-paragraph (3), the Regulator
must act through its board.

(3)   The functions referred to in sub-paragraph (2) are—

(a)   giving general directions under section (Directions);

(b)   imposing requirements under section (System rules) that apply to
all operators of regulated payment systems.

(4)   The function of issuing general guidance may not be discharged by an
officer or member of staff of the Regulator or of the FCA.

Annual plan

6    (1)   The Regulator must in respect of each of its financial years prepare an
annual plan which has been approved by the FCA.

(2)   The plan must be prepared—

(a)   in the case of the Regulator’s first financial year, as soon as
reasonably practicable after it is established, and

(b)   in the case of each subsequent financial year, before the start of
the financial year.

(3)   The Regulator may, with the approval of the FCA, vary the plan in
respect of a financial year at any time after its preparation.

(4)   An annual plan in respect of a financial year must set out—

(a)   the aims of the Regulator for the year,

(b)   how the extent to which each of those aims is met is to be
determined,

(c)   the relative priorities of each of those aims, and

(d)   how its resources are to be allocated among the activities to be
carried on in connection with the discharge of its functions.

(5)   In sub-paragraph (4) references to aims for a financial year include aims
for a longer period that includes that year.

(6)   Before preparing or varying an annual plan, the Regulator must
consult—

(a)   the Treasury, and

(b)   such other persons (if any) as the Regulator considers
appropriate.

(7)   The Regulator must publish each annual plan, and each variation of an
annual plan, in the way it considers appropriate.

Annual report

7    (1)   At least once a year, the Regulator must make a report to the FCA in
relation to the discharge of its functions.

(2)   The report must—

(a)   set out the extent to which the Regulator has met its aims and
priorities for the period covered by the report,

(b)   set out the extent to which the Regulator has advanced its
payment systems objectives,

(c)   include a copy of its latest accounts, and

(d)   comply with any requirement specified in rules made by the
FCA.

(3)   The Regulator must publish each report in the way it considers
appropriate.

(4)   Nothing in this paragraph requires the Regulator to make a report at any
time in the period of 12 months beginning with its establishment.

(5)   The Treasury may—

(a)   require the Regulator to comply with any provision of the
Companies Act 2006 about accounts and their audit which would
not otherwise apply to it, or

(b)   direct that any provision of that Act about accounts and their
audit is to apply to the Regulator with such modifications as are
specified in the direction, whether or not the provision would
otherwise apply to it.

(6)   Compliance with any requirement under sub-paragraph (5)(a) or (b) is
enforceable by injunction or, in Scotland, an order for specific
performance under section 45 of the Court of Session Act 1988.

(7)   Proceedings under sub-paragraph (6) may be brought only by the
Treasury.

(8)   The FCA’s power to make rules under sub-paragraph (2)(d) is to be
treated as if it were a power of the FCA to make rules under FSMA 2000
(and rules made under sub-paragraph (2)(d) are to be treated
accordingly).

Audit of accounts

8    (1)   The Regulator must send a copy of its annual accounts to the
Comptroller and Auditor General and the Treasury as soon as is
reasonably practicable.

(2)   The Comptroller and Auditor General must—

(a)   examine, certify and report on accounts received under this
paragraph, and

(b)   send a copy of the certified accounts and the report to the
Treasury.

(3)   The Treasury must lay the copy of the certified accounts and the report
before Parliament.

(4)   The Regulator must send a copy of the certified accounts and the report
to the FCA.

(5)   Except as provided for by paragraph 7(5), the Regulator is exempt from
the requirements of Part 16 of the Companies Act 2006 (audit) and its
balance sheet must contain a statement to that effect.

(6)   In this paragraph “annual accounts” has the meaning given by section
471 of the Companies Act 2006.

Funding

9    (1)   In this paragraph “the relevant costs” means—

(a)   the expenses incurred, or expected to be incurred, by the
Regulator in connection with the discharge of its functions,

(b)   the expenses incurred by the FCA in establishing the Regulator,

(c)   any other expenses incurred by the FCA in connection with the
discharge of its functions under this Part, and

(d)   any expenses incurred, or expected to be incurred, by the FCA in
connection with the discharge of the Regulator’s functions by an
officer or member of staff of the FCA under arrangements made
under paragraph 5.

For the purposes of paragraph (b) it does not matter when the expenses were incurred.

(2)   For the purpose of meeting the relevant costs the FCA may make rules
requiring participants in regulated payment systems to pay to the FCA
specified amounts or amounts calculated in a specified way.

(3)   Before making any rules under sub-paragraph (2) the FCA must consult
the Treasury.

(4)   The amounts to be paid under the rules may include a component to
cover the expenses of the FCA in collecting the payments (“collection
costs”).

(5)   The FCA must pay to the Regulator the amounts that it receives under
the rules, apart from the following amounts (which it may keep)—

(a)   amounts in respect of expenses falling within sub-paragraph
(1)(b) to (d);

(b)   amounts in respect of its collection costs.

(6)   In this paragraph “specified” means specified in the rules.

(7)   The FCA’s power to make rules under this paragraph is to be treated as
if it were a power of the FCA to make rules under FSMA 2000 (and rules
made under this paragraph are to be treated accordingly).

Penalty receipts

10    (1)   The Regulator must in respect of each of its financial years pay to the
Treasury any amounts received by it during the year by way of penalties
imposed under section (Penalties).

(2)   The Treasury may give directions to the Regulator as to how it is to
comply with its duty under sub-paragraph (1).

(3)   The directions may in particular—

(a)   specify the time when any payment is required to be made to the
Treasury, and

(b)   require the Regulator to provide the Treasury at specified times
with information relating to penalties that the Regulator has
imposed under section (Penalties).

(4)   The Treasury must pay into the Consolidated Fund any sums received
by them under this paragraph.

Records

11 The Regulator must maintain satisfactory arrangements for—

(a)   recording decisions made in the exercise of its functions, and

(b)   the safe-keeping of those records which it considers ought to be
preserved.

Exemption from liability in damages

12    (1)   None of the following is to be liable in damages for anything done or
omitted in the discharge, or purported discharge, of the Regulator’s
functions—

(a)   the Regulator;

(b)   any person (“P”) who is, or is acting as, an officer or member of
staff of the Regulator;

(c)   any person who could be held vicariously liable for things done
or omitted by P, but only in so far as the liability relates to P’s
conduct.

(2)   If the Regulator has made arrangements under paragraph 5 for any of its
functions to be discharged by an officer or member of staff of the FCA,
references in sub-paragraph (1) to a person who is an officer or member
of staff of the Regulator include references to the officer or member of
staff of the FCA.

(3)   Anything done or omitted by a person mentioned in sub-paragraph
(1)(b) or (c) while acting, or purporting to act, as a result of an
appointment under section (Reports by skilled persons) or (Appointment of
persons to conduct investigations
) is to be taken for the purposes of sub-
paragraph (1) to have been done or omitted in the discharge or (as the
case may be) purported discharge of the Regulator’s functions.

(4)   Sub-paragraph (1) does not apply—

(a)   if the act or omission is shown to have been in bad faith, or

(b)   so as to prevent an award of damages made in respect of an act
or omission on the ground that the act or omission was unlawful
as a result of section 6(1) of the Human Rights Act 1998.”

106B

Insert the following new Schedule—

“SCHEDULE

PROCEDURE FOR APPEALS TO THE CMA

Functions of CMA to be discharged by group

1 Except where specified otherwise in this Schedule, the functions of the
CMA with respect to an appeal are to be carried out on behalf of the
CMA by a group constituted for the purpose by the chair of the CMA
under Schedule 4 to the Enterprise and Regulatory Reform Act 2013.

2    (1)   Schedule 4 to the Enterprise and Regulatory Reform Act 2013 is
amended as follows.

(2)   In paragraph 35(1) (membership of CMA panel), after paragraph (c)
insert—

“(ca)   at least one person (a “payment systems panel
member”) appointed to the CMA panel under
paragraph 1(1)(b) for the purpose of being available for
selection as a member of a group constituted to carry
out functions on behalf of the CMA with respect to an
appeal made in accordance with section (Appeals to
Competition and Markets Authority
) of the Financial
Services (Banking Reform) Act 2013 (a “specialist
payment systems group”);”.

(3)   In paragraph 38 (membership of CMA groups), after sub-paragraph (5)
insert—

“(5A)   In the case of a specialist payment systems group, the group
must include at least one payment systems member.”

(4)   In paragraph 48 (performance of functions of chair with respect to
constitution etc of CMA group), in sub-paragraph (4)(c), at the end
insert—

“(v)   Schedule (Procedure for appeals to the CMA) to
the Financial Services (Banking Reform) Act
2013.”

Application for permission to bring appeal

3    (1)   An application for permission to bring an appeal may be made only by
sending a notice to the CMA requesting the permission.

(2)   An application for permission to appeal must be accompanied by all
such information as may be required by appeal rules.

(3)   Appeal rules may require information contained in an application for
permission to appeal to be verified by a statement of truth.

(4)   A person who applies for permission to bring an appeal in accordance
with this paragraph is referred to in this Schedule as the appellant.

