Bank of England and Financial Services Bill (HL Bill 65)

Bank of England and Financial Services BillPage 10

(3) The Comptroller must notify the court whether the Comptroller agrees
with the court’s opinion and, if not, give the reasons.

(4) If the Comptroller does not agree with the court’s opinion, the court
must consider the reasons given and notify the Comptroller whether it
5remains of the opinion mentioned in subsection (1).

(5) If it remains of that opinion—

(a) the Comptroller may not proceed with the examination, or the
part of the examination, to which the opinion relates,

(b) the results of the examination, or the part of the examination, to
10which the opinion relates, are not to be included in a report
under section 7D(5), and

(c) the Comptroller must publish the notices given by the court and
the Comptroller under this section.

(6) Publication under subsection (5)(c) is to be—

(a) 15by inclusion in the report made by the Comptroller to the House
of Commons under section 7D(5), or

(b) if there is no such report, in any way the Comptroller considers
appropriate.

(7) References in this section to an examination include a proposed
20examination.

(8) A notification under subsection (2), (3) or (4) must—

(a) be in writing, and

(b) state that it is a notification under that subsection.

7F Review by the Treasury

(1) 25The Treasury may appoint an independent person to conduct a review
of the economy, efficiency and effectiveness with which the Bank has
used its resources in discharging its functions as the Prudential
Regulation Authority.

(2) “Independent” means appearing to the Treasury to be independent of
30the Bank.

(3) A review under this section may be limited to such of the Bank’s
functions as the Prudential Regulation Authority (however described)
as the Treasury may specify in appointing the person to conduct it.

(4) A review under this section is not to be concerned with the merits of the
35Bank’s general policy or principles in pursuing the Bank’s objectives
(including its objectives as the Prudential Regulation Authority).

(5) On completion of the review, the person conducting it must make a
written report to the Treasury—

(a) setting out the result of the review, and

(b) 40making such recommendations (if any) as the person considers
appropriate.

(6) A copy of the report must be—

(a) laid before Parliament, and

(b) published in such manner as the Treasury think fit.

Bank of England and Financial Services BillPage 11

(7) Any expenses reasonably incurred in the conduct of the review are to
be met by the Treasury out of money provided by Parliament.

7G Right to obtain documents and information

(1) A person conducting an examination under section 7D or a review
5under section 7F

(a) has a right of access at any reasonable time to any document the
person may reasonably require for the purposes of the
examination or review, and

(b) may require any person holding or accountable for any such
10document to provide such information and explanation as are
reasonably necessary for that purpose.

(2) Subsection (1) applies only to documents in the custody or under the
control of—

(a) the Bank;

(b) 15the auditor or auditors appointed by the Bank under section
7(5).

(3) An obligation imposed on a person as a result of the exercise of the
powers conferred by subsection (1) is enforceable by injunction or, in
Scotland, by an order for specific performance under section 45 of the
20Court of Session Act 1988.

7H Restriction on disclosing information

Section 353A of the Financial Services and Markets Act 2000 (FCA not
to disclose certain information received from the Bank) applies in
relation to the Comptroller and Auditor General and the National
25Audit Office as it applies in relation to the FCA.”

Prudential regulation

12 Bank to act as Prudential Regulation Authority

In the Financial Services and Markets Act 2000, for section 2A substitute—

2A The Prudential Regulation Authority

(1) 30The “Prudential Regulation Authority” is the Bank of England.

(2) The Bank’s functions as the Prudential Regulation Authority—

(a) are to be exercised by the Bank acting through its Prudential
Regulation Committee (see Part 3A of the Bank of England Act
1998), and

(b) 35are not exercisable by the Bank in any other way.

(3) References in this Act or any other enactment to the Prudential
Regulation Authority do not include the Bank of England acting
otherwise than in its capacity as the Prudential Regulation Authority.

(4) References in this Act to the Bank of England do not (unless otherwise
40provided) include the Bank acting in its capacity as the Prudential
Regulation Authority.

