Financial Services (Banking Reform) Bill

House of Lords

Session 2013 - 14
Internet Publications
Other Bills before Parliament

Financial Services (Banking Reform) Bill

Financial Services (Banking Reform) Bill
Part 5 — Regulation of payment systems
77

(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
5
in relation to payment systems is a reference to the following—
(i)
any general directions given under section 44;
(ii)
any requirements imposed under section 45 on all operators of
regulated payment systems;
(iii)
any guidance given under section 81.
10
Miscellaneous and supplemental
93
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
15
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.
20
94
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)
25
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)
30
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.
95
Interpretation of Part
(1)
In this Part—
35
“compliance failure” has the meaning given by section 61;
“designation order” has the meaning given by section 34;
“direct access”, in relation to a payment system, is to be read in accordance
with section 33(6);
“document” includes information recorded in any form and, in relation to
40
information recorded otherwise than in legible form, references to its
production include references to producing a copy of the information

Financial Services (Banking Reform) Bill
Part 6 — Special administration for operators of certain infrastructure systems
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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 44(5);
“general guidance” has the meaning given by section 81(3);
“infrastructure provider”, in relation to a payment system, has the
5
meaning given by section 33(4);
“operator”, in relation to a payment system, has the meaning given by
section 33(3);
“participant”, in relation to a payment system, has the meaning given by
section 33 (and references to participation in a payment system are to
10
be read in accordance with that section);
“payment service provider”, in relation to a payment system, has the
meaning given by section 33(5);
“payment system” has the meaning given by section 32;
“recognised inter-bank payment system” means an inter-bank payment
15
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
20
2000.
(2)
References in this Part to the Payment Systems Regulator’s payment systems
objectives are to be read in accordance with section 39(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.
25
Part 6
Special administration for operators of certain infrastructure systems
Introductory
96
Financial market infrastructure administration
This Part—
30
(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.
97
Interpretation: infrastructure companies
(1)
In this Part “infrastructure company” has the meaning given by this section.
35
(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
40
title) as the operator of a securities settlement system, or
(c)
a company designated by the Treasury under subsection (4).

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(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
5
(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.
10
(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—
15
(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
20
(e)
if the company is an authorised person other than a PRA-authorised
person, the FCA.
98
Interpretation: other expressions
(1)
In this Part—
“company” means a company registered under the Companies Act 2006;
25
“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;
30
“the relevant system” means—
(a)
in relation to an infrastructure company falling within
subsection (2)(a) of section 97, the recognised inter-bank
payment system,
(b)
in relation to an infrastructure company falling within
35
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
40
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.
45
(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.

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FMI administration orders
99
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
5
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
10
property, and exercise and perform the FMI administrator’s functions, so as to
achieve the objective in section 100.
100
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
15
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
20
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.
25
(2)
Where an FMI administrator is appointed in relation to a company designated
under subsection (4) of section 97, 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
30
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,
35
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
40
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

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(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
5
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
10
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
15
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
20
them.
101
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
25
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).
102
Powers of court
30
(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
35
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
40
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;
45

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(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;
5
(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.
10
(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).
103
FMI administrators
(1)
The FMI administrator of a company—
15
(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
20
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—
25
(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.
104
Continuity of supply
(1)
This section applies where, before the commencement of FMI administration,
30
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
35
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
40
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

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(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
5
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.
10
(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
15
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;
20
“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;
25
(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.
30
105
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
35
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
40
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.
45