(5)   The appellant must send the Payment Systems Regulator—

(a)   a copy of the application for permission to appeal at the same
time as it is sent to the CMA, and

(b)   such other information as may be required by appeal rules.

(6)   The CMA’s decision whether to grant permission to appeal is to be taken
by an authorised member of the CMA.

(7)   Before the authorised member decides whether to grant permission
under this paragraph, the Payment Systems Regulator must be given an
opportunity of making representations or observations, in accordance
with paragraph 5(2).

(8)   The CMA’s decision on an application for permission must be made—

(a)   where the Payment Systems Regulator makes representations or
observations in accordance with paragraph 5(2), before the end
of 10 working days beginning with the first working day after the
day on which those representations or observations are received;

(b)   in any other case, before the end of 14 working days beginning
with the first working day after the day on which the application
for permission was received.

(9)   The grant of permission may be made subject to conditions, which may
include—

(a)   conditions which limit the matters that are to be considered on
the appeal in question;

(b)   conditions for the purpose of expediting the determination of the
appeal;

(c)   conditions requiring the appeal to be considered together with
other appeals (including appeals relating to different matters or
decisions and appeals brought by different persons).

(10)   Where a decision is made to grant or to refuse an application for
permission, an authorised member of the CMA must notify the decision,
giving reasons, to the following persons—

(a)   the appellant, and

(b)   the Payment Systems Regulator.

(11)   A decision of the CMA under this paragraph must be published, in such
manner as an authorised member of the CMA considers appropriate, as
soon as reasonably practicable after it is made.

(12)   The CMA may exclude from publication under sub-paragraph (11) any
information which it is satisfied is—

(a)   commercial information, the disclosure of which would, or
might in the CMA’s opinion, significantly harm the legitimate
business interests of an undertaking to which it relates, or

(b)   information relating to the private affairs of an individual, the
disclosure of which would, or might in the CMA’s opinion,
significantly harm the individual’s interests.

Suspension of decision

4    (1)   The CMA may direct that, pending the determination of an appeal
against a decision of the Payment Systems Regulator—

(a)   the decision is not to have effect, or

(b)   the decision is not to have effect to such extent as may be
specified in the direction.

(2)   The power to give a direction under this paragraph is exercisable only
where—

(a)   an application for its exercise has been made by the appellant at
the same time as the appellant made an application in accordance
with paragraph 3 for permission to bring an appeal against a
decision of the Payment Systems Regulator,

(b)   the Payment Systems Regulator has been given an opportunity of
making representations or observations, in accordance with
paragraph 5(2), and

(c)   the balance of convenience does not otherwise require effect to be
given to the decision pending that determination.

(3)   The CMA’s decision on an application for a direction under this
paragraph must be made—

(a)   where the Payment Systems Regulator makes representations or
observations in accordance with paragraph 5(2), before the end
of 10 working days beginning with the first working day after the
day on which those representations or observations are received;

(b)   in any other case, before the end of 14 working days beginning
with the first working day following the day on which the
application under sub-paragraph (2)(a) is received.

(4)   The appellant must send the Payment Systems Regulator a copy of the
application for a direction under this paragraph at the same time as it is
sent to the CMA.

(5)   The CMA’s decision whether to give a direction is to be taken by an
authorised member of the CMA.

(6)   A direction under this paragraph must be—

(a)   given by an authorised member of the CMA, and

(b)   published, in such manner as an authorised member of the CMA
considers appropriate, as soon as reasonably practicable after it
is given.

(7)   Sub-paragraph (12) of paragraph 3 applies to the publication of a
direction under sub-paragraph (6) of this paragraph as it applies to the
publication of a decision under sub-paragraph (11) of that paragraph.

Time limit for representations and observations by the Regulator

5    (1)   Sub-paragraph (2) applies where the Payment Systems Regulator wishes
to make representations or observations to the CMA in relation to—

(a)   an application for permission to bring an appeal under
paragraph 3;

(b)   an application for a direction under paragraph 4.

(2)   The Payment Systems Regulator must make the representations or
observations in writing before the end of 10 working days beginning
with the first working day after the day on which it received a copy of
the application under paragraph 3(5) or 4(4) (as the case may be).

(3)   Sub-paragraph (4) applies where an application for permission to bring
an appeal has been granted and the Payment Systems Regulator wishes
to make representations or observations to the CMA in relation to—

(a)   the Payment Systems Regulator’s reasons for the decision in
relation to which the appeal is being brought;

(b)   any grounds on which that appeal is being brought against that
decision.

(4)   The Payment Systems Regulator must make the representations or
observations in writing before the end of 15 working days beginning
with the first working day after the day on which permission to bring the
appeal was granted.

(5)   The Payment Systems Regulator must send a copy of the representations
and observations it makes under this paragraph to the appellant.

Consideration and determination of appeal by group

6    (1)   A group constituted by the chair of the CMA under Schedule 4 to the
Enterprise and Regulatory Reform Act 2013 for the purpose of carrying
out functions of the CMA with respect to an appeal must consist of three
members of the CMA panel.

(2)   A decision of the group is effective if, and only if—

(a)   all the members of the group are present when it is made, and

(b)   at least two members of the group are in favour of the decision.

Time limits for determining appeal

7    (1)   The CMA must determine an appeal within the period of 6 months
beginning with the permission date.

(2)   If—

(a)   the CMA has received representations on the timing of the
determination from a party to the appeal, and

(b)   it is satisfied that there are special reasons why the determination
cannot be made within the period specified in sub-paragraph (1),

the CMA must determine the appeal within the period specified by it, which must not be longer than the period of 7 months beginning with the permission date.

(3)   In a case where sub-paragraph (2) applies, the CMA must also—

(a)   inform the parties to the appeal of the time limit for determining
the appeal, and

(b)   publish that time limit in such manner as it considers appropriate
for the purpose of bringing it to the attention of any other persons
likely to be affected by the determination.

(4)   In this paragraph the “permission date” is the date on which the CMA
gave permission to bring the appeal in accordance with section (Appeals:
general
)(8).

Matters to be considered on appeal

8    (1)   The CMA, if it thinks it necessary to do so for the purpose of securing the
determination of an appeal within the period provided for by paragraph
7, may disregard—

(a)   any or all matters raised by an appellant that were not raised by
that appellant at the time of the relevant application, and

(b)   any or all matters raised by the Payment Systems Regulator that
were not contained in representations or observations made for
the purposes of the appeal in accordance with paragraph 5.

(2)   In this paragraph “relevant application” means an application under
paragraph 3 or 4.

Production of documents etc

9    (1)   For the purposes of this Schedule, the CMA may by notice—

(a)   require a person to produce to the CMA the documents specified
or otherwise identified in the notice;

(b)   require any person who carries on a business to supply to the
CMA such estimates, forecasts, returns or other information as
may be specified or described in the notice in relation to that
business.

(2)   The power to require the production of a document, or the supply of any
estimate, forecast, return or other information, is a power to require its
production or, as the case may be, supply—

(a)   at the time and place specified in the notice, and

(b)   in a legible form.

(3)   No person is to be compelled under this paragraph to produce a
document or supply an estimate, forecast, return or other information
which the person could not be compelled to produce in civil proceedings
in the High Court or Court of Session.

(4)   An authorised member of the CMA may, for the purpose of the exercise
of the functions of the CMA, make arrangements for copies to be taken
of a document produced or an estimate, forecast, return or other
information supplied to it under this paragraph.

(5)   A notice for the purposes of this paragraph—

(a)   may be issued on the CMA’s behalf by an authorised member of
the CMA;

(b)   must include information about the possible consequences of not
complying with the notice (as set out in paragraph 13).

Oral hearings

10    (1)   For the purposes of this Schedule an oral hearing may be held, and
evidence may be taken on oath—

(a)   by a person considering an application for permission to bring an
appeal under paragraph 3,

(b)   by a person considering an application for a direction under
paragraph 4, or

(c)   by a group with the function of determining an appeal;

and, for that purpose, such a person or group may administer oaths.

(2)   The CMA may by notice require a person—

(a)   to attend at a time and place specified in the notice, and

(b)   at that time and place, to give evidence to a person or group
mentioned in sub-paragraph (1).

(3)   At any oral hearing the person or group conducting the hearing may—

(a)   require the appellant or the Payment Systems Regulator, if
present at the hearing, to give evidence or to make
representations or observations, or

(b)   require a person attending the hearing as a representative of the
appellant or of the Payment Systems Regulator to make
representations or observations.

(4)   A person who gives oral evidence at the hearing may be cross-examined
by or on behalf of any party to the appeal.

(5)   If the appellant, the Payment Systems Regulator, or the appellant’s or
Payment Systems Regulator’s representative is not present at a
hearing—

(a)   there is no requirement to give notice to that person under sub-
paragraph (2), and

(b)   the person or group conducting the hearing may determine the
application or appeal without hearing that person’s evidence,
representations or observations.

(6)   No person is to be compelled under this paragraph to give evidence
which the person could not be compelled to give in civil proceedings in
the High Court or Court of Session.

(7)   Where a person is required under this paragraph to attend at a place
more than 10 miles from the person’s place of residence, an authorised
member of the CMA must arrange for the person to be paid the
necessary expenses of attendance.

(8)   A notice for the purposes of this paragraph may be issued on the CMA’s
behalf by an authorised member of the CMA.