(5) Subsections (3) and (4) do not apply to this section.

Bank of England and Financial Services BillPage 12

(6) Subsection (4) does not apply for the interpretation of references to the
court of directors of the Bank of England, or to a Deputy Governor or
committee of the Bank.

(7) The Prudential Regulation Authority is referred to in this Act as the
5PRA.

2AB Functions of the PRA

(1) The PRA is to have the functions conferred on it by or under this Act.

(2) Schedule 1ZB makes provision about functions of the PRA.

(3) References in this Act or any other enactment to functions conferred on
10the PRA by or under this Act include references to functions conferred
on the PRA by or under—

(a) the Insolvency Act 1986,

(b) the Banking Act 2009,

(c) the Financial Services Act 2012, or

(d) 15a qualifying EU provision that is specified, or of a description
specified, for the purposes of this subsection by the Treasury by
order.”

13 Prudential Regulation Committee

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

(2) 20After Part 3 insert—

“Part 3A Prudential regulation
30A Prudential Regulation Committee

(1) There is to be a committee of the Bank known as the Prudential
25Regulation Committee of the Bank of England.

(2) The Prudential Regulation Committee is to consist of—

(a) the Governor of the Bank,

(b) the Deputy Governor for financial stability,

(c) the Deputy Governor for markets and banking,

(d) 30the Deputy Governor for prudential regulation,

(e) the Chief Executive of the Financial Conduct Authority,

(f) one member appointed by the Governor of the Bank with the
approval of the Chancellor of the Exchequer, and

(g) at least 6 members appointed by the Chancellor of the
35Exchequer.

(3) The functions of the Prudential Regulation Committee are—

(a) its functions by virtue of section 2A of the Financial Services and
Markets Act 2000 (which provides for the Bank’s functions as
the Prudential Regulation Authority to be exercised by the Bank
40acting through the Prudential Regulation Committee), and

(b) the functions conferred on it by this Act.

Bank of England and Financial Services BillPage 13

(4) Schedule 6A has effect with respect to the Prudential Regulation
Committee.

30B Recommendations by Treasury

(1) The Treasury may at any time by notice in writing to the Prudential
5Regulation Committee make recommendations to the Committee
about aspects of the economic policy of Her Majesty’s Government to
which the Committee should have regard—

(a) when considering how to advance the objectives of the
Prudential Regulation Authority, and

(b) 10when considering the application of the regulatory principles
set out in section 3B of the Financial Services and Markets Act
2000.

(2) The Treasury must make recommendations under subsection (1) at
least once in each Parliament.

(3) 15The Treasury must—

(a) publish in such manner as they think fit any notice given under
subsection (1), and

(b) lay a copy of it before Parliament.

30C Operational independence

(1) 20The Bank must make arrangements to ensure compliance with—

(a) article 4.7 of the capital requirements directive, and

(b) article 3.3 of the recovery and resolution directive,

(which require resolution functions and supervisory functions to be
operationally independent of one another).

(2) 25The Bank must prepare and issue a statement of its arrangements under
subsection (1).

(3) If there are material changes to the arrangements, it must prepare and
issue a revised statement.

(4) The Bank must consult the Treasury before issuing a statement under
30subsection (2) or a revised statement under subsection (3).

(5) If it appears to the Treasury that any action proposed to be taken by the
Bank would be incompatible with obligations of the United Kingdom
under the provisions mentioned in subsection (1)(a) or (b), the Treasury
may direct the Bank not to take that action.

(6) 35If it appears to the Treasury that any action which the Bank has power
to take is required for the purpose of implementing those obligations,
the Treasury may direct the Bank to take that action.

(7) In this section—

  • “the capital requirements directive” means Directive 2013/36/EU
    40of the European Parliament and of the Council of 26 June 2013
    on access to the activity of credit institutions and the prudential
    supervision of credit institutions and investment firms;

  • “the recovery and resolution directive” means Directive 2014/59/
    EU of the European Parliament and of the Council of 15 May
    452014 establishing a framework for the recovery and resolution
    of credit institutions and investment firms.”

