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Financial Services (Banking Reform) BillPage 80

(4) The third condition is that the PRA is of the opinion that the giving of the
direction is necessary in order to avoid the possible consequence falling within
subsection (3).

(5) A direction under this section is a direction requiring the Payment Systems
5Regulator not to exercise the power or not to exercise it in a specified manner.

(6) The direction may be expressed to have effect during a specified period or until
revoked.

(7) The Payment Systems Regulator is not required to comply with a direction
under this section if or to the extent that in the opinion of the Payment Systems
10Regulator compliance would be incompatible with any EU obligation or any
other international obligation of the United Kingdom.

(8) The reference in subsection (3)(b) to the “failure” of a PRA-authorised person
is to be read in accordance with section 2J(3) and (4) of FSMA 2000.

(9) In this section—

Consultation, accountability and oversight

96 20Regulator’s general duty to consult

(1) The Payment Systems Regulator must make and maintain effective
arrangements for consulting relevant persons on—

(a) the extent to which its general policies and practices are consistent with
its general duties under section 42, and

(b) 25how its payment systems objectives may best be achieved.

(2) The following are “relevant persons” for the purposes of this section—

(a) participants in regulated payment systems, and

(b) those who use, or are likely to use, services provided by regulated
payment systems.

(3) 30Arrangements under this section must include the establishment and
maintenance of one or more panels of persons to represent the interests of
relevant persons.

(4) Where the Payment Systems Regulator establishes a panel under subsection
(3), it must appoint one of the members of the panel to be its chair.

(5) 35The Treasury’s approval is required for the appointment or dismissal of the
chair of a panel established under subsection (3).

(6) The Payment Systems Regulator must—

(a) consider representations that are made to it in accordance with
arrangements made under this section, and

(b) 40from time to time publish, in such manner as it thinks fit, responses to
the representations.

Financial Services (Banking Reform) BillPage 81

97 Consultation in relation to generally applicable requirements

(1) In this section references to imposing a generally applicable requirement are
to—

(a) giving a general direction under section 47, or

(b) 5imposing a generally-imposed requirement under section 48,

and references to the requirement are to be read accordingly.

(2) Before imposing a generally applicable requirement, the Payment Systems
Regulator must—

(a) consult the Bank of England, the FCA and the PRA, and

(b) 10after doing so, publish a draft of the proposed requirement in the way
appearing to the Payment Systems Regulator to be best calculated to
bring it to the attention of the public.

(3) The draft must be accompanied by—

(a) a cost benefit analysis,

(b) 15an explanation of the purpose of the proposed requirement,

(c) an explanation of the Payment Systems Regulator’s reasons for
believing that imposing the requirement is compatible with its duties
under section 42, and

(d) notice that representations about the proposed requirement may be
20made to the Payment Systems Regulator within a specified time.

(4) Before imposing the proposed requirement the Payment Systems Regulator
must have regard to any representations made to it in accordance with
subsection (3)(d).

(5) If the Payment Systems Regulator proposes to impose the requirement, it must
25publish an account, in general terms, of—

(a) the representations made to it in accordance with subsection (3)(d), and

(b) its response to them.

(6) If the requirement differs from the draft published under subsection (2)(b) in a
way which is, in the opinion of the Payment Systems Regulator, significant the
30Payment Systems Regulator must (in addition to complying with subsection
(5)) publish details of the difference together with a cost benefit analysis.

(7) For the purposes of this section a “cost benefit analysis” is—

(a) an analysis of the costs together with an analysis of the benefits that will
arise—

(i) 35if the proposed requirement is imposed, or

(ii) if subsection (6) applies, from the requirement imposed, and

(b) subject to subsection (8), an estimate of those costs and of those benefits.

(8) If, in the opinion of the Payment Systems Regulator—

(a) the costs or benefits referred to in subsection (7) cannot reasonably be
40estimated, or

(b) it is not reasonably practicable to produce an estimate,

the cost benefit analysis need not estimate them, but must include a statement
of the Payment Systems Regulator’s opinion and an explanation of it.

(9) The Payment Systems Regulator may charge a reasonable fee for providing a
45person with a copy of a draft published under subsection (2)(b).