Written statements

11    (1)   The CMA may by notice require a person to produce a written statement
with respect to a matter specified in the notice to—

(a)   a person who is considering, or is to consider, an application for
a direction under paragraph 4, or

(b)   a group with the function of determining an appeal.

(2)   The power to require the production of a written statement includes
power—

(a)   to specify the time and place at which it is to be produced, and

(b)   to require it to be verified by a statement of truth;

and a statement required to be so verified must be disregarded unless it is so verified.

(3)   No person is to be compelled under this paragraph to produce a written
statement with respect to any matter about which the person could not
be compelled to give evidence in civil proceedings in the High Court or
Court of Session.

(4)   A notice for the purposes of this paragraph may be issued on the CMA’s
behalf by an authorised member of the CMA.

Expert advice

12 Where permission to bring an appeal is granted under paragraph 3, the
CMA may commission expert advice with respect to any matter raised
by a party to the appeal.

Defaults in relation to evidence

13    (1)   If a person (“the defaulter”)—

(a)   fails to comply with a notice issued or other requirement
imposed under paragraph 9, 10 or 11,

(b)   in complying with a notice under paragraph 11, makes a
statement that is false in any material particular, or

(c)   in providing information verified in accordance with a statement
of truth required by appeal rules, provides information that is
false in a material particular,

an authorised member of the CMA may certify that fact to the court.

(2)   If the court is satisfied that the defaulter failed without reasonable excuse
to comply with the notice or other requirement, or made the false
statement, or provided the false information, it may deal with the
defaulter (and in the case of a body corporate, any director or other
officer of the body) as if that person were in contempt.

(3)   In sub-paragraph (2) “officer”, in relation to a limited liability
partnership, means a member of the limited liability partnership.

(4)   In this paragraph “court” means—

(a)   the High Court, or

(b)   in Scotland, the Court of Session.

14    (1)   A person who wilfully alters, suppresses or destroys a document which
the person has been required to produce under paragraph 9 is guilty of
an offence.

(2)   A person guilty of an offence under this paragraph 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 2 years or a fine, or both.

Determination of appeal by CMA

15    (1)   A determination by the CMA on an appeal—

(a)   must be contained in an order made by the CMA;

(b)   must set out the reasons for the determination;

(c)   takes effect at the time specified in the order or determined in
accordance with provision made in the order;

(d)   must be notified by the CMA to the parties to the appeal;

(e)   must be published by the CMA—

(i)   as soon as reasonably practicable after the determination
is made;

(ii)   in such manner as the CMA considers appropriate for the
purpose of bringing the determination to the attention of
any person likely to be affected by it (other than a party to
the appeal).

(2)   The CMA may exclude from publication under sub-paragraph (1)(e) any
information which it is satisfied is—

(a)   commercial information, the disclosure of which would, or
might in the CMA’s opinion, significantly harm the legitimate
business interests of an undertaking to which it relates, or

(b)   information relating to the private affairs of an individual, the
disclosure of which would, or might in the CMA’s opinion,
significantly harm the individual’s interests.

(3)   The Payment Systems Regulator must take such steps as it considers
necessary for it to comply with an order of the CMA made by virtue of
sub-paragraph (1)(a).

(4)   The steps must be taken—

(a)   if a time is specified in (or is to be determined in accordance with)
the order, within that time;

(b)   in any other case, within a reasonable time.

Appeal rules

16    (1)   The CMA Board may make rules of procedure regulating the conduct
and disposal of appeals.

(2)   Those rules may include provision supplementing the provisions of this
Schedule in relation to any application, notice, hearing, power or
requirement for which this Schedule provides; and that provision may,
in particular, impose time limits or other restrictions on—

(a)   the taking of evidence at an oral hearing, or

(b)   the making of representations or observations at such a hearing.

(3)   The CMA Board must publish rules made under this paragraph in such
manner as it considers appropriate for the purpose of bringing them to
the attention of those likely to be affected by them.

(4)   Before making rules under this paragraph, the CMA Board must consult
such persons as it considers appropriate.

(5)   Rules under this paragraph may make different provision for different
cases.

Costs

17    (1)   A group that determines an appeal must make an order requiring the
payment to the CMA of the costs incurred by the CMA in connection
with the appeal.

(2)   An order under sub-paragraph (1) must require those costs to be paid—

(a)   where the appeal is allowed in full, by the Payment Systems
Regulator;

(b)   where the appeal is dismissed in full, by the appellant;

(c)   where the appeal is partially allowed, by one or more parties in
such proportions as the CMA considers appropriate in all the
circumstances.

(3)   The group that determines an appeal may also make such order as it
thinks fit for requiring a party to the appeal to make payments to another
party in respect of costs reasonably incurred by that other party in
connection with the appeal.

(4)   A person who is required by an order under this paragraph to pay a sum
to another person must comply with the order before the end of the
period of 28 days beginning with the day after the making of the order.

(5)   Sums required to be paid by an order under this paragraph but not paid
within the period mentioned in sub-paragraph (4) are to bear interest at
such rate as may be determined in accordance with provision contained
in the order.

(6)   Any costs payable by virtue of an order under this paragraph and any
interest that has not been paid may be recovered as a civil debt by the
person in whose favour the order is made.

Interpretation

18    (1)   In this Schedule—

“appeal” means an appeal made in accordance with section (Appeals
to Competition and Markets Authority
);

“appeal rules” means rules of procedure under paragraph 16;

“authorised member of the CMA”—

(a)   in relation to a power exercisable in connection with an
appeal in respect of which a group has been constituted by
the chair of the CMA under Schedule 4 to the Enterprise and
Regulatory Reform Act 2013, means a member of that group
who has been authorised by the chair of the CMA to exercise
that power;

(b)   in relation to a power exercisable in connection with an
application for permission to bring an appeal, or otherwise
in connection with an appeal in respect of which a group has
not been so constituted by the chair of the CMA, means—

(i)   any member of the CMA Board who is also a
member of the CMA panel, or

(ii)   any member of the CMA panel authorised by the
Treasury (whether generally or specifically) to
exercise the power in question;

“CMA” means the Competition and Markets Authority;

“CMA Board” and “CMA panel” have the same meaning as in
Schedule 4 to the Enterprise and Regulatory Reform Act 2013;

“group” means a group selected in accordance with paragraph 6;

“statement of truth”, in relation to the production of a statement or
provision of information by a person, means a statement that the
person believes the facts stated in the statement or information to
be true;

“working day” means any day other than—

(a)   Saturday or Sunday;

(b)   Christmas Day or Good Friday;

(c)   a day which is a bank holiday under the Banking and
Financial Dealings Act 1971 in any part of the United
Kingdom.

(2)   References in this Schedule to a party to an appeal are references to—

(a)   the appellant, or

(b)   the Payment Systems Regulator.”

107

Insert the following new Schedule—

“SCHEDULE

CONDUCT OF FMI ADMINISTRATION

1 The following provisions of this Schedule provide for—

(a)   the general powers and duties of FMI administrators (by
application of provisions about administrators), and

(b)   the general process and effects of FMI administration (by
application of provisions about administration).

2 The provisions set out in the Tables apply in relation to FMI
administration as in relation to administration, with—

(a)   the modifications set out in paragraph 3,

(b)   any other modification specified in the Tables, and

(c)   any other necessary modification.

3 The modifications are that—

(a)   a reference to the administrator is a reference to the FMI
administrator,

(b)   a reference to administration is a reference to FMI
administration,

(c)   a reference to an administration application is a reference to an
FMI administration application,

(d)   a reference to an administration order is a reference to an FMI
administration order,

(e)   a reference to a company is a reference to the infrastructure
company, and

(f)   a reference to the purpose of administration (other than the
reference in paragraph 111(1) of Schedule B1) is a reference to the
objective in section (Objective of FMI administration).

4 Powers conferred by this Part of this Act and by the 1986 Act (as applied)
are in addition to, and not in restriction of, any existing powers of
instituting proceedings against any contributory or debtor of an
infrastructure company, or the estate of any contributory or debtor, for
the recovery of any call or other sum.

5 A reference in an enactment or other document to anything done under
a provision applied by this Part of this Act includes a reference to the
provision as applied.

TABLE 1 OF APPLIED PROVISIONSSCHEDULE B1 TO THE INSOLVENCY ACT 1986

 
Provision of
Schedule B1

Subject

Modification
 
Para.
40(1)(a)

Dismissal of pending winding-
up petition
 
Para. 41

Dismissal of administrative or
other receiver
 
Para. 42

Moratorium on insolvency
proceedings

Ignore sub-paras. (4) and (5).
 
Para. 43

Moratorium on other legal
process
 
Para.
44(1)(a) and
(5)

Interim moratorium
 
Para. 46

Announcement of appointment

Ignore sub-para. (6)(b) and (c).
 
Paras. 47
and 48

Statement of affairs
 
Para. 49

Administrator’s proposals

The administrator must obtain the
approval of the Bank of England to
any proposals under sub-para. (1).
Treat the reference in sub-para.
(2)(b) to the objective mentioned in
para. 3(1)(a) or (b) as a reference to
the objective in section (Objective of
FMI administration
) of this Act.
Ignore sub-para. (3)(b).
 