Bank of England and Financial Services BillPage 14

(3) Before Schedule 7 insert the Schedule 6A set out in Schedule 1 to this Act.

14 Accounts relating to Bank’s functions as Prudential Regulation Authority

(1) Section 7 of Bank of England Act 1998 (accounts) is amended as follows.

(2) After subsection (2) insert—

(2A) 5The Bank shall also prepare for each of its financial years a statement of
accounts in relation to—

(a) income received and assets accrued by the Bank by virtue of its
functions as the Prudential Regulation Authority, and

(b) expenses and liabilities incurred by the Bank by virtue of its
10functions as the Prudential Regulation Authority.”

(3) After subsection (4) insert—

(4A) In preparing a statement under subsection (2A) the Bank must comply
with any directions given by the Treasury as to—

(a) the information to be contained in the statement and the
15manner in which it is to be presented, and

(b) the methods and principles according to which the statement is
to be prepared.”

(4) In subsection (5), after “subsection (2)” insert “or (2A)”.

(5) After subsection (5) insert—

(5A) 20The auditor’s report on a statement under subsection (2A) must state
whether the auditor is satisfied that the Bank has complied with the
requirements of Part 3 of Schedule 1ZB to the Financial Services and
Markets Act 2000 (Prudential Regulation Authority fees and
penalties).”

(6) 25In subsection (6), after “subsection (2)” insert “or (2A)”.

(7) After subsection (8) insert—

(8A) A direction under subsection (4A) or a notice under subsection (7) may
be revoked by a further direction or notice.”

15 Transfer of property etc to Bank

(1) 30The property, rights and liabilities to which the company is entitled or subject
immediately before this section comes into force transfer to and vest in the
Bank of England, in its capacity as the Prudential Regulation Authority.

(2) Subsection (1) has effect in spite of any provision (of whatever nature) that
would otherwise prevent, penalise or restrict the transfer of the property,
35rights or liabilities.

(3) In particular, it has effect regardless of a contravention, liability or interference
with an interest or right that would otherwise exist by reason of such a
provision having effect in relation to the terms on which the company is
entitled to the property or right, or subject to the liability, in question.

Bank of England and Financial Services BillPage 15

(4) A certificate by the Chancellor of the Exchequer that anything specified in the
certificate has vested in the Bank of England under this section is conclusive
evidence for all purposes of that fact.

(5) In this section “the company” means the body corporate originally
5incorporated as the Prudential Regulation Authority Limited and renamed as
the Prudential Regulation Authority by section 2A of the Financial Services
and Markets Act 2000 (as it had effect before section 12 came into force).

Consequential and transitional provision

16 Amendments relating to Part 1

10Schedule 2 makes amendments relating to this Part.

17 Saving and transitional provision relating to Part 1

Schedule 3 makes saving and transitional provision relating to this Part.

Part 2 Financial services

15Conduct of persons working in financial services sector

18 Extension of relevant authorised persons regime to all authorised persons

Schedule 4 makes provision extending to authorised persons provisions of Part
5 of the Financial Services and Markets Act 2000 (performance of regulated
activities) which now apply only to relevant authorised persons.

19 20Rules about controlled functions: power to make transitional provision

In the Financial Services and Markets Act 2000, after section 59A insert—

59AB Specifying functions as controlled functions: transitional provision

(1) In relation to rules made by the FCA or the PRA under section 59, the
power conferred by section 137T(c) to make transitional provision
25includes in particular power—

(a) to provide for anything done under this Part in relation to
controlled functions of a particular description to be treated as
having been done in relation to controlled functions of a
different description;

(b) 30to provide for anything done under this Part (including any
application or order made, any requirement imposed and any
approval or notice given) to cease to have effect, to continue to
have effect, or to continue to have effect with modifications, or
subject to time limits or conditions;

(c) 35to provide for rules made by the regulator making the rules
under section 59 to apply with modifications;

(d) to make saving provision.

