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

(2) The first review must be completed before the end of the period of 5
years beginning with the day on which the first ring-fencing rules come
into force.

(3) Subsequent reviews must be completed before the end of the period of
55 years beginning with the day on which the previous review was
completed.

(4) The PRA must give the Treasury a report of each review.

(5) The Treasury must lay a copy of the report before Parliament.

(6) The PRA must publish the report in such manner as it thinks fit.

(7) 10If (because any ring-fenced body is not a PRA-authorised person)
section 142H has the effect of requiring the FCA to make ring-fencing
rules, subsections (1) to (6) apply to the FCA as they apply to the PRA.

Group restructuring powers

142K   Cases in which group restructuring powers become exercisable

(1) 15The appropriate regulator may exercise the group restructuring
powers only if it is satisfied that one or more of Conditions A to D is met
in relation to a ring-fenced body that is a member of a group.

(2) Condition A is that the carrying on of core activities by the ring-fenced
body is being adversely affected by the acts or omissions of other
20members of its group.

(3) Condition B is that in carrying on its business the ring-fenced body—

(a) is unable to take decisions independently of other members of
its group, or

(b) depends on resources which are provided by a member of its
25group and which would cease to be available in the event of the
insolvency of the other member.

(4) Condition C is that in the event of the insolvency of one or more other
members of its group the ring-fenced body would be unable to
continue to carry on the core activities carried on by it.

(5) 30Condition D is that the ring-fenced body or another member of its
group has engaged, or is engaged, in conduct which is having, or
would apart from this section be likely to have, an adverse effect on the
advancement by the appropriate regulator—

(a) in the case of the PRA, of the objective in section 2B(3)(c), or

(b) 35in the case of the FCA, of the continuity objective.

(6) The appropriate regulator may not exercise the group restructuring
powers in relation to any person if—

(a) either regulator has previously exercised the group
restructuring powers in relation to that person, and

(b) 40the decision notice in relation to the current exercise is given
before the second anniversary of the day on which the decision
notice in relation to the previous exercise was given.

(7) In this section and sections 142L to 142Q “the appropriate regulator”
means—

(a) where the ring-fenced body is a PRA-authorised person, the
PRA;

(b) where it is not, the FCA.

142L   Group restructuring powers

(1) 5In this Part “the group restructuring powers” means one or more of the
powers conferred by this section.

(2) Where the appropriate regulator is the PRA, the powers conferred by
this section are as follows—

(a) in relation to the ring-fenced body, power to impose a
10requirement on the ring-fenced body requiring it to take any of
the steps mentioned in subsection (5),

(b) in relation to any member of the ring-fenced body’s group
which is a PRA-authorised person, power to impose a
requirement on the PRA-authorised person requiring it to take
15any of the steps mentioned in subsection (6),

(c) in relation to any member of the ring-fenced body’s group
which is an authorised person but not a PRA-authorised
person, power to direct the FCA to impose a requirement on the
authorised person requiring it to take any of the steps
20mentioned in subsection (6), and

(d) in relation to a qualifying parent undertaking, power to give a
direction under this paragraph to the parent undertaking
requiring it to take any of the steps mentioned in subsection (6).

(3) Where the appropriate regulator is the FCA, the powers conferred by
25this section are as follows—

(a) in relation to the ring-fenced body, power to impose a
requirement on the ring-fenced body requiring it to take any of
the steps mentioned in subsection (5),

(b) in relation to any member of the ring-fenced body’s group
30which is an authorised person but not a PRA-authorised
person, power to impose a requirement on the authorised
person requiring it to take any of the steps mentioned in
subsection (6),

(c) in relation to any member of the ring-fenced body’s group
35which is a PRA-authorised person, power to direct the PRA to
impose a requirement on the authorised person requiring it to
take any of the steps mentioned in subsection (6), and

(d) in relation to a qualifying parent undertaking, power to give a
direction under this paragraph to the parent undertaking
40requiring it to take any of the steps mentioned in subsection (6).

(4) A parent undertaking of a ring-fenced body by reference to which the
group restructuring powers are exercisable is for the purposes of this
Part a “qualifying parent undertaking” if—

(a) it is a body corporate which is incorporated in the United
45Kingdom and has a place of business in the United Kingdom,
and

(b) it is not itself an authorised person.