Para. 59

General powers
 
Para. 60 and
Schedule 1

General powers

The exercise of powers under Schedule 1 is
subject to section (Objective of FMI
administration
) of this Act.
 
Para. 61

Directors
 
Para. 62

Power to call meetings of
creditors
 
Para. 63

Application to court for
directions

Before making an application in
reliance on this paragraph the FMI
administrator must give notice to
the Bank of England, which is to be
entitled to participate in the
proceedings.
In making directions the court must
have regard to the objective in
section (Objective of FMI
administration
) of this Act.
 
Para. 64

Management powers
 
Para. 65

Distribution to creditors
 
Para. 66

Payments
 
Para. 67

Taking custody of property
 
Para. 68

Management

Ignore sub-paras. (1) and (3).
The Bank of England may apply to
the court for the variation or
revocation of any directions given
by the court.
 
Para. 69

Agency
 
Para. 70

Floating charges
 
Para. 71

Fixed charges
 
Para. 72

Hire-purchase property
 
Para. 73

Protection for secured and
preferential creditors
 
Para. 74

Challenge to administrator’s
conduct

For sub-para. (2) there is to be taken to be
substituted—
“(2) Where a company is in FMI
administration, a creditor or
member of the company may apply
to the court claiming that the FMI
administrator is conducting himself
or herself in a manner preventing
the achievement of the objective of
the FMI administration as quickly
and efficiently as is reasonably
practicable.”
 
Para. 75

Misfeasance

In addition to applications that may anyway
be made under para. 75, an application may
be made by the FMI administrator or the
Bank of England.
 
Para. 79

Court ending administration on
application of administrator

For sub-paras. (1) to (3) there are to be taken
to be substituted—
“(1) On an application made by a
person mentioned in sub-paragraph
(2), the court may provide for the
appointment of an FMI
administrator of a company to cease
to have effect from a specified time.
(2) The persons who may apply to
the court under sub-paragraph (1)
are—
(a) the Bank of England;
(b) with the consent of the Bank, the
FMI administrator.”
 
Para. 84

Termination: no more assets for
distribution
 
Para. 85

Discharge of administration
order
 
Para. 86

Notice to Companies Registrar
of end of administration
 
Para. 87

Resignation

An FMI administrator may not resign under
para. 87 without giving 28 days’ notice of the
intention to do so to the Bank of England.
 
Para. 88

Removal

An application for an order removing an FMI
administrator from office may be made only
by or with the consent of the Bank of
England.
 
Para. 89

Disqualification

The notice under sub-para. (2) must be given
to the Bank of England.
 
Paras. 90
and 91

Replacement

Para. 91(1) applies as if the only
person who could make an
application were the Bank of
England.
Ignore para. 91(2).
 
Para. 98

Discharge

Ignore sub-paras. (2)(b) and (3).
 
Para. 99

Vacation of office: charges and
liabilities

In the application of sub-para. (3), payments
may be made only—
in accordance with directions of the
Bank of England, and
if the Bank is satisfied that they will
not prejudice the objective in section
(Objective of FMI administration) of
this Act.
 
Paras. 100 to
103

Joint administrators

An application under para. 103 may be made
only by the Bank of England.
 
Para. 104

Validity
 
Para. 106
(and section
430 and
Schedule 10)

Fines
 
Paras. 107 to
109

Extension of time limits
 
Para. 110

Amendment of provisions about
time

An order under para. 110 may amend a
provision of the Schedule as it applies by
virtue of this Act (whether or not in the same
way as it amends the provision as it applies
otherwise).
 
Para. 111

Interpretation
 
Paras. 112 to
116

Scotland

TABLE 2 OF APPLIED PROVISIONSOTHER PROVISIONS OF THE INSOLVENCY ACT 1986

 
Section

Subject

Modification or comment
 
Section 233

Utilities
 
Section 234

Getting in company’s property
 
Section 235

Duty to co-operate with office-
holder
 
Section 236

Inquiry into company’s dealings
 
Section 237

Section 236: enforcement by
court
 
Section 238

Transactions at an undervalue
(England and Wales)
 
Section 239

Preferences (England and
Wales)
 
Section 240

Ss. 238 and 239: relevant time
 
Section 241

Orders under ss. 238 and 239

In considering making an order in
reliance on section 241 the court
must have regard to the objective in
section (Objective of FMI
administration
) of this Act.
Ignore subsections (2A)(a) and (3) to
(3C).
 
Section 242

Gratuitous alienations
(Scotland)
 
Section 243

Unfair preferences (Scotland)

In considering the grant of a decree under
subsection (5) the court must have regard to
the objective in section (Objective of FMI
administration
) of this Act.
 
Section 244

Extortionate credit transactions
 
Section 245

Avoidance of floating charges
 
Section 246

Unenforceability of liens
 
Sections 386
and 387, and
Schedule 6
(and
Schedule 4
to the
Pension
Schemes Act
1993)

Preferential debts
 
Section 389

Offence of acting without being
qualified

Treat references to acting as an insolvency
practitioner as references to acting as an FMI
administrator.
 
Section 390

Persons not qualified to act

Treat references to acting as an insolvency
practitioner as references to acting as an FMI
administrator.
 
Section 391

Recognised professional bodies

An order under section 391 has effect in
relation to any provision applied for the
purposes of FMI administration.
 
Sections 423
to 425

Transactions defrauding
creditors

In considering granting leave under section
424(1) or making an order in reliance on
section 425, the court must have regard to the
objective in section (Objective of FMI
administration)
of this Act.
 
Sections 430
to 432 and
Schedule 10

Offences

6    (1)   The Treasury may by order amend this Schedule so as to make further
modifications.

(2)   The further modifications that may be made are confined to such
modifications of—

(a)   the 1986 Act, or

(b)   other enactments passed or made before this Act that relate to
insolvency or make provision by reference to anything that is or
may be done under the 1986 Act,

as the Treasury consider appropriate in relation to any provision made by or under this Part of this Act.

(3)   An order under this paragraph may also make modifications of the
provisions of this Schedule.”

108

Insert the following new Schedule—

“SCHEDULE

FINANCIAL MARKET INFRASTRUCTURE TRANSFER SCHEMES

Application of Schedule

1 This Schedule applies where—

(a)   the court has made an FMI administration order in relation to a
company (“the old company”), and

(b)   it is proposed that a transfer within section (Objective of FMI
administration
)(5) be made to another company (“the new
company”).

Interpretation of Schedule

2 In this Schedule—

“FMI transfer scheme” has the meaning given by paragraph 4(1);

“the new company” and “the old company” are to be read in
accordance with paragraph 1;

“third party”, in relation to an FMI transfer scheme or a
modification of such a scheme, means a person other than the old
company or the new company.

FMI administrator to act on behalf of old company

3 It is for the FMI administrator, while the FMI administration order is in
force, to act on behalf of the old company in the doing of anything that it
is authorised or required to do by or under this Schedule.

Making of FMI transfer schemes

4    (1)   The old company may—

(a)   with the consent of the new company, and�

(b)   for the purpose of giving effect to the proposed transfer,

make a scheme under this Schedule for the transfer of property, rights and liabilities from the old company to the new company (an “FMI transfer scheme”).

(2)   Such a scheme may be made only at a time when the FMI administration
order is in force in relation to the old company.

(3)   An FMI transfer scheme may set out the property, rights and liabilities
to be transferred in one or more of the following ways—�

(a)   by specifying or describing them in particular,

(b)   by identifying them generally by reference to, or to a specified
part of, the undertaking of the old company, or�

(c)   by specifying the manner in which they are to be determined.

(4)   An FMI transfer scheme is to take effect in accordance with paragraph 7
at the time appointed by the court.

(5)   But the court must not appoint a time for a scheme to take effect unless
that scheme has been approved by the Bank of England.

(6)   The Bank of England may modify an FMI transfer scheme before
approving it, but only modifications to which both the old company and
the new company have consented may be made.

(7)   In deciding whether to approve an FMI transfer scheme, the Bank of
England must have regard, in particular, to—


Before approving an FMI transfer scheme, the Bank of England must
consult the Treasury.
The old company and the new company each have a duty to provide the
Bank of England with all information and other assistance that the Bank
may reasonably require for the purposes of, or in connection with, the
exercise of the powers conferred on it by this paragraph.

(a)   the public interest, and

(b)   any effect that the scheme is likely to have on the interests of third
parties.

Provision that may be made by a scheme

5    (1)   An FMI transfer scheme may contain provision—

(a)   for the creation, in favour of the old company or the new
company, of an interest or right in or in relation to property
transferred in accordance with the scheme;

(b)   for giving effect to a transfer to the new company by the creation,
in favour of that company, of an interest or right in or in relation
to property retained by the old company;

(c)   for the creation of new rights and liabilities (including rights of
indemnity and duties to indemnify) as between the old company
and the new company;

(d)   in connection with any provision made under this sub-
paragraph, provision making incidental provision as to the
interests, rights and liabilities of other persons with respect to the
property, rights and liabilities to which the scheme relates.

