Financial Services (Banking Reform) Bill

House of Lords

Session 2013 - 14
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Other Bills before Parliament

Financial Services (Banking Reform) Bill

Financial Services (Banking Reform) Bill
Schedule 2 — Bail-in stabilisation option
Part 1 — Amendments of Banking Act 2009
127

(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
5
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).
10
(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.”
15
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.”
20
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
25
insert—

“48F(1)
Power to amend
Draft

and (2)
definition of
affirmative

“excluded liabilities”
resolution

48G
Insolvency treatment
Draft

30

principles
affirmative

resolution

48P
Safeguarding of
Draft

certain financial
affirmative

arrangements
resolution

35

52A
Bail-in compensation
Draft

orders
affirmative

resolution”

“60A
Third party
Draft

compensation:
affirmative

40

instruments
resolution”;

containing special

bail-in provision

Financial Services (Banking Reform) Bill
Schedule 2 — Bail-in stabilisation option
Part 2 — Modification of Investment Bank Special Administration Regulations 2011
128

(c)
in the Table in subsection (3), in Part 3, at the appropriate place
insert—

“152A
Property transfer
Draft

from transferred
affirmative

institution
resolution”;

5
(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
10
from transferred institution),”.
33
In section 261 (index of defined terms), in the Table, at the appropriate places
insert—

“Bail-in
49”

compensation

15

order

“Resolution
12A”

instrument

“Special bail-
48B”.

in provision

20
Part 2
Modification of Investment Bank Special Administration Regulations 2011
34    (1)
This paragraph 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
25
Banking Act 2009 with respect to the investment bank in the relevant 3-
month period.
      (2)
In sub-paragraph (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.
30
      (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
35
of England” and after “notice” insert “and the appropriate
regulator”;

Financial Services (Banking Reform) Bill
Schedule 3 — Consequential amendments relating to Part 4
129

(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
5
also inform the Bank of England of the contents of the notice.
(6B)
Where the Bank of England receives notice under paragraph
(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
10
which the notice relates going ahead.”
Schedule 3
Section 26

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
15
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
20
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
25
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.
30
      (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
35
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),

Financial Services (Banking Reform) Bill
Schedule 3 — Consequential amendments relating to Part 4
130

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—
5
“(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;”.
10
      (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
15
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
20
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)”.
25
      (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)”.
30
      (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)”.
35
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”;
40

Financial Services (Banking Reform) Bill
Schedule 3 — Consequential amendments relating to Part 4
131

(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
5
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—
10
“(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
15
(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,
20
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)”.
25
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.
30
      (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—
35
“(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
40
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”;

Financial Services (Banking Reform) Bill
Schedule 4 — The Payment Systems Regulator
132

(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)—
5
(a)
omit paragraph (b);
(b)
in paragraph (c)(i)—
(i)
after “section” insert “63ZD,”, and
(ii)
omit “64,”.
Financial Services Act 2012
10
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”;
15
(b)
in paragraph (c)(i)—
(i)
after “section” insert “63ZD,”, and
(ii)
omit “64,”.
      (3)
In subsection (5)—
(a)
omit paragraph (b);
20
(b)
in paragraph (c)(i)—
(i)
after “section” insert “63ZD,”, and
(ii)
omit “64,”.
Schedule 4
Section 31

The Payment Systems Regulator
25
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.
30
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
35
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.

Financial Services (Banking Reform) Bill
Schedule 4 — The Payment Systems Regulator
133

      (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
      (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
10
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
15
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
20
(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—
25
(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
30
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.
35

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 44;
40