Financial Services (Banking Reform) Bill (HL Bill 62)

(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
objective of the FMI administration as quickly and efficiently as is reasonably
practicable.

(3) 5The 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—

(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
10whole.

112 Continuity of supply

(1) This section applies where, before the commencement of FMI administration,
the infrastructure company had entered into arrangements with a supplier for
the provision of a supply to the infrastructure company.

(2) 15After 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
given after the commencement of FMI administration remain
unpaid for more than 28 days,

(ii) 20the 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
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
25the supply which relate to a supply given before the commencement of
FMI administration are paid, and

(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
30terminate 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
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
35supplier that purports to terminate the agreement if any action is taken to put
the infrastructure company in FMI administration is void.

(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) 40In this section—

• “commencement of FMI administration” means the making of the FMI
  administration order;

• “supplier” means the person controlling the provision of a supply to the
  infrastructure company, and includes a company that is a group
  45undertaking (as defined by section 1161(5) of the Companies Act 2006)
  in respect of the infrastructure company;

• “supply” means a supply of any of the following—

  Financial Services (Banking Reform) BillPage 91

  (a)

  computer hardware or software used by the infrastructure
  company in connection with the operation of the relevant
  system;

  (b)

  financial data;

  (c)

  5infrastructure 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;

  (f)

  10staff.

113 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) 15In deciding whether to give a direction under this section, the Bank of England
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) 20A direction under this section must not be incompatible with a direction of the
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
25respect of action or inaction in accordance with a direction under this section.

(6) Those persons are—

(a) the FMI administrator;

(b) the company in FMI administration;

(c) the officers or staff of the company.

(7) 30Immunity conferred by this section does not extend to action or inaction—

(a) in bad faith, or

(b) in contravention of section 6(1) of the Human Rights Act 1998.

(8) This section does not limit the powers conferred on the Bank of England by
section 191 of the Banking Act 2009 (directions) in relation to a recognised
35inter-bank payment system.

114 Conduct of administration, transfer schemes etc.

(1) Schedule 6 (which applies the provisions of Schedule B1 to the 1986 Act about
ordinary administration orders and certain other enactments to FMI
administration orders) has effect.

(2) 40Schedule 7 (which makes provision for transfer schemes to achieve the
objective of an FMI administration) has effect.

(3) The power to make rules conferred by section 411(1B) of the 1986 Act (rules
relating to bank administration) is to apply for the purpose of giving effect to

this Part as it applies for the purposes of giving effect to Part 3 of the Banking
Act 2009 (and, accordingly, as if the reference in section 411(1B) to that Part
included a reference to this Part).

Restrictions on other insolvency procedures

115 5Restriction on winding-up orders and voluntary winding up

(1) A petition by a person other than the Bank of England for a winding up order
in respect of an infrastructure company may not be determined unless—

(a) the petitioner has notified the Bank of England that the petition has
been presented, and

(b) 10the period of 14 days beginning with the day on which the notice is
received by the Bank has ended.

(2) A resolution for the voluntary winding up of an infrastructure company may
not be made unless—

(a) the infrastructure company has applied to the court under this section,

(b) 15the company has notified the Bank of England that the application has
been made, and

(c) after the end of the period of 14 days beginning with the day on which
the notice is received by the Bank, the court gives permission for the
resolution to be made.

116 20Restriction on making of ordinary administration orders

(1) This section applies where an ordinary administration application is made in
relation to an infrastructure company by a person other than the Bank of
England.

(2) The court must dismiss the application if—

(a) 25an FMI administration order is in force in relation to the company, or

(b) an FMI administration order has been made in relation to the company
but is not yet in force.

(3) Where subsection (2) does not apply, the court, on hearing the application,
must not exercise its powers under paragraph 13 of Schedule B1 to the 1986 Act
30(other than its power of adjournment) unless—

(a) the applicant has notified the Bank of England that the application has
been made, and

(b) the period of 14 days beginning with the day on which the notice is
received by the Bank has ended.

(4) 35On the making of an FMI administration order in relation to an infrastructure
company, the court must dismiss any ordinary administration application
made in relation to the company which is outstanding.

(5) “Ordinary administration application” means an application under paragraph
12 of Schedule B1 to the 1986 Act.

117 40Restriction on enforcement of security

A person may not take any step to enforce a security over property of an
infrastructure company unless—

(a) notice of the intention to do so has been given to the Bank of England,
and

(b) the period of 14 days beginning with the day on which the notice was
received by the Bank has ended.