(2)   The property, rights and liabilities of the old company that may be
transferred in accordance with an FMI transfer scheme include—

(a)   property, rights and liabilities that would not otherwise be
capable of being transferred or assigned by the old company;

(b)   property acquired, and rights and liabilities arising, in the period
after the making of the scheme but before it takes effect;

(c)   rights and liabilities arising after it takes effect in respect of
matters occurring before it takes effect;

(d)   property situated anywhere in the United Kingdom or
elsewhere;

(e)   rights and liabilities under the law of a part of the United
Kingdom or of a place outside the United Kingdom;

(f)   rights and liabilities under an enactment, EU instrument or
subordinate legislation.

(3)   The transfers to which effect may be given by an FMI transfer scheme
include transfers of interests and rights that are to take effect in
accordance with the scheme as if there were—

(a)   no such requirement to obtain a person’s consent or concurrence,

(b)   no such liability in respect of a contravention of any other
requirement, and

(c)   no such interference with any interest or right,�

as there would be, in the case of a transaction apart from this Act, by reason of a provision falling within sub-paragraph (4).

(4)   A provision falls within this sub-paragraph to the extent that it has effect
(whether under an enactment or agreement or otherwise) in relation to
the terms on which the old company is entitled, or subject, to anything
to which the transfer relates.�

(5)   Sub-paragraph (6) applies where (apart from that sub-paragraph) a
person would be entitled, in consequence of anything done or likely to
be done by or under this Act in connection with an FMI transfer
scheme—

(a)   to terminate, modify, acquire or claim an interest or right, or�

(b)   to treat an interest or right as modified or terminated.�

(6)   That entitlement—

(a)   is not enforceable in relation to that interest or right until after the
transfer of the interest or right by the scheme, and

(b)   is then enforceable in relation to the interest or right only in so far
as the scheme contains provision for the interest or right to be
transferred subject to whatever confers that entitlement.

(7)   Sub-paragraphs (3) to (6) have effect where shares in a subsidiary of the
old company are transferred—

(a)   as if the reference in sub-paragraph (4) to the terms on which the
old company is entitled or subject to anything to which the
transfer relates included a reference to the terms on which the
subsidiary is entitled or subject to anything immediately before
the transfer takes effect, and

(b)   in relation to an interest or right of the subsidiary, as if the
references in sub-paragraph (6) to the transfer of the interest or
right included a reference to the transfer of the shares.

(8)   Sub-paragraphs (3) and (4) apply to the creation of an interest or right by
an FMI transfer scheme as they apply to the transfer of an interest or
righ�t.

Further provision about transfers

6    (1)   An FMI transfer scheme may make incidental, supplemental,
consequential and transitional provision in connection with the other
provisions of the scheme.

(2)   An FMI transfer scheme may in particular make provision, in relation to
a provision of the scheme—





Sub-paragraph (2)(c) does not apply to references in an enactment or in
subordinate legislation.

(a)   for the new company to be treated as the same person in law as
the old company;�

(b)   for agreements made, transactions effected or other things done
by or in relation to the old company to be treated, so far as may
be necessary for the purposes of or in connection with a transfer
in accordance with the scheme, as made, effected or done by or
in relation to the new company;

(c)   for references in an agreement, instrument or other document to
the old company or to an employee or office holder with the old
company to have effect, so far as may be necessary for the
purposes of or in connection with a transfer in accordance with
the scheme, with such modifications as are specified in the
scheme;

(d)   that the effect of any transfer in accordance with the scheme in
relation to contracts of employment with the old company is not
to terminate any of those contracts but is to be that periods of
employment with that company are to count for all purposes as
periods of employment with the new company;

(e)   for proceedings commenced by or against the old company to be
continued by or against the new company.

(4)   An FMI transfer scheme may make provision for disputes between the
old company and the new company as to the effect of the scheme to be
referred to such arbitration as may be specified in or determined under
the scheme.�

(5)   Where a person is entitled, in consequence of an FMI transfer scheme, to
possession of a document relating in part to the title to land or other
property in England and Wales, or to the management of such land or
other property—�

(a)   the scheme may provide for that person to be treated as having
given another person an acknowledgement in writing of the right
of that other person to production of the document and to
delivery of copies of it, and�

(b)   section 64 of the Law of Property Act 1925 (production and safe
custody of documents) is to have effect accordingly, and on the
basis that the acknowledgement did not contain an expression of
contrary intention.�

(6)   Where a person is entitled, in consequence of an FMI transfer scheme, to
possession of a document relating in part to the title to land or other
property in Scotland or to the management of such land or other
property, subsections (1) and (2) of section 16 of the Land Registration
(Scotland) Act 1979 (omission of certain clauses in deeds) is to have effect
in relation to the transfer—�

(a)   as if the transfer had been effected by deed, and�

(b)   as if the words “unless specially qualified” were omitted from
each of those subsections.

(7)   Where a person is entitled, in consequence of an FMI transfer scheme, to
possession of a document relating in part to the title to land or other
property in Northern Ireland or to the management of such land or other
property—

(a)   the scheme may provide for that person to be treated as having
given another person an acknowledgement in writing of the right
of that other person to production of the document and to
delivery of copies of it, and�

(b)   section 9 of the Conveyancing Act 1881 is to have effect
accordingly, and on the basis that the acknowledgement does not
contain an expression of contrary intention.�

(8)   �In this paragraph references to a transfer in accordance with an FMI
transfer scheme include references to the creation in accordance with
such a scheme of an interest, right or liability.

Effect of scheme

7    (1)   In relation to each provision of an FMI transfer scheme for the transfer of
property, rights or liabilities, or for the creation of interests, rights or
liabilities—�

(a)   the property, interests, rights or liabilities become by virtue of
this Schedule the property, interests, rights or liabilities of the
transferee at the time appointed by the court for the purposes of
paragraph 4(4), and

(b)   the provisions of that scheme in relation to that property, or those
interests, rights or liabilities, have effect from that time.

(2)   In this paragraph “the transferee” means—

(a)   in relation to property, rights or liabilities transferred by an FMI
transfer scheme, the new company;

(b)   in relation to interests, rights or liabilities created by such a
scheme, the person in whose favour, or in relation to whom, they
are created.

Subsequent modification of scheme

8    (1)   The Bank of England may by notice to the old company and the new
company modify an FMI transfer scheme after it has taken effect, but
only modifications to which both the old company and the new
company have consented may be made.�

(2)   The notice must specify the time at which it is to take effect (the
“modification time”).�

(3)   Where a notice is issued under this paragraph in relation to an FMI
transfer scheme, as from the modification time, the scheme is for all
purposes to be treated as having taken effect, at the time appointed for
the purposes of paragraph 4(4), with the modifications made by the
notice.

(4)   Those modifications may make—

(a)   any provision that could have been included in the scheme when
it took effect at the time appointed for the purposes of paragraph
4(4), and�
transitional provision in connection with provision falling within
paragraph (a).

(5)   In deciding whether to modify an FMI transfer scheme, the Bank of
England must have regard, in particular, to—

(a)   the public interest, and

(b)   any effect that the modification is likely to have on the interests
of third parties.

(6)   Before modifying an FMI transfer scheme that has taken effect, the Bank
of England must consult the Treasury.�
The old company and the new company each have a duty to provide the
Bank of England with all information and other assistance that the Bank
may reasonably require for the purposes of, or in connection with, the
exercise of the powers conferred on it by this paragraph.�

Provision relating to foreign property

9    (1)   An FMI transfer scheme may contain provision about—

(a)   the transfer of foreign property, right and liabilities, and

(b)   the creation of foreign property, rights and liabilities.

(2)   For this purpose property, or a right, interest or liability, is “foreign” if
an issue relating to it arising in any proceedings would (in accordance
with the rules of private international law) be determined under the law
of a country or territory outside the United Kingdom.

Application of Schedule to transfers to subsidiaries

10 Where a proposed transfer falling within subsection (5) of section
(Objective of FMI administration) is a transfer of the kind mentioned in
subsection (6)(a) of that section, this Schedule has effect in relation to the
transfer as if—

(a)   paragraph 4(1)(a) were omitted, and

(b)   in paragraph 4(6), for the words from “both” onwards there were
substituted “the old company has consented may be made”.”

109

Insert the following new Schedule—

“SCHEDULE

FUNCTIONS OF FCA UNDER COMPETITION LEGISLATION

PART 1

AMENDMENTS OF FINANCIAL SERVICES AND MARKETS ACT 2000

1 Part 16A of FSMA 2000 (consumer protection and competition) is
amended as follows.

2 Omit section 234H (power of FCA to make request to Office of Fair
Trading).

3 After section 234H insert—

“234I          Matters in relation to which the FCA has competition functions

(1)   In sections 234J and 234K “financial sector activities” means the
provision of financial services.

(2)   The Treasury may by order amend this section.

234J          The FCA’s functions under Part 4 of the Enterprise Act 2002

(1)   The functions to which this subsection applies (“the concurrent
functions”) are to be concurrent functions of the FCA and the
Competition and Markets Authority (referred to in this Part as
“the CMA”).

(2)   Subsection (1) applies to the functions of the CMA under Part 4
of the Enterprise Act 2002 (market investigations), so far as those
functions—

(a)   are exercisable by the CMA Board (within the meaning of
Schedule 4 to the Enterprise and Regulatory Reform Act
2013), and

(b)   relate to financial sector activities.