(5) The steps that the ring-fenced body may be required to take are—

(a) to dispose of specified property or rights to an outside person;

(b) to apply to the court under Part 7 for an order sanctioning a
ring-fencing transfer scheme relating to the transfer of the
whole or part of the business of the ring-fenced body to an
outside person;

(c) 5otherwise to make arrangements discharging the ring-fenced
body from specified liabilities.

(6) The steps that another authorised person or a qualifying parent
undertaking may be required to take are—

(a) to dispose of any shares in, or securities of, the ring-fenced body
10to an outside person;

(b) to dispose of any interest in any other body corporate that is a
member of the ring-fenced body’s group to an outside person;

(c) to dispose of other specified property or rights to an outside
person;

(d) 15to apply to the court under Part 7 for an order sanctioning a
ring-fencing transfer scheme relating to the transfer of the
whole or part of the business of the authorised person or
qualifying parent undertaking to an outside person.

(7) In subsections (5) and (6) “outside person” means a person who, after
20the implementation of the disposal or scheme in question, will not be a
member of the group of the ring-fenced body by reference to which the
powers are exercised (whether or not that body is to remain a ring-
fenced body after the implementation of the disposal or scheme in
question).

(8) 25It is immaterial whether a requirement to be imposed on an authorised
person by the appropriate regulator, or by the other regulator at the
direction of the appropriate regulator, is one that the regulator
imposing it could impose under section 55L or 55M.

142M   Procedure: preliminary notices

(1) 30If the appropriate regulator proposes to exercise the group
restructuring powers in relation to any authorised person or qualifying
parent undertaking (“the person concerned”), the regulator must give
each of the relevant persons a notice (a “preliminary notice”).

(2) The preliminary notice must—

(a) 35state that it is a preliminary notice,

(b) state that the regulator proposes to exercise the group
restructuring powers,

(c) state the action which the regulator proposes to take in the
exercise of those powers,

(d) 40be in writing, and

(e) give reasons for the proposed action (which must include the
regulator’s reasons for being satisfied as to the matters
mentioned in section 142K(1)).

(3) The appropriate regulator must give a copy of the preliminary notice to
45the Treasury.

(4) The preliminary notice must specify a reasonable period (which may
not be less than 14 days) within which any of the relevant persons may
make representations to the regulator.

(5) The relevant persons are—

(a) the person concerned,

(b) the ring-fenced body, if not the person concerned, and

(c) any other authorised person who will, in the opinion of the
5appropriate regulator, be significantly affected by the exercise
of the group restructuring powers.

142N   Procedure: warning notice and decision notice

(1) If the appropriate regulator has given a preliminary notice under
section 142M, it must either—

(a) 10if, having considered any representations made by any of the
relevant persons, it still proposes to exercise the group
restructuring powers, give each of the relevant persons a
warning notice during the warning notice period, or

(b) before the end of the warning notice period, give each of them
15a written notice stating that it has decided not to exercise the
powers and give a copy of that notice to the Treasury.

(2) The “warning notice period” is the period—

(a) beginning 3 months after the end of the period specified under
section 142M(4) as that within which any representations must
20be made, and

(b) ending 6 months after the end of that period.

(3) Before giving a warning notice under subsection (1)(a), the appropriate
regulator must—

(a) give the Treasury a draft of the notice,

(b) 25provide the Treasury with any information that the Treasury
may require in order to decide whether to give their consent,
and

(c) obtain the consent of the Treasury.

(4) The action specified in the warning notice may be different from that
30specified in the preliminary notice if—

(a) the appropriate regulator considers that different action is
appropriate as a result of any change in circumstances since the
preliminary notice was given, or

(b) the person concerned consents to the change.

(5) 35The regulator must, in particular, have regard to anything that—

(a) has been done by the person concerned since the giving of the
preliminary notice, and

(b) represents action that would have been required in pursuance
of the proposals in that notice.

(6) 40If the regulator decides to exercise the group restructuring powers it
must give each of the relevant persons a decision notice.

(7) The decision notice must specify the date or dates by which each of the
following must be completed—

(a) any disposal of shares, securities or other property that is
45required by the notice;

(b) any transfer of liabilities for which the notice requires
arrangements to be made.