Financial Services (Banking Reform) BillPage 82

(10) Subsections (2)(b) and (3) to (6) do not apply if the Payment Systems Regulator
considers that the delay involved in complying with them would be prejudicial
to the interests of those who use, or are likely to use, services provided by
regulated payment systems.

(11) 5Subsections (3)(a) and (6) do not apply if the Payment Systems Regulator
considers that, making the appropriate comparison—

(a) there will be no increase in costs, or

(b) there will be an increase in costs but the increase will be of minimal
significance.

(12) 10In subsection (11) the “appropriate comparison” means—

(a) in relation to subsection (3)(a), a comparison between the overall
position if the requirement is imposed and the overall position if it is
not imposed;

(b) in relation to subsection (6), a comparison between the overall position
15after the imposing of the requirement and the overall position before it
was imposed.

98 Independent inquiries

(1) Section 68 of the Financial Services Act 2012 (cases in which Treasury may
arrange independent inquiries) is amended as follows.

(2) 20In subsection (1), for “two” substitute “three”.

(3) After subsection (3) insert—

(3A) The third case is where it appears to the Treasury that—

(a) events have occurred in relation to a regulated payment system
which caused or risked causing significant damage to business
25or other interests throughout the United Kingdom, and

(b) those events might not have occurred, or the threat or damage
might have been reduced, but for a serious failure in—

(i) the system established by Part

5

30 of the Financial Services
(Banking Reform) Act 2013 for the regulation of
payment systems, or

(ii) the operation of that system.

(4) In section 83(1) (interpretation), after the definition of “regulated activity”
35insert—

99 Investigations into regulatory failure

(1) Part 5 of the Financial Services Act 2012 (inquiries and investigations) is
amended as follows.

Financial Services (Banking Reform) BillPage 83

(2) After section 76 insert—

76A Duty of Payment Systems Regulator to investigate and report on
possible regulatory failure

(1) Subsection (3) applies where it appears to the Payment Systems
5Regulator that—

(a) events have occurred in relation to a regulated payment system
which had or could have had a significant adverse effect on
effective competition in the interests of—

(i) participants in the payment system, or

(ii) 10those who use, or are likely to use, the services provided
by the payment system, and

(b) those events might not have occurred, or the adverse effect
might have been reduced, but for a serious failure in—

(i) the system established by Part 5 of the Financial Services
15(Banking Reform) Act 2013 for the regulation of
payment systems, or

(ii) the operation of that system.

(2) Subsection (3) also applies where the Treasury direct the Payment
Systems Regulator that it appears to the Treasury that the conditions in
20subsection (1) are met in relation to specified events.

(3) The Payment Systems Regulator must carry out an investigation into
the events and the circumstances surrounding them and report to the
Treasury on the result of the investigation.

(4) Subsection (3) does not apply by virtue of subsection (1) if the Treasury
25direct the Payment Systems Regulator that it is not required to carry out
an investigation into the events concerned.

(5) In this section “participant”, in relation to a regulated payment system,
has the same meaning as in Part 5 of the Financial Services (Banking
Reform) Act 2013 (see section 35 of that Act).

(5) 30In section 77 (power of Treasury to require FCA or PRA to undertake
investigation)—

(a) in subsection (1)(a), for “either regulator” substitute “a regulator”;

(b) in subsection (3), omit the “or” at the end of paragraph (b) and after
paragraph (c) insert , or

(d) 35a regulated payment system.;

(c) the heading of that section becomes “Power of Treasury to require
regulator to undertake investigation
”.

(6) In section 78 (conduct of investigation), in subsection (1), for “or 74” substitute
“, 74 or 76A”.

(7) 40In section 79 (conclusion of investigation), for “or 74” substitute “, 74 or 76A”.

(8) In section 80 (statements of policy), in subsection (1)(a), for “or 74” substitute “,
74 or 76A”.

(9) In section 81 (publication of directions), in subsection (1), after paragraph (b)
insert—

(ba) 45section 76A(4);.