(3)   But subsection (1) does not apply to functions under the
following sections of the Enterprise Act 2002—

  section 166 (duty to maintain register of undertakings
and orders);

  section 171 (duty to publish guidance).

(4)   So far as is necessary for the purposes of, or in connection with,
subsections (1) and (2)—

(a)   references in Part 4 of the Enterprise Act 2002 to the CMA
(including references in provisions of that Act applied by
that Part) are to be read as including references to the
FCA, and

(b)   references in that Part to section 5 of that Act are to be
read as including references to section 234N of this Act.

(5)   But subsection (4) does not apply—

(a)   in relation to section 166 or 171 of that Act, or

(b)   where the context otherwise requires.

(6)   Section 130A of the Enterprise Act 2002 has effect in relation to
the FCA by virtue of subsections (1) and (2) as if—

(a)   in subsection (2)(a) of that section, the reference to the
acquisition or supply of goods or services of one or more
than one description in the United Kingdom were a
reference to financial sector activities involving services
provided or received in the United Kingdom, and

(b)   in subsection (2)(b) of that section, the reference to the
extent to which steps can and should be taken were a
reference to the extent to which steps that might include
steps under Part 4 of that Act can and should be taken.

(7)   Before the CMA or the FCA first exercises any of the concurrent
functions in relation to any matter, it must consult the other.

(8)   Neither the CMA nor the FCA may exercise any of the concurrent
functions in relation to any matter if any of those functions have
been exercised in relation to that matter by the other.

234K          The FCA’s functions under the Competition Act 1998

(1)   The functions to which this subsection applies (“the concurrent
functions”) are to be concurrent functions of the FCA and the
CMA.

(2)   Subsection (1) applies to the functions of the CMA under the
provisions of Part 1 of the Competition Act 1998, so far as relating
to any of the following that relate to financial sector activities—

(a)   agreements, decisions or concerted practices of the kind
mentioned in section 2(1) of that Act,

(b)   conduct of the kind mentioned in section 18(1) of that Act,

(c)   agreements, decisions or concerted practices of the kind
mentioned in Article 101(1) of the Treaty on the
Functioning of the European Union, and

(d)   conduct which amounts to abuse of the kind mentioned
in Article 102 of the Treaty on the Functioning of the
European Union.

(3)   But subsection (1) does not apply to functions under the
following provisions of that Act—

  section 31D(1) to (6) (duty to publish guidance);

  section 38(1) to (6) (duty to publish guidance about
penalties);

  section 40B(1) to (4) (duty to publish statement of policy
on penalties);

  section 51 (rules).

(4)   So far as necessary for the purposes of, or in connection with, the
provisions of subsections (1) and (2), references to the CMA in
Part 1 of the Competition Act 1998 are to be read as including
references to the FCA.

(5)   But subsection (4) does not apply—

(a)   in relation to sections 31D(1) to (6), 38(1) to (6), 40B(1) to
(4), 51, 52(6) and (8) and 54 of that Act, or

(b)   where the context otherwise requires.

234L          Duty to consider exercise of powers under Competition Act 1998

(1)   Before exercising a power listed in subsection (3), the FCA must
consider whether it would be more appropriate to proceed under
the Competition Act 1998.

(2)   The FCA must not exercise such a power if it considers that it
would be more appropriate to proceed under the Competition
Act 1998.

(3)   Those powers are—

(a)   the power under section 55J(2) to vary or cancel a Part 4A
permission;

(b)   the power under section 55L to impose a requirement on
an authorised person with a Part 4A permission, or to
vary a requirement imposed under that section;

(c)   the power to take action under section 88E;

(d)   the power to take action under section 89U;

(e)   the power to give a direction under section 192C;

(f)   the power to impose a requirement under section 196.

234M           Provision of information and assistance to a CMA group

(1)   For the purpose of assisting a CMA group in carrying out a
relevant investigation, the FCA must give the CMA group—

(a)   any relevant information which the FCA has in its
possession, and

(b)   any other assistance which the CMA group may
reasonably require in relation to any matters falling
within the scope of the investigation.

(2)   A “relevant investigation” is an investigation carried out on a
reference made by the FCA under section 131 of the Enterprise
Act 2002 by virtue of section 234J.

(3)   “Relevant information”, in relation to a relevant investigation, is
information—

(a)   which relates to matters falling within the scope of the
investigation, and

(b)   which—

(i)   is requested by the CMA group for the purpose of
the investigation, or

(ii)   in the FCA’s opinion, it would be appropriate to
give to the CMA group for that purpose.

(4)   A CMA group, in carrying out a relevant investigation, must take
into account any information given to it under this section.

(5)   In this section “CMA group” has the same meaning as in
Schedule 4 to the Enterprise and Regulatory Reform Act 2013.

234N          Information relating to FCA’s competition functions

(1)   For the purpose of the functions conferred on it by sections 234J
to 234M the FCA is to have the function of keeping under review
the market for financial services.

(2)   The function conferred by subsection (1) is to be carried out with
a view to (among other things) ensuring that the FCA has
sufficient information to take informed decisions and to carry out
its other functions effectively.

234O          Exclusion of general duties

(1)   Section 1B (the FCA’s general duties) does not apply in relation
to anything done by the FCA in the carrying out of its functions
by virtue of sections 234J to 234M.

(2)   But in the carrying out of any functions by virtue of sections 234J
to 234M, the FCA may have regard to any of the matters in
respect of which a duty is imposed by section 1B if it is a matter
to which the CMA is entitled to have regard in the carrying out
of those functions.

234P          Supplementary provision

(1)   If any question arises as to whether, by virtue of sections 234J and
234K, any functions fall to be, or are capable of being, carried out
by the FCA in relation to any particular case, that question is to
be referred to, and determined by, the Treasury.

(2)   No objection is to be taken to anything done under the
Competition Act 1998 or Part 4 of the Enterprise Act 2002 by or
in relation to the FCA on the ground that it should have been
done by or in relation to the CMA.”

4 In section 3I of FSMA 2000 (power of PRA to require FCA to refrain from
specified action), in subsection (3)(a), after “55I” insert “, a power
conferred on it by sections 234J to 234N”.

5 In section 354A of FSMA 2000 (FCA’s duty to co-operate with others),
after subsection (2) insert—

“(2A)    Subsection (1) does not apply in relation to the Competition and
Markets Authority in a case where the FCA has made a reference
under section 131 of the Enterprise Act 2002 as a result of section
234J (but see section 234M).”

6    (1)   Schedule 1ZA to FSMA 2000 (the Financial Conduct Authority) is
amended as follows.

(2)   In paragraph 8 (arrangements for discharging functions), after sub-
paragraph (4) insert—

“(5)   In respect of the exercise of a function under Part 1 of the
Competition Act 1998, the power in sub-paragraph (1) is
subject to provision in rules made under section 51 of that Act
by virtue of paragraph 1A of Schedule 9 to that Act.”

(3)   In paragraph 23 (fees), after sub-paragraph (2) insert—

“(2A)   The functions referred to in sub-paragraph (1)(a) include
functions of the FCA under the Competition Act 1998 or the
Enterprise Act 2002 as a result of Part 16A of this Act.”

PART 2

AMENDMENTS OF OTHER LEGISLATION

Company Directors Disqualification Act 1986

7 In section 9E of the Company Directors Disqualification Act 1986
(interpretation of sections 9A to 9D), in subsection (2), after paragraph
(g) insert—

“(h)   the Financial Conduct Authority.”

Competition Act 1998

8 In section 54 of the Competition Act 1998 (regulators), in subsection (1),
after paragraph (i) insert—

“(j)   the Financial Conduct Authority.”

Enterprise Act 2002

9    (1)   Section 136 of the Enterprise Act 2002 (investigations and reports on
market investigation references) is amended as follows.

(2)   In subsection (7), after paragraph (e) insert—

“(ea)   in relation to the Financial Conduct Authority, section
234J of the Financial Services and Markets Act 2000;”.

(3)   In subsection (8), after “the Office of Rail Regulation,” insert “the
Financial Conduct Authority,”.

Enterprise and Regulatory Reform Act 2013

10 In section 52(4) of the Enterprise and Regulatory Reform Act 2013
(power to remove concurrent competition functions of sectoral
regulators), after paragraph (g) insert—

“(h)   the Financial Conduct Authority.”

11 In Schedule 4 to the Enterprise and Regulatory Reform Act 2013 (the
Competition and Markets Authority), in paragraph 16 (concurrency
report), at the end of sub-paragraph (7) insert—

“(i)   the Financial Conduct Authority.””

110

Insert the following new Schedule—

“SCHEDULE

BUILDING SOCIETIES

Introductory

1 The Building Societies Act 1986 is amended as follows.

Exclusion of small business deposits from funding limit

2    (1)   Section 7 (the funding limit) is amended as follows.

(2)   In subsection (3), omit the “and” at the end of paragraph (a) and after that
paragraph insert—

“(aa)   subject to subsection (3A), the principal of, and interest
accrued on, sums deposited with the society or any
subsidiary undertaking of the society by a small business
(see subsection (10));”.