(8) The giving of consent for the purpose of subsection (4)(b) does not
affect any right to refer to the Tribunal the matter to which any decision
notice resulting from the warning notice relates.

(9) “The relevant persons” has the same meaning as in section 142M.

142O 5  References to Tribunal

(1) A notified person who is aggrieved by—

(a) the imposition by either regulator of a requirement as a result of
section 142L(2)(a) or (b) or (3)(a) or (b),

(b) a requirement to be imposed as a result of the giving by one
10regulator to the other of a direction under section 142L(2)(c) or
(3)(c), or

(c) the giving by either regulator of a direction under section
142L(2)(d) or (3)(d),

may refer the matter to the Tribunal.

(2) 15“Notified person” means a person to whom a decision notice under
section 142N(6) was given or ought to have been given.

142P   Subsequent variation of requirement or direction

(1) A regulator may at any time with the consent of the person concerned
vary—

(a) 20a requirement imposed by it as a result of section 142L(2)(a) or
(b) or (3)(a) or (b), or

(b) a direction given by it as a result of section 142L(2)(c) or (d) or
(3)(c) or (d).

(2) The person concerned may at any time apply to the appropriate
25regulator for the variation of—

(a) a requirement imposed by it as a result of section 142L(2)(a) or
(b) or (3)(a) or (b), or

(b) a direction given by it as a result of section 142L(2)(c) or (d) or
(3)(c) or (d).

(3) 30Sections 55U, 55V, 55X and 55Z3 apply to an application under
subsection (2) as they apply to an application for the variation of a
requirement imposed by the appropriate regulator under section 55L
or 55M.

142Q   Consultation etc. between regulators

(1) 35Where a notice under section 142M or a warning notice or decision
notice under section 142N relates to a requirement to be imposed in
pursuance of a direction to be given as a result of section 142L(2)(c) or
(3)(c), the appropriate regulator must—

(a) consult the other regulator before giving the notice, and

(b) 40give a copy of the notice to the other regulator.

(2) The appropriate regulator must consult the other regulator before
varying under section 142P a direction given as a result of section
142L(2)(c) or (3)(c).

(3) Directions given by the FCA as a result of section 142L(3)(c) are subject
45to any directions given to the FCA under section 3I.

142R   Relationship with regulators’ powers under Parts 4A and 12A

(1) Subsection (2) applies in relation to—

(a) a ring-fenced body which is a member of a mixed group, and

(b) a parent undertaking of such a ring-fenced body.

(2) 5A regulator may not exercise its general powers in relation to the ring-
fenced body or parent undertaking so as to achieve either of the results
in subsection (3).

(3) Those results are—

(a) that no existing group member is a parent undertaking of the
10ring-fenced body;

(b) that the ring-fenced body is not a member of a mixed group.

(4) In subsection (3)(a) “existing group member” means a person who is a
member of the ring-fenced body’s group at the time when the
requirement is imposed or the direction given.

(5) 15Except as provided by subsections (1) to (4), the provisions of sections
142K to 142Q do not limit the general powers of either regulator.

(6) For the purposes of this section, a regulator’s “general powers” are its
powers under the following provisions—

(a) section 55L or 55M (imposition of requirements in connection
20with Part 4A permission);

(b) section 192C (power to direct qualifying parent undertaking).

(7) For the purposes of this section, a ring-fenced body is a member of a
mixed group if a member of the ring-fenced body’s group carries on an
excluded activity.

25Failure of parent undertaking to comply with direction

142S   Power to impose penalty or issue censure

(1) This section applies if a regulator is satisfied that a person who is or has
been a qualifying parent undertaking as defined in section 142L(4) (“P”)
has contravened a requirement of a direction given to P by that
30regulator as a result of section 142L(2)(d) or (3)(d).

(2) The regulator may impose a penalty of such amount as it considers
appropriate on—

(a) P, or

(b) any person who was knowingly concerned in the
35contravention.

(3) The regulator may, instead of imposing a penalty on a person, publish
a statement censuring the person.

(4) The regulator may not take action against a person under this section
after the end of the limitation period unless, before the end of that
40period, it has given a warning notice to the person under section 142T.

(5) “The limitation period” means the period of 3 years beginning with the
first day on which the regulator knew of the contravention.

