Parent undertakings

116 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 5  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) 10it 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
15142H(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.

20Rules 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
25relation 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) 30the 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
35to—

(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
40facilities 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) 5“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
10undertaking 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
15FCA;

(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) 20This 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.”

Fees to meet Treasury expenditure

117 25Fees to meet Treasury expenditure relating to international organisations

After section 410 of FSMA 2000 insert—

“Fees to meet Treasury expenses

410A Fees to meet certain expenses of the Treasury

(1) The Treasury may by regulations—

(a) 30enable the Treasury from time to time by direction to require the
FCA, the PRA or the Bank of England (each a “regulator”) to
require the payment of fees by relevant persons, or such class of
relevant person as may be specified in, or determined by the
regulator in accordance with, the direction, for the purpose of
35meeting relevant expenses incurred by the Treasury;

(b) make provision about how the regulator to which a direction is
given is to comply with the direction;

(c) require the regulator to pay to the Treasury, by such time or
times as may be specified in the direction, the amount of any
40fees received by the regulator.

(2) “Relevant expenses” are expenses (including any expenses of a capital
nature) which are attributable to United Kingdom membership of, or
Treasury participation in, a prescribed international organisation so far
as those expenses—

(a) represent a contribution (by way of subscription or otherwise)
to the resources of the international organisation, and

(b) are in the opinion of the Treasury attributable to functions of the
organisation which relate to financial stability or financial
5services.

(3) The regulations must provide for the charging of fees in pursuance of a
direction given under the regulations to the FCA or the PRA to be by
rules made by that regulator.

(4) The provisions of Chapter 2 of Part 9A apply to rules of the FCA or the
10PRA providing for the charging of fees in pursuance of a direction
given under the regulations—

(a) in the case of the FCA, as they apply to rules relating to the
payment of fees under paragraph 23 of Schedule 1ZA;

(b) in the case of the PRA, as they apply to rules relating to the
15payment of fees under paragraph 31 of Schedule 1ZB.

(5) Paragraph 36(1) of Schedule 17A applies to the charging of fees by the
Bank of England in pursuance of a direction given to the Bank under
the regulations.

(6) The regulations may in particular—

(a) 20make provision about what is, or is not, to be regarded as an
expense;

(b) specify requirements that the Treasury must comply with
before giving a direction;

(c) enable a direction to be varied or revoked by a subsequent
25direction;

(d) confer functions on a regulator.

(7) An amount payable to a regulator as a result of—

(a) any provision of rules made by the FCA or the PRA as a result
of the regulations, or

(b) 30the imposition of fees by the Bank of England as a result of a
direction given under the regulations to the Bank,

may be recovered as a debt due to the regulator.

(8) “Relevant persons” means—

(a) in the case of a direction given to the PRA, PRA-authorised
35persons;

(b) in the case of a direction given to the FCA, authorised persons
and recognised investment exchanges who (in either case) are
not PRA-authorised persons;

(c) in the case of a direction given to the Bank of England,
40recognised clearing houses, other than those falling within
paragraph (a) or (b).

(9) This section is subject to section 410B.

410B Directions in pursuance of section 410A

(1) In this section “a fees direction” means a direction given by the
45Treasury as a result of regulations under section 410A.

(2) Before giving a fees direction to the FCA, the PRA or the Bank of
England (each a “regulator”), the Treasury must consult the regulator
concerned.

(3) A fees direction must—

(a) 5be in writing;

(b) except in the case of a direction that revokes a previous
direction or a direction that varies a previous direction without
affecting the total amount intended to be raised by the fees,
specify the total amount intended to be raised by the fees to be
10charged by the regulator and explain how that amount is
calculated;

(c) contain such other information as may be prescribed.

(4) As soon as practicable after giving a fees direction, the Treasury must
lay before Parliament a copy of the direction.”

15Parliamentary control of statutory instruments under FSMA 2000

118 Amendments of section 429 of FSMA 2000

(1) Section 429 of FSMA 2000 (Parliamentary control of statutory instruments) is
amended as follows.

(2) In subsection (1)(a) (orders subject to affirmative procedure)—

(a) 20for “144(4), 192(b) or (e), 138K(6)(c)” substitute “138K(6)(c), 144(4),
192(b) or (e)”, and

(b) after “213(1A),” insert “234I(2),”.

(3) In subsection (2) (regulations subject to affirmative procedure), after “90B,”
insert “142W,”.

(4) 25After subsection (2) insert—

“(2A) Regulations to which subsection (2B) applies are not to be made unless
a draft of the regulations has been laid before Parliament and approved
by a resolution of each House.

(2B) This subsection applies to regulations which contain provision made
30under section 410A, other than provision made only by virtue of
subsection (2) of that section.”

(5) In subsection (8), for “or 23A” substitute “, 23A or 142Z”.

Bank of England

119 Accounts of Bank of England and its wholly-owned subsidiaries

(1) 35The Bank of England Act 1998 is amended as follows.

(2) In section 7 (accounts), in subsection (4), for the words from “appropriate” to
the end substitute “necessary to do so having regard to the Financial Stability
Objective”.