(3)   After subsection (3) insert—

“(3A)    In respect of any day by reference to which the value of X falls to
be calculated for the purposes of subsection (1) in relation to the
society, the total amount to be disregarded under subsection
(3)(aa) may not exceed 10% of the amount that would, in the
absence of subsection (3)(aa), be the value of X on that day.”

(4)   After subsection (6) insert—

“(6ZA)   Where a person declares that the person is a small business, the
person shall, unless the contrary is shown, be conclusively
presumed for the purposes of this section to be a small business.”

(5)   After subsection (9) insert—

“(10)   In this section “small business” means any person (other than an
individual acting as a sole trader) carrying on a business which
had a turnover in the relevant financial year of less than
£1,000,000.

“(11)   For the purposes of subsection (10)—

(a)   the “relevant financial year”, in relation to any day by
reference to which the value of X falls to be calculated for
the purposes of subsection (1) in relation to a building
society, means the last financial year ending before that
day;

(b)   “turnover”, in relation to a small business, means the
amount derived from the provision of goods and services
falling within the business’s ordinary activities, after
deduction of trade discounts, value added tax and any
other taxes based on the amounts so derived;

(c)   in respect of any relevant financial year, the reference to
£1,000,000 includes the equivalent amount in any other
currency, calculated as at the last day of that year.

(12)   The Treasury may, by order made by statutory instrument,
amend the figure for the time being specified in subsections (10)
and (11)(c).

(13)   A statutory instrument containing an order under subsection (12)
is subject to annulment in pursuance of a resolution of either
House of Parliament.”

3    (1)   In article 3 of the Building Societies Act 1986 (Substitution of Specified
Amounts and Modification of the Funding Limits Calculation) Order
2007 (S.I. 2007/860), in paragraph 3, for “the modification required by
this article” substitute “the modifications required by this article and by
section 7(3)(aa)”.

(2)   The amendment by this paragraph of a provision contained in
subordinate legislation is without prejudice to any power to amend that
provision by subordinate legislation.

Ability to create floating charges

4    (1)   Omit section 9B (restriction on creation of floating charges).

(2)   In Schedule 15A (application of other companies insolvency legislation
to building societies), omit the following paragraphs—

(a)   paragraph 18 (which modifies section 15 of the Insolvency Act
1986);

(b)   paragraph 20 (which modifies section 19 of that Act);

(c)   paragraph 40 (which modifies Article 28 of the Insolvency
(Northern Ireland) Order 1989);

(d)   paragraph 42 (which modifies Article 31 of that Order).

(3)   In consequence of the amendment made by sub-paragraph (1)—

(a)   in section 1(1A)(b), for “, 9A and 9B” substitute “and 9A”;

(b)   in the Building Societies Act 1997, omit section 11;

(c)   in section 11(3) of the Banking (Special Provisions) Act 2008, for
paragraph (c) substitute—

“(c)   sections 8 and 9A of the Building Societies Act
1986 (restrictions on raising funds and borrowing
and on transactions involving derivative
instruments etc);”;

(d)   in section 251 of the Banking Act 2009, omit subsection (7);

(e)   in the Financial Services Act 2012, omit section 55.

Annual business statements

5    (1)   Section 74 (duty of directors to prepare annual business statement) is
amended as follows.

(2)   In subsection (4), omit the words from “and other officers” to “them”.

(3)   In subsection (8), omit “or other officer”.

Summary financial statements

6    (1)   Section 76 (summary financial statement for members and depositors) is
amended as follows.

(2)   After subsection (8A) insert—

“(8AA)   The society shall also—

(a)   publish the summary financial statement and (where
applicable) the auditor’s report on a web site, and

(b)   ensure that the statement and (where applicable) the
report may be accessed on the web site until the
publication of the next summary financial statement.”

(3)   After subsection (8D) insert—

“(8E)    If, at any time during the period beginning with the publication
of the summary financial statement and ending with the
publication of the next summary financial statement, an
individual for the first time subscribes for shares in the society,
the society shall at that time notify the individual of the
information in subsection (8C)(c)(i) to (iii).

(8F)   In a case where subsection (8E) applies, the society is not
required under section 115B (right to hard copy version) to send
the individual a version of the summary financial statement or
(where applicable) the auditor’s report in hard copy form (within
the meaning of that section).”

(4)   Omit subsections (9) to (9E).

(5)   In subsection (11), for “subsection (9)” substitute “subsection (8AA) or
(8E)”.

7 In consequence of the amendments made by paragraph 6—

(a)   in section 78(6), for “subsections (8) and (9) of section 76 extend”
substitute “subsection (8) of section 76 extends”;

(b)   in paragraphs 7(3) and 8(3) of Schedule 2, omit “the summary
financial statement,”.

Transfers of business: distributions and share rights

8    (1)   Section 100 (regulated terms etc: distributions and share rights) is
amended as follows.

(2)   For subsection (8) substitute—

“(8)   The terms of a transfer of a society’s business may confer a right
to acquire shares in the successor on a member of the society only
if the member—

(a)   held shares in the society throughout the period of two
years ending with the qualifying day, or

(b)   on that day, holds deferred shares in the society that are
of a class described in the transfer agreement;

and it is unlawful for any right in relation to shares to be
conferred in contravention of this subsection.”

(3)   In subsection (9), for the words from “who” to “and” substitute “who—

(a)   held shares in the society throughout the period of two
years ending with the qualifying day, or

(b)   on that day, hold deferred shares in the society that are of
a class described in the transfer agreement;

and”.

Methods of communicating with members etc

9 After section 115 insert—

“115A            Deemed agreement to use of web site

(1)   For the purposes of this Act, a person is to be taken to have
agreed with a building society to access a document, information
or facility on a web site if—

(a)   the person has been asked individually by the society to
agree to access documents, information or facilities
generally, or documents, information or facilities of the
description in question, on a web site, and

(b)   the society has not received a response within the period
of 28 days beginning with the date on which the society’s
request was received.

This is subject to subsections (2) to (4).

(2)   A person is not to be taken to have so agreed if the society’s
request—

(a)   did not state clearly what the effect of a failure to respond
would be, or

(b)   was sent less than 12 months after a previous request
made to the person for the purposes of this section in
respect of the same or a similar description of document,
information or facility.

(3)   A person who is taken to have made an agreement by virtue of
subsection (1) may revoke the agreement.

(4)   Subsection (1) does not apply in relation to the following
documents—

(a)   a statement required to be sent to members by paragraph
1(1) of Schedule 16 (statements in connection with
proposed mergers);

(b)   a merger statement (within the meaning of Part 2 of that
Schedule) required to be sent to members by paragraph 3
of that Schedule;

(c)   a transfer statement or transfer summary (within the
meaning of Part 1 of Schedule 17) required to be sent to
members by paragraph 4(1) or (2) of that Schedule;

(d)   a transfer proposal notification (within the meaning of
Part 1A of Schedule 17) required to be sent to members by
paragraph 5B(1) of that Schedule.

115B          Right to hard copy version

(1)   Where a person has received a document or information from a
building society otherwise than in hard copy form, the person is
entitled to require the society to send the person a version of the
document or information in hard copy form.

(2)   The society must send the document or information in hard copy
form within 21 days of receipt of the request from the person.

(3)   The society may not make a charge for providing the document
or information in that form.

(4)   Subsection (1) does not apply if the recipient of the document or
information is the FCA or the PRA.

(5)   A building society that fails to comply with this section is to be
treated as having contravened rules made under section 137A of
the Financial Services and Markets Act 2000.

(6)   For the purposes of this section a person is treated as receiving a
document or information from a building society if—

(a)   the society is required by this Act to send the document
or information to the person, and

(b)   the requirement to send it is treated as satisfied.

(7)   For the purposes of this section—

(a)   a document or information is sent or supplied in hard
copy form if it is sent or supplied in a paper copy or
similar form capable of being read, and

(b)   a document or information can be read only if it can be
read with the naked eye, or (to the extent that it consists
of images) it can be seen with the naked eye.

115C          Other agreed forms of communication

(1)   A document or information that is sent or supplied by a building
society otherwise than in hard copy form or electronically or by
means of a web site is validly sent or supplied if it is sent or
supplied in a form or manner that has been agreed by the
intended recipient.

(2)   For the purposes of this section “hard copy form” is to be read in
accordance with section 115B(7).”

10 In the following provisions, omit “, in a manner agreed between him and
the society,”—

  section 60(7B)(c),

  section 61(7D)(c),

  section 68(6B)(c),

  section 69(15B)(c),

  section 76(8C)(c).

11 In section 81(3B)(c), omit “, in a manner agreed for the purpose between
him and the society,”.

12    (1)   Schedule 2 is amended as follows.

(2)   In paragraph 20A(1B)(c), omit “, in a manner agreed between him and
the society,”.

(3)   In paragraphs 22B(2)(c) and 33(5C)(c), omit “, in a manner agreed
between him and the society for that purpose,”.

(4)   In paragraph 24(1B)(b), omit “in a manner agreed between the society
and that member,”.

(5)   In paragraph 32(2D)(c), omit “, in a manner agreed between the society
and the member,”.

(6)   In paragraph 33A(9)(c), omit “, in a manner agreed for the purpose
between him and the society”.