Financial Services (Banking Reform) BillPage 84

(10) In section 83(1) (interpretation)—

(a) after the definition of “listed securities” insert—

(b) in the definition of “regulator”, for “or the PRA” substitute “, the PRA
or the Payment Systems Regulator”.

100 Competition scrutiny

(1) Chapter 4 of Part 9A of FSMA 2000 (competition scrutiny) applies to the
10Payment Systems Regulator’s practices and regulating provisions in relation to
payment systems as it applies to the FCA’s practices and regulating provisions
within the meaning of that Chapter.

(2) In subsection (1)

(a) the reference to the Payment Systems Regulator’s practices in relation
15to 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
in relation to payment systems is a reference to the following—

(i) any general directions given under section 47;

(ii) 20any generally-imposed requirements under section 48;

(iii) any guidance given under section 89.

Miscellaneous and supplemental

101 Relationship with Part 8 of the Payment Services Regulations 2009

(1) The Payment Systems Regulator may not exercise any power under this Part
25for 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
of the Payment Services Regulations 2009 (S.I. 2009/209S.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
30access to payment systems) applies in relation to access to, or participation in,
a payment system by the person.

102 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) 35In sub-paragraph (1) the reference to the FCA’s functions includes its
functions under Part 5 of the Financial Services (Banking Reform)
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) 40In sub-paragraph (1) the reference to the PRA’s functions includes its
functions under Part 5 of the Financial Services (Banking Reform)
Act 2013 (regulation of payment systems).

Financial Services (Banking Reform) BillPage 85

(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.

103 Interpretation of Part

(1) In this Part—

(2) References in this Part to the Payment Systems Regulator’s payment systems
objectives are to be read in accordance with section 42(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.

Financial Services (Banking Reform) BillPage 86

Part 6 Special administration for operators of certain infrastructure systems

Introductory

104 Financial market infrastructure administration

5This Part—

(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.

105 Interpretation: infrastructure companies

(1) 10In this Part “infrastructure company” has the meaning given by this section.

(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
152006 (provision enabling procedures for evidencing and transferring
title) as the operator of a securities settlement system, or

(c) a company designated by the Treasury under subsection (4).

(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) 20The 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
(2)(a) or (b), and

(b) the Treasury are satisfied that an interruption in the provision of those
25services would have a serious adverse effect on the effective operation
of the recognised inter-bank payment system or securities settlement
system in question.

(5) An order under subsection (4) must specify the recognised inter-bank payment
system or securities settlement system in connection with which the company
30is designated.

(6) Before designating a company under subsection (4), the Treasury must
consult—

(a) the company to be designated,

(b) the person within subsection (2)(a) or (b) to whom the company
35provides services,

(c) the Bank of England,

(d) if the company is a PRA-authorised person, the PRA and the FCA, and

(e) if the company is an authorised person other than a PRA-authorised
person, the FCA.

106 40Interpretation: other expressions

(1) In this Part—

(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.

25FMI administration orders

107 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
30property 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
35property, and exercise and perform the FMI administrator’s functions, so as to
achieve the objective in section 108.

108 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
40objective 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

Financial Services (Banking Reform) BillPage 88

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
5purpose or those purposes.

(2) Where an FMI administrator is appointed in relation to a company designated
under subsection (4) of section 105, the objective of the FMI administration is—

(a) to ensure that services falling within that subsection continue to be
provided, and

(b) 10to 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.

(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) 15regulated activities falling within section 285(3)(a) or (b) of FSMA 2000,
or

(b) related activities which are necessary for the efficient carrying on of any
of those regulated activities.

(4) The specified means are—

(a) 20the rescue as a going concern of the company subject to the FMI
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

(b) 25as 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
30include, 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
35which 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
40practicable 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
45them.

Financial Services (Banking Reform) BillPage 89

109 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
5administrator.

(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).

110 Powers of court

(1) 10The 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
15124A 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
20case 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;

(b) 25dismiss 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;

(f) 30make 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.

(5) 35For 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).

111 FMI administrators

(1) The FMI administrator of a company—

(a) 40is an officer of the court, and

(b) in exercising and performing powers and duties in relation to the
company, is the company’s agent.

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