(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) 5Regulations 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) 10are 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
15particular, 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) 20References 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) 25in 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
30the 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
35(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) 40after 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
5a 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) 10Condition 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
15systems,

(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
20Kingdom.

(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) 25the 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 30 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
35administration 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
40bank”)—

(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
5resolution 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
10in 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
15bank”)—

(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) 20section 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,
25and

(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) 30section 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
35with 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
40form) 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
45(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
50undertaking 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 5In 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—

5Recognised 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) 10after 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”
15substitute “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
20been 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
25months 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) 30in 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
35insolvency 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
40determination, resolution or appointment in question (see
subsections (1) to (4)).”

State aid

11 After section 256 insert—

““State aid

256A State aid

(1) 5This 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
10provisions 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
15director 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
20consult 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
25by 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) 30For 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) 35transfer 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)
40and 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) 5in 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
10references 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
15transfer 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) 20in 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) 25in 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 30In 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) 35after 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
40another 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) 5omit 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) 10after 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) 15resolution 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
20resolution 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) 25the 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) 30The 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) 35in 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 40After 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
5from 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
10with 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
15approved 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
20the 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) 25in the Table in subsection (3), in Part 1, at the appropriate places
insert—

(c) in the Table in subsection (3), in Part 3, at the appropriate place
45insert—

(d) in subsection (5), after paragraph (d) insert—

“(da) 50section 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 55In section 261 (index of defined terms), in the Table, at the appropriate places
insert—

Part 2 65Modification of Investment Bank Special Administration Regulations 2011

34 (1) This paragraph modifies the application of the Investment Bank Special
Administration Regulations 2011 (S.I. 2011/245S.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-
70month 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.

(3) In their application to those cases, the regulations have effect with the
75modifications 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
80regulator”;

(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) 5Where 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 paragraph
(6A), it must, within the period in Condition 3, inform the
person who gave the notice and the appropriate regulator
10whether or not it consents to the insolvency procedure to
which the notice relates going ahead.”

Section 26

SCHEDULE 3 Consequential amendments relating to Part 4

Financial Services and Markets Act 2000

1 (1) 15Section 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) 20In 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) 25In 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) 30Section 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
35function 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),