(6) For this purpose a regulator is to be treated as knowing of a
contravention if it has information from which the contravention can
reasonably be inferred.

(7) The requirements that a regulator may be required to impose as a result
5of a direction under section 142L(2)(c) or (3)(c) include requirements
that the regulator would not but for the direction have power to
impose.

142T   Procedure and right to refer to Tribunal

(1) If a regulator proposes to take action against a person under section
10142S, it must give the person a warning notice.

(2) A warning notice about a proposal to impose a penalty must state the
amount of the penalty.

(3) A warning notice about a proposal to publish a statement must set out
the terms of the statement.

(4) 15If the regulator decides to take action against a person under section
142S, it must give the person a decision notice.

(5) A decision notice about the imposition of a penalty must state the
amount of the penalty.

(6) A decision notice about the publication of a statement must set out the
20terms of the statement.

(7) If the regulator decides to take action against a person under section
142S, the person may refer the matter to the Tribunal.

142U   Duty on publication of statement

After a statement under section 142S(3) is published, the regulator must
25send a copy of the statement to—

(a) the person in respect of whom it is made, and

(b) any person to whom a copy of the decision notice was given
under section 393(4).

142V   Imposition of penalties under section 142S: statement of policy

(1) 30Each regulator must prepare and issue a statement of policy with
respect to—

(a) the imposition of penalties under section 142S, and

(b) the amount of penalties under that section.

(2) A regulator’s policy in determining what the amount of a penalty
35should be must include having regard to—

(a) the seriousness of the contravention,

(b) the extent to which the contravention was deliberate or reckless,
and

(c) whether the person on whom the penalty is to be imposed is an
40individual.

(3) A regulator may at any time alter or replace a statement issued under
this section.

(4) If a statement issued under this section is altered or replaced, the
regulator must issue the altered or replacement statement.

(5) In exercising, or deciding whether to exercise, a power under section
142S(2) in the case of any particular contravention, a regulator must
5have regard to any statement of policy published under this section and
in force at a time when the contravention occurred.

(6) A statement under this section must be published by the regulator
concerned in the way appearing to the regulator to be best calculated to
bring it to the attention of the public.

(7) 10A regulator may charge a reasonable fee for providing a person with a
copy of the statement published under this section.

(8) A regulator must, without delay, give the Treasury a copy of any
statement which it publishes under this section.

(9) Section 192I applies in relation to a statement under this section as it
15applies in relation to a statement under section 192H.

Pension liabilities

142W Pension liabilities

(1) The Treasury may by regulations require a ring-fenced body to make
arrangements for any one or more of the following purposes—

(a) 20ensuring that, except in prescribed cases, the ring-fenced body
cannot become liable to meet, or contribute to the meeting of,
pension liabilities which arise in connection with persons’
service on or after a date specified in the regulations (“the
specified date”) in any employment, other than service in an
25employment in respect of which the employer is a ring-fenced
body;

(b) ensuring that, except in prescribed cases, the default of a person
other than another ring-fenced body would not result in the
ring-fenced body becoming liable to meet, or contribute to the
30meeting of, pension liabilities arising in connection with
persons’ service in any employment before the specified date;

(c) to the extent that it is not possible to ensure the result
mentioned in paragraph (a) or (b), minimising any potential
liability falling within paragraph (a) or (b).

(2) 35The regulations may make provision enabling the trustees or managers
of a relevant pension scheme in respect of which the employer or one
of the employers is a ring-fenced body—

(a) to transfer to another relevant pension scheme all or part of the
pension liabilities arising in connection with persons’ service
40before the specified date together with all or part of the assets of
the scheme, or

(b) to divide the scheme into two or more sections in relation to
which prescribed conditions are met.

(3) The regulations may make provision—

(a) 45enabling a ring-fenced body to apply to the court in a case
where the ring-fenced body has been unable to reach agreement
with another person (“P”) about the making of arrangements

with P on commercial terms for one or more of the purposes in
subsection (1), and

(b) enabling the court on such an application to order P to enter into
arrangements with the ring-fenced body for those purposes on
5such terms as the court considers fair and reasonable in the
circumstances.

(4) The regulations must provide that any terms specified by the court by
virtue of provision made under subsection (3)—

(a) must be terms which, in the court’s opinion, represent terms on
10which the arrangements might be entered into if they were
being entered into for commercial reasons between willing
parties dealing at arm’s length, and

(b) may involve the payment of any sum by instalments.