13 In paragraphs 3(2B)(c) and 9(2B)(c) of Schedule 8A, omit “in a manner
agreed between the society and that person,”.

14    (1)   Schedule 11 is amended as follows.

(2)   In paragraph 4(9C)(c), omit “, in a manner agreed between him and the
society,”.

(3)   In paragraph 7(7C)(c), for “in a manner agreed between the society and
that person, he” substitute “the person”.

(4)   In paragraph 8(3B)(c), omit “, in a manner agreed between him and the
society for the purpose,”.

Financial year

15    (1)   Section 117 (financial year of building societies) is amended as follows.

(2)   For subsection (1) substitute—

“(1)   A building society’s financial years (apart from its final financial
year) are determined according to its year-end date in each
calendar year.

For provision about a building society’s final financial year, see
subsection (1G).

(1A)   The year-end date of a building society established before 25th
August 1894 is—

(a)   the date up to which, as at 1st January 1987, the accounts
of the society were annually made up, or

(b)   if the society has, at any time before the day on which
subsection (1) comes into force (“the relevant day”),
altered its financial year in exercise of a power within
subsection (1B), 31st December.

(1B)   The powers referred to in subsection (1A)(b) are—

(a)   the power conferred by section 70(2) of the Building
Societies Act 1960,

(b)   the power conferred by section 128(2) of the Building
Societies Act 1962, and

(c)   the power conferred by subsection (3) of this section (as it
had effect immediately before the relevant day).

(1C)   The year-end date of a building society established on or after
25th August 1894 and before the relevant day is 31st December.

(1D)   The year-end date of a building society established on or after the
relevant day is the last day of the month in which the anniversary
of its establishment falls.

(1E)   The financial year of a building society established before the
relevant day is the period of 12 months ending with the year-end
date of the society (but see subsection (1G)).

(1F)   In the case of a building society established on or after the
relevant day—

(a)   the initial financial year of the society shall be the period
of more than 6 months, but not more than 18 months,
beginning with the date of its establishment and ending
with its year-end date, and

(b)   its subsequent financial years are successive periods of 12
months beginning immediately after the end of the
previous financial year and ending with its year-end date
(but see subsection (1G)).

(1G)   The final financial year of a building society is a period of less
than 12 months that begins immediately after the end of the
previous financial year and ends with the date as at which the
society makes up its final accounts.

(1H)   This section has effect subject to section 117A (alteration of
financial year).”

(3)   Omit subsections (2) and (3).

16 After section 117 insert—

“117A            Alteration of financial year

(1)   A building society may by notice given to the FCA specify a new
year-end date.

(2)   A notice given under subsection (1) has effect in relation to—

(a)   the financial year in which the notice is given (“the
current financial year”), and

(b)   subsequent financial years.

(3)   The notice must state whether the current financial year—

(a)   is to be shortened, so as to come to an end on the first
occasion on which the new year-end date falls or fell after
the beginning of the current financial year, or

(b)   is to be extended, so as to come to an end on the second
occasion on which that date falls or fell after the
beginning of the current financial year.

(4)   A notice extending a building society’s financial year is not
effective if given less than 5 years after the end of an earlier
financial year of the society that was extended under this section.

(5)   A financial year of a building society may not be extended so as
to exceed 18 months and a notice under subsection (1) is
ineffective if the current financial year as extended in accordance
with the notice would exceed that limit.”

17 In Schedule 20 (transitional and saving provisions), omit paragraph 16
(existing financial years).

18 The amendments made by paragraphs 15 to 17 have effect in relation to
financial years beginning on or after the day on which those
amendments come into force.”

Schedule 2

LORD DEIGHTON

111

Page 34, line 11, at end insert—

“2A    (1)   Part 25 of FSMA 2000 (injunctions and restitution) is amended as
follows.

(2)   In section 380 (injunctions), in subsection (6)(a), omit the “or” at the end
of sub-paragraph (i) and after sub-paragraph (ii) insert “or

(iii)   which is imposed by Part 7 of the Financial
Services Act 2012 (offences relating to financial
services) and whose contravention constitutes an
offence under that Part;”.

“(3)   In section 382 (restitution orders), in subsection (9)(a), omit the “or” at
the end of sub-paragraph (i) and after sub-paragraph (ii) insert “or

(iii)   which is imposed by Part 7 of the Financial
Services Act 2012 (offences relating to financial
services) and whose contravention constitutes an
offence under that Part;”.

(4)   In section 384 (power of FCA or PRA to require restitution), in subsection
(7), omit the “and” at the end of paragraph (a) and after paragraph (b)
insert “or

(c)   a requirement which is imposed by Part 7 of the Financial
Services Act 2012 (offences relating to financial services)
and whose contravention constitutes an offence under
that Part.””

112

Page 34, line 11, at end insert—

“2B    (1)   In Schedule 1ZA to FSMA 2000 (the Financial Conduct Authority),
paragraph 20 (penalties) is amended as follows.

(2)   In sub-paragraph (3)(b), after “this Act” insert “or under a provision
mentioned in sub-paragraph (4A)”.

(3)   In sub-paragraph (4), after paragraph (c) insert—

“(ca)   its powers under the relevant competition provisions
(as applied by Part 16A of this Act),”.

(4)   After sub-paragraph (4) insert—

“(4A)   “The relevant competition provisions” are—

(a)   section 31E of the Competition Act 1998 (enforcement
of commitments);

(b)   section 34 of that Act (enforcement of directions);

(c)   section 36 of that Act (penalties);

(d)   section 40A of that Act (penalties: failure to comply
with requirements);

(e)   section 174A of the Enterprise Act 2002 (penalties).”

(5)   In sub-paragraph (5)—

(a)   in paragraph (a), for “FSMA 2000” substitute “this Act”,

(b)   in paragraph (b), for “that Act” substitute “this Act”,

(c)   in paragraph (c), omit “of that Act”, and

(d)   after paragraph (c) insert—

“(ca)   offences under Part 1 of the Competition Act
1998,

(cb)   offences under Part 4 of the Enterprise Act
2002,”.”

113

[Withdrawn]

Clause 17

LORD DEIGHTON

[In substitution for Amendment 113]

113A

Page 28, line 38, leave out subsections (2) and (3) and insert—

“(2)   A statutory instrument containing an order or regulations under this Act is
subject to annulment in pursuance of a resolution of either House of
Parliament, unless—

(a)   the instrument contains only provision made under section 21
(commencement), or

(b)   the instrument is required by subsection (4) or any other enactment
to be laid in draft before, and approved by a resolution of, each
House.

(3)   Subsection (4) applies to a statutory instrument that contains (with or
without other provisions)—

(a)   regulations under section 8 (building societies: power to make
provision about ring-fencing);

(b)   an order under section (Meaning of “payment system”)(4) (meaning
of “payment system”);

(c)   an order under section (Power to make further consequential
amendments
) (power to make further consequential amendments)
that amends or repeals primary legislation;

(d)   an order under paragraph 6 of Schedule (Conduct of FMI
administration
) (conduct of FMI administration).

(4)   A statutory instrument to which this subsection applies may not be made
unless a draft of the instrument has been laid before, and approved by a
resolution of, each House of Parliament.

(5)   In subsection (3)(c) “primary legislation” means—

(a)   an Act of Parliament,

(b)   an Act of the Scottish Parliament,

(c)   a Measure or Act of the National Assembly for Wales, or

(d)   Northern Ireland legislation.”

After Clause 18

LORD DEIGHTON

114

Insert the following new Clause—

“Power to make further consequential amendments

(1)   The Treasury may by order make such provision amending, repealing,
revoking or applying with modifications any enactment to which this
section applies as they consider necessary or expedient in consequence of
any provision made by or under this Act.

(2)   This section applies to—

(a)   any enactment passed or made before the passing of this Act, and

(b)   any enactment passed or made on or before the last day of the
Session in which this Act is passed.

(3)   Amendments and repeals made under this section are additional to those
made by or under any other provision of this Act.”

Clause 21

LORD DEIGHTON

115

Page 29, line 33, at end insert—

“( )   Section (Building societies) and Schedule (Building societies), apart from
paragraph 4 of that Schedule, come into force at the end of the period of 2
months beginning with the day on which this Act is passed.”

LORD TURNBULL

LORD LAWSON OF BLABY

116

Page 29, line 36, at end insert—

“( )   No order may be made appointing a day for the coming into force of
section 4 so far as it inserts sections 142K to 142V of FSMA 2000 unless the
day is later than that on which the report of the first review under section
142J of that Act is published.”

LORD TURNBULL

LORD LAWSON OF BLABY

LORD MCFALL OF ALCLUITH

117

Page 29, line 36, at end insert—

“( )   No order may be made appointing a day for the coming into force of
section 4 so far as it inserts section 142VA of FSMA 2000 unless—

(a)   the day is later than that on which there is published the report of a
review under section 142J of that Act containing a recommendation
that section 4 of that Act should be brought into force to that extent,
and

(b)   a draft of the order has been laid before, and approved by a
resolution of, each House of Parliament.”

In the Title

LORD DEIGHTON

118

Line 4, after “insolvency;” insert “to make further provision about payment
systems and securities settlement systems;”

Prepared 17th October 2013