(3) After section 7 insert—

“7A Accounts of companies wholly owned by the Bank

(1) If the Bank considers it necessary to do so having regard to the
Financial Stability Objective, the Bank may by direction to a qualifying
5company exclude the application to the qualifying company of any of
the relevant Companies Act requirements.

(2) The relevant Companies Act requirements are the requirements to
which the directors of the qualifying company would otherwise be
subject under the Companies Act 2006 (except sections 412 and 413
10(directors’ benefits)) in relation to the preparation of accounts under
section 394 of that Act.

(3) A direction under subsection (1) may relate to one or more specified
accounting periods of the qualifying company, or to a specified
accounting period and all subsequent accounting periods of the
15qualifying company.

(4) The Bank must consult the Treasury before giving a direction under
subsection (1).

(5) The Treasury may by notice in writing to the Bank require it to publish
in such manner as it thinks fit such information relating to the accounts
20of a qualifying company as the Treasury may specify in the notice.

(6) The information specified in a notice under subsection (5) may include
information which as a result of a direction under subsection (1) was
excluded from accounts prepared in accordance with the Companies
Act 2006.

(7) 25The Treasury must consult the Bank before giving a notice under
subsection (5).

(8) A direction under subsection (1) or a notice under subsection (5) may
be revoked by a subsequent direction or notice (as the case may be).

(9) “Qualifying company” means any company which is wholly owned by
30the Bank other than—

(a) the Prudential Regulation Authority, or

(b) a company which is a bridge bank for the purposes of section
12(3) of the Banking Act 2009.

(10) For the purposes of subsection (9), a company is wholly owned by the
35Bank if—

(a) it is a company of which no person other than the Bank or a
nominee of the Bank is a member, or

(b) it is a wholly-owned subsidiary of a company within paragraph
(a).”

40Building societies

120 Building societies

Schedule 9 (which contains provision about building societies) has effect.

Minor amendments

121 Minor amendments

Schedule 10 (which contains amendments of, or connected with, the Financial
Services Act 2012 and amendments of provisions amended by that Act) has
5effect.

Part 8 Final provisions

122 Orders and regulations

(1) Any power of the Treasury to make an order or regulations under this Act is
10exercisable by statutory instrument.

(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 127
15(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) 20regulations under section 8 (building societies: power to make
provision about ring-fencing);

(b) an order under section 32(4) (meaning of “payment system”);

(c) an order under section 124 (power to make further consequential
amendments) that amends or repeals primary legislation;

(d) 25an order under paragraph 6 of Schedule 6 (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) 30In 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.

123 35Interpretation

In this Act—

• “enactment” includes—

  (a)

  an enactment contained in subordinate legislation,

  (b)

  an enactment contained in, or in an instrument made under, an
  40Act of the Scottish Parliament,

  (c)

  an enactment contained in, or in an instrument made under, a
  Measure or Act of the National Assembly for Wales, and

  Financial Services (Banking Reform) BillPage 96

  (d)

  an enactment contained in, or in an instrument made under,
  Northern Ireland legislation;

• “the FCA” means the Financial Conduct Authority;

• “FSMA 2000” means the Financial Services and Markets Act 2000;

• 5“the PRA” means the Prudential Regulation Authority.

124 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
10provision 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) 15Amendments and repeals made under this section are additional to those
made by or under any other provision of this Act.

125 Transitional provisions and savings

(1) The Treasury may by order make such provision as they consider necessary or
expedient for transitory, transitional or saving purposes in connection with the
20commencement of any provision made by or under this Act.

(2) An order under this section may—

(a) confer functions on the FCA or the PRA;

(b) modify, exclude or apply (with or without modifications) any
enactment (including any provision of, or made under, this Act).

126 25Extent

The provisions of this Act extend to England and Wales, Scotland and
Northern Ireland, except that the amendments made by section 9 (preferential
debts: Great Britain) have the same extent as the enactments amended.

127 Commencement and short title

(1) 30This Part comes into force on the day on which this Act is passed.

(2) Section 120 and Schedule 9, 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.

(3) The remaining provisions of this Act come into force on such day as the
35Treasury may by order appoint.

(4) Different days may be appointed for different purposes.

(5) This Act may be cited as the Financial Services (Banking Reform) Act 2013.

SCHEDULES

Section 7

SCHEDULE 1 Ring-fencing transfer schemes

1 Part 7 of FSMA 2000 (control of business transfer schemes) is amended as
5follows.

2 For “the authorised person concerned”, wherever occurring in Part 7
(including Schedule 12), substitute “the transferor concerned”.

3 (1) Section 103A (meaning of “the appropriate regulator”) is amended as
follows.

(2) 10In subsection (1), in paragraph (a), for “a scheme” substitute “a ring-fencing
transfer scheme or a scheme (other than a ring-fencing transfer scheme)”.

(3) At the end of subsection (2) insert—

“(d) in the case of a ring-fencing transfer scheme, means the body
to whose business the scheme relates.”

4 15In section 106 (banking business transfer schemes), at the end of subsection
(1)(c) insert “or a ring-fencing transfer scheme”.

