|
| |
| |
(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 |
| 5 |
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. |
| 10 |
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 |
| 15 |
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 |
| 20 |
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 |
| 25 |
transfers those, or other, securities to the bail-in administrator. |
| |
(5) | For example, the following provision may be made by virtue of |
| |
| |
(a) | provision that specified rights of a bail-in administrator with |
| |
respect to all or any of the securities are to be exercisable only |
| 30 |
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 |
| |
| |
(6) | A bail-in administrator must have regard, in performing any |
| 35 |
functions of the office, to any objectives that may be specified in a |
| |
| |
(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. |
| 40 |
(8) | See sections 48I to 48K for further provision about bail-in |
| |
| |
| |
| |
|
| |
| |
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. |
| 5 |
(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 |
| |
| 10 |
(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— |
| |
| 15 |
| |
| |
(4) | The condition in this section is in addition to the conditions in section |
| |
| |
Further provision about the bail-in option |
| 20 |
4 | After section 48A insert— |
| |
| |
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)— |
| 25 |
(a) | provision cancelling a liability owed by the bank; |
| |
(b) | provision modifying, or changing the form of, a liability |
| |
| |
(c) | provision that a contract under which the bank has a liability |
| |
is to have effect as if a specified right had been exercised |
| 30 |
| |
(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. |
| 35 |
(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 |
| |
| 40 |
| |
| |
|
| |
| |
| |
| 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. |
| |
| 5 |
| 3. The reference to changing the form of a liability owed by the bank, |
| |
| |
(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 |
| 10 |
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 |
| 15 |
have or do not have (directly or indirectly) specified |
| |
consequences or are to be treated in a specified manner for |
| |
| |
(b) | provision discharging persons from further performance of |
| |
obligations under a contract and dealing with the |
| 20 |
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 |
| 25 |
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; |
| 30 |
(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; |
| 35 |
(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 |
| 40 |
relation to salary or other remuneration, except variable |
| |
| |
(h) | liabilities owed to an employee or former employee in |
| |
relation to rights under a pension scheme, except rights to |
| |
| 45 |
(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 |
| |
| |
(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 |
| 5 |
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 |
| |
| |
48C | Meaning of “protected deposit” |
| 10 |
(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 |
| 15 |
| |
(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 |
| 20 |
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 |
| |
| 25 |
“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 |
| 30 |
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 |
| 35 |
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 |
| 40 |
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 |
| |
| |
“pension scheme” includes any arrangement for the payment of |
| 45 |
pensions, allowances and gratuities; |
| |
“secured” means secured against property or rights, or |
| |
otherwise covered by collateral arrangements. |
| |
| |
| |
|
| |
| |
| |
“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 |
| 5 |
| |
(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 |
| 10 |
(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. |
| 15 |
(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 |
| 20 |
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 |
| 25 |
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. |
| 30 |
48F | Power to amend definition of “excluded liabilities” |
| |
(1) | The Treasury may by order amend section 48B(6) by— |
| |
(a) | adding to the list of excluded liabilities; |
| |
(b) | amending or omitting any paragraph of that subsection, |
| |
other than paragraphs (a) to (c). |
| 35 |
(2) | The Treasury may by order amend section 48C or 48D. |
| |
(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 |
| 40 |
(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. |
| |
| |
| |
|