(5) The regulations may make other provision—

(a) 15about the making by a ring-fenced body of arrangements for
one or more of the purposes in subsection (1);

(b) about any transfer or division falling within subsection (2).

(6) The regulations may in particular—

(a) require a ring-fenced body to cease to participate in a relevant
20pension scheme unless the scheme is divided into two or more
sections in relation to which prescribed conditions are met;

(b) provide that assets or liabilities of a relevant pension scheme
may not be transferred under the arrangements to another
occupational pension scheme unless the other scheme meets
25prescribed conditions;

(c) require ring-fenced bodies to establish new occupational
pension schemes in prescribed circumstances;

(d) provide that any provision of a relevant pension scheme that
might prevent the making of the arrangements, other than a
30provision requiring the consent of the trustees or managers of
the scheme, is not to have effect in prescribed circumstances;

(e) make provision enabling the trustees or managers of a relevant
pension scheme, with the consent of the employers in relation
to the scheme, to modify the scheme by resolution for the
35purpose of enabling the arrangements to be made;

(f) require the trustees or managers of a relevant pension scheme
or any employer in relation to a relevant pension scheme to give
notice of prescribed matters to prescribed persons;

(g) make provision enabling the court, on an application made in
40accordance with the regulations by a ring-fenced body, if it
appears to the court that the trustees or managers of a relevant
pension scheme, or an employer in relation to such a scheme,
have unreasonably refused their consent to any step that would
enable the arrangements to be made, to order that the step may
45be taken without that consent;

(h) confer exemption from any provision of the regulations in
prescribed cases;

(i) confer functions on the PRA;

(j) provide that a ring-fenced body which contravenes a prescribed
50requirement of the regulations is to be taken to have
contravened a requirement imposed by the PRA under this Act;

(k) modify, exclude or apply (with or without modification) any
primary or subordinate legislation.

(7) The Treasury may by regulations require an authorised person who
will or may be a ring-fenced body or an authorised person who will or
5may be a member of a ring-fenced body’s group to do all it can to obtain
from the Pensions Regulator a clearance statement in relation to any
arrangements to be made for the purpose of complying with—

(a) regulations under this section, or

(b) any provision made by or under this Part (other than this
10section) when the provision comes into force.

(8) A “clearance statement” is a statement issued by the Pensions
Regulator under any of the following provisions—

(a) section 42 of the Pensions Act 2004 (clearance statements
relating to contribution notice under section 38);

(b) 15section 46 of that Act (clearance statements relating to financial
support directions);

(c) Article 38 of the Pensions (Northern Ireland) Order 2005
(clearance statements relating to contribution notices under
article 34);

(d) 20Article 42 of that Order (clearance statements relating to
financial support directions).

(9) In relation to a ring-fenced body that is not a PRA-authorised person,
references in subsection (6) to the PRA are to be read as references to the
FCA.

(10) 25Regulations under this section may not require ring-fenced bodies to
achieve the results mentioned in subsection (1) before 1 January 2026,
but this does not prevent the regulations requiring steps to be taken at
any time after the regulations come into force.

142X Further interpretative provisions for section 142W

(1) 30The following provisions have effect for the interpretation of section
142W and this section.

(2) “Relevant pension scheme” means an occupational pension scheme
that is not a money purchase scheme.

(3) “Occupational pension scheme” has the meaning given in section 1 of
35the Pension Schemes Act 1993 or section 1 of the Pension Schemes
(Northern Ireland) Act 1993 and, in relation to such a scheme,
“member” and “trustees or managers” have the same meaning as in
Part 1 of the Pensions Act 1995 or Part 2 of the Pensions (Northern
Ireland) Order 1995.

(4) 40“Money purchase scheme” has the meaning given in section 181(1) of
the Pension Schemes Act 1993 or section 176(1) of the Pension Schemes
(Northern Ireland) Act 1993.

(5) “Employer”, in relation to a relevant pension scheme, means—

(a) a person who is for the purposes of Part 1 of the Pensions Act
451995 or Part 2 of the Pensions (Northern Ireland) Order 1995 an
employer in relation to the scheme, and