5 After section 106A insert—

106B   Ring-fencing transfer scheme

(1) A scheme is a ring-fencing transfer scheme if it—

(a) 20is one under which the whole or part of the business carried
on—

(i) by a UK authorised person, or

(ii) by a qualifying body,

is to be transferred to another body (“the transferee”),

(b) 25is to be made for one or more of the purposes mentioned in
subsection (3), and

(c) is not an excluded scheme or an insurance business transfer
scheme.

(2) “Qualifying body” means a body which—

(a) 30is incorporated in the United Kingdom,

(b) is a member of the group of a UK authorised person, and

(c) is not itself an authorised person.

(3) The purposes are—

(a) enabling a UK authorised person to carry on core activities as
35a ring-fenced body in compliance with the ring-fencing
provisions;

(b) enabling the transferee to carry on core activities as a ring-
fenced body in compliance with the ring-fencing provisions;

(c) making provision in connection with the implementation of
proposals that would involve a body corporate whose group
5includes the body corporate to whose business the scheme
relates becoming a ring-fenced body while one or more other
members of its group are not ring-fenced bodies;

(d) making provision in connection with the implementation of
proposals that would involve a body corporate whose group
10includes the transferee becoming a ring-fenced body while
one or more other members of the transferee’s group are not
ring-fenced bodies.

(4) A scheme is an excluded scheme for the purposes of this section if—

(a) the body to whose business the scheme relates is a building
15society or credit union, or

(b) the scheme is a compromise or arrangement to which Part 27
of the Companies Act 2006 (mergers and divisions of public
companies) applies.

(5) For the purposes of subsection (1)(a) it is immaterial whether or not
20the business to be transferred is carried on in the United Kingdom.

(6) “UK authorised person” has the same meaning as in section 105.

(7) “Building society” and “credit union” have the same meanings as in
section 106.

(8) “The ring-fencing provisions” means ring-fencing rules and the duty
25imposed as a result of section 142G.”

6 (1) Section 107 (application for order sanctioning transfer scheme) is amended
as follows.

(2) In subsection (1), for “or a reclaim fund business transfer scheme” substitute
“, a reclaim fund business transfer scheme or a ring-fencing transfer
30scheme”.

(3) After subsection (2) insert—

“(2A) An application relating to a ring-fencing transfer scheme may be
made only with the consent of the PRA.

(2B) In deciding whether to give consent, the PRA must have regard to
35the scheme report prepared under section 109A in relation to the
ring-fencing transfer scheme.”

7 For the heading to section 109 substitute “Scheme reports: insurance
business transfer schemes”.

8 After section 109 insert—

109A 40  Scheme reports: ring-fencing transfer schemes

(1) An application under section 106B in respect of a ring-fencing
transfer scheme must be accompanied by a report on the terms of the
scheme (a “scheme report”).

(2) A scheme report may be made only by a person—

(a) appearing to the PRA to have the skills necessary to enable
the person to make a proper report, and

(b) nominated or approved for the purpose by the PRA.

(3) A scheme report must be made in a form approved by the PRA.

(4) 5A scheme report must state—

(a) whether persons other than the transferor concerned are
likely to be adversely affected by the scheme, and

(b) if so, whether the adverse effect is likely to be greater than is
reasonably necessary in order to achieve whichever of the
10purposes mentioned in section 106B(3) is relevant.

(5) The PRA must consult the FCA before—

(a) nominating or approving a person under subsection (2)(b), or

(b) approving a form under subsection (3).”

9 (1) Section 110 (right to participate in proceedings) is amended as follows.

(2) 15In subsection (1), after “section 107” insert “relating to an insurance business
transfer scheme, a banking business transfer scheme or a reclaim fund
business transfer scheme”.

(3) After subsection (2) insert—

“(3) Subsections (4) and (5) apply where an application under section 107
20relates to a ring-fencing transfer scheme.

(4) The following are also entitled to be heard—

(a) the PRA,

(b) where the transferee is an authorised person, the FCA, and

(c) any person (“P”) (including an employee of the transferor
25concerned or of the transferee) who alleges that P would be
adversely affected by the carrying out of the scheme.

(4)
P is not entitled to be heard by virtue of subsection (4)(c) unless
before the hearing P has—

(a) filed (in Scotland, lodged) with the court a written statement
30of the representations that P wishes the court to consider, and

(b) served copies of the statement on the PRA and the transferor
concerned.”

10 (1) Section 111 (sanction of court for business transfer schemes) is amended as
follows.

(2) 35In subsection (1), for “or a reclaim fund business transfer scheme” substitute
“, a reclaim fund business transfer scheme or a ring-fencing transfer
scheme”.

(3) In subsection (2), after paragraph (aa) insert—

“(ab) in the case of a ring-fencing transfer scheme, the appropriate
40certificates have been obtained (as to which see Part 2B of that
Schedule);”

11 In section 112 (effect of order sanctioning business transfer scheme), in
subsection (10), after “transfer scheme” insert “or ring-fencing transfer
scheme”.