5Financial support for companies in FMI administration

118 Loans

(1) This section applies where an FMI administration order has been made in
relation to an infrastructure company.

(2) The Treasury may, out of money provided by Parliament, make loans to the
10company for achieving the objective in section 108.

(3) A loan under this section may be made on such terms as the Treasury think fit.

(4) The Treasury must pay into the Consolidated Fund sums received by them as
a result of this section.

119 Indemnities

(1) 15This section applies where an FMI administration order has been made in
relation to an infrastructure company.

(2) The Treasury may agree to indemnify persons in respect of one or both of the
following—

(a) liabilities incurred in connection with the exercise of powers and duties
20by the FMI administrator;

(b) loss or damage sustained in that connection.

(3) The agreement may be made in whatever manner, and on whatever terms, the
Treasury think fit.

(4) As soon as practicable after agreeing to indemnify persons under this section,
25the Treasury must lay before Parliament a statement of the agreement.

(5) If sums are paid by the Treasury in consequence of an indemnity agreed to
under this section, the infrastructure company must pay the Treasury—

(a) such amounts in or towards the repayment to them of those sums as the
Treasury may direct, and

(b) 30interest, at such rates as they may direct, on amounts outstanding
under this subsection.

(6) Subsection (5) does not apply in the case of a sum paid by the Treasury for
indemnifying a person in respect of a liability to the infrastructure company.

(7) Where a sum has been paid out by the Treasury in consequence of an
35indemnity agreed to under this section, the Treasury must lay a statement
relating to that sum before Parliament—

(a) as soon as practicable after the end of the financial year in which that
sum is paid out, and

(b) (except where subsection (5) does not apply in the case of the sum) as
40soon as practicable after the end of each subsequent relevant financial
year.

(8) In relation to a sum paid out in consequence of an indemnity, a financial year
is a relevant financial year for the purposes of subsection (7) unless—

(a) before the beginning of that year, the whole of that sum has been repaid
to the Treasury under subsection (5), and

(b) 5the infrastructure company is not at any time during that year subject
to liability to pay interest on amounts that became due under that
subsection in respect of that sum.

(9) The power of the Treasury to agree to indemnify persons—

(a) is confined to a power to agree to indemnify persons in respect of
10liabilities, loss and damage incurred or sustained by them as relevant
persons, but

(b) includes power to agree to indemnify persons (whether or not they are
identified or identifiable at the time of the agreement) who
subsequently become relevant persons.

(10) 15For the purposes of this section each of the following is a relevant person—

(a) the FMI administrator;

(b) an employee of the FMI administrator;

(c) a member or employee of a firm of which the FMI administrator is a
member;

(d) 20a member or employee of a firm of which the FMI administrator is an
employee;

(e) a member or employee of a firm of which the FMI administrator was an
employee or member at a time when the order was in force;

(f) a body corporate which is the employer of the FMI administrator;

(g) 25an officer, employee or member of such a body corporate.

(11) For the purposes of subsection (10)—

(a) the references to the FMI administrator are to be read, where two or
more persons are appointed to act as the FMI administrator, as
references to any one or more of them, and

(b) 30the references to a firm of which a person was a member or employee
at a particular time include references to a firm which holds itself out to
be the successor of a firm of which the person was a member or
employee at that time.

(12) The Treasury must pay into the Consolidated Fund sums received by them as
35a result of subsection (5).

Interpretation

120 Interpretation of Part

(1) In this Part—

• “the 1986 Act” means the Insolvency Act 1986;

• 40“business”, “member”, “property” and “security” have the same meaning
  as in the 1986 Act;

• “company” has the meaning given by section 106;

• “the court” means—

  (a)

  in England and Wales and Northern Ireland, the High Court;

  (b)

  45in Scotland, the Court of Session;

Financial Services (Banking Reform) BillPage 95

• “FMI administration order” and “FMI administrator” are to be read in
  accordance with section 107;

• “infrastructure company” has the meaning given by section 105;

• “operator”, in relation to a recognised inter-bank payment system, has the
  5meaning given by section 106;

• “recognised inter-bank payment system” has the meaning given by
  section 106;

• “regulated activity” has the same meaning as in FSMA 2000;

• “the relevant system” has the meaning given by section 106;

• 10“securities settlement system” has the meaning given by section 106.

(2) In this Part references to the FMI administrator of a company include a person
appointed under paragraph 91 or 103 of Schedule B1 to the 1986 Act, as applied
by Schedule 6 to this Act, to be the FMI administrator of a company.

(3) In this Part references to a person qualified to act as an insolvency practitioner
15in relation to a company are to be read in accordance with Part 13 of the 1986
Act, but as if references in that Part to a company included a company
registered under the Companies Act 2006 in Northern Ireland.

Application of Part to Northern Ireland

121 Northern Ireland

(1) 20This section makes provision about this Part in its application to Northern
Ireland.

(2) Any reference to any provision of the 1986 Act is to have effect as a reference
to the corresponding provision of the Insolvency (Northern Ireland) Order
1989.

(3) 25Section 120(3) is to have effect as if the reference to Northern Ireland were a
reference to England and Wales or Scotland.

Part 7 Miscellaneous

Competition

122 30Functions of FCA under competition legislation

Schedule 8 (which contains provision conferring on the FCA functions under
competition legislation) has effect.

123 Competition as a secondary objective of the PRA

(1) For section 2H of FSMA 2000 substitute—

“2H 35Secondary competition objective and duty to have regard to regulatory
principles

(1) When discharging its general functions in a way that advances its
objectives (see section 2F), the PRA must so far as is reasonably possible
act in a way which, as a secondary objective, facilitates effective

competition in the markets for services provided by PRA-authorised
persons in carrying on regulated activities.

(2) In discharging its general functions, the PRA must also have regard to
the regulatory principles in section 3B.”

(2) 5In section 3B (regulatory principles to be applied by both regulators), in
subsection (1), for “2H(1)(a)” substitute “2H(2)”.

(3) In Schedule 1ZB to FSMA 2000 (the Prudential Regulation Authority)—

(a) in paragraph 19 (annual report), in sub-paragraph (1)—

(i) after paragraph (b) insert—

“(ba) 10how it has complied with section 2H(1),”, and

(ii) in paragraph (c), omit the words from “and of” onwards, and

(b) in paragraph 20 (consultation about annual report), in sub-paragraph
(1)(c), for the words from “and the PRA” onwards substitute “and the
PRA has facilitated effective competition in accordance with section 2H
15and has considered the regulatory principles in section 3B”.

Parent undertakings

124 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 20  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) 25it 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
30142H(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.

35Rules 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
40relation 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) 5the 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
10to—

(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
15facilities 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) 20“Debt instrument” has the same meaning as in section 142Y.

(6) “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) 25where the subsidiary undertakings of the qualifying parent
undertaking 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
30undertaking do not include any PRA-authorised person, the
FCA;

(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) 35after that subsection insert—

“(1A) This 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

125 Fees to meet Treasury expenditure relating to international organisations

(1) After section 410 of FSMA 2000 insert—

“Fees to meet Treasury expenses

410A 5Fees to meet certain expenses of the Treasury

(1) The Treasury may by regulations—

(a) enable 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
10relevant person as may be specified in, or determined by the
regulator in accordance with, the direction, for the purpose of
meeting 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) 15require the regulator to pay to the Treasury, by such time or
times as may be specified in the direction, the amount of any
fees 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
20Treasury 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
25organisation which relate to financial stability or financial
services.

(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) 30The provisions of Chapter 2 of Part 9A apply to rules of the FCA or the
PRA 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) 35in the case of the PRA, as they apply to rules relating to the
payment 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) 40The regulations may in particular—

(a) make 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
direction;

(d) confer functions on a regulator.

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

(a) 5any provision of rules made by the FCA or the PRA as a result
of the regulations, or

(b) the 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) 10“Relevant persons” means—

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

(b) in the case of a direction given to the FCA, authorised persons
and recognised investment exchanges who (in either case) are
15not PRA-authorised persons;

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

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

410B 20Directions in pursuance of section 410A

(1) In this section “a fees direction” means a direction given by the
Treasury 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
25concerned.

(3) A fees direction must—

(a) be in writing;

(b) except in the case of a direction that revokes a previous
direction or a direction that varies a previous direction without
30affecting the total amount intended to be raised by the fees,
specify the total amount intended to be raised by the fees to be
charged by the regulator and explain how that amount is
calculated;

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

(4) 35As soon as practicable after giving a fees direction, the Treasury must
lay before Parliament a copy of the direction.”

(2) In section 3A of FSMA 2000 (meaning of “regulator”), in subsection (3)—

(a) omit the “or” at the end of paragraph (a), and

(b) after paragraph (b) insert “or

(c) 40the meaning of “regulator” in sections 410A and 410B
(fees to meet certain expenses of Treasury).”