Bank of England and Financial Services BillPage 16

(2) The Treasury may by regulations make whatever incidental,
consequential, transitional, supplemental or saving provision the
Treasury consider appropriate in connection with the making of rules
by the FCA or the PRA under section 59.

(3) 5Regulations under subsection (2) may—

(a) confer functions on the FCA or the PRA (including the function
of making rules);

(b) modify, exclude or apply (with or without modifications) any
primary or subordinate legislation (including any provision of,
10or made under, this Act).”

20 Administration of senior managers regime

(1) The Financial Services and Markets Act 2000 is amended as follows.

(2) In section 62A(4) (changes in responsibilities of senior managers), at the end of
the definition of “the appropriate regulator” insert “, except that the reference
15in section 60(9)(b) to subsection (3) is to be treated as a reference to subsection
(2) of this section”.

(3) In section 63ZA (variation of senior manager’s approval at request of
authorised person)—

(a) in subsection (1), for “application for approval under section 59 is
20granted” substitute “approval under section 59 has effect”;

(b) after subsection (1) insert—

(1A) Where an approval under section 59 has effect for a limited
period, the authorised person concerned may apply to the
appropriate regulator to vary the approval by—

(a) 25varying the period for which the approval is to have
effect, or

(b) removing the limit on the period for which the approval
is to have effect.”;

(c) in subsection (2)(a) the words from “whichever” to the end become sub-
30paragraph (i), and after that sub-paragraph insert , or

(ii) if the condition has been varied before (under
this section or section 63ZB), whichever of the
FCA or the PRA last varied it;”;

(d) after subsection (2)(b) insert—

(c) 35in the case of an application for variation of an approval
in a way described in subsection (1A), means—

(i) whichever of the FCA or the PRA imposed the
limit on the period for which the approval has
effect, or

(ii) 40if the limit has been varied before (under this
section or section 63ZB), whichever of the FCA
or the PRA last varied it.”;

(e) in subsection (3) for “which was imposed” substitute “, or a limit on the
period for which an approval has effect, which was imposed (or last
45varied)”;

Bank of England and Financial Services BillPage 17

(f) after subsection (7) insert—

(7A) An application may not be made under this section for the
variation or removal of a condition, or a limit on the period for
which an approval has effect, where the condition or limit has
5effect by virtue of section 66.”;

(g) in subsection (8), after “section 62” insert “, but as if in subsections (2),
(3) and (4) the words “, or to grant the application subject to conditions
or for a limited period (or both)” were omitted”.

(4) In section 63ZB (variation of senior manager’s approval on initiative of
10regulator)—

(a) omit the “or” at the end of subsection (3)(c);

(b) at the beginning of subsection (3)(d) insert “where the approval has
effect for an unlimited period,”;

(c) at the end of subsection (3)(d) insert , or

(e) 15where the approval has effect for a limited period,
varying that period or removing the limit on the period
for which the approval is to have effect.”;

(d) after subsection (4) insert—

(4A) A regulator may not under this section vary or remove a
20condition, or a limit on the period for which an approval has
effect, where the condition or limit has effect by virtue of section
66.”

21 Rules of conduct

(1) The Financial Services and Markets Act 2000 is amended as follows.

(2) 25In section 64A (power of FCA and PRA to make rules of conduct)—

(a) in subsection (1) after paragraph (b) insert—

(c) persons who are directors of authorised persons.”;

(b) in subsection (2) after paragraph (c) insert—

(d) persons who are directors of PRA-authorised persons.”;

(c) 30omit the “and” at the end of subsection (5)(a);

(d) after subsection (5)(a) insert—

(ab) in the case of a person who is a director of an authorised
person but is not an approved person, that authorised
person, and”;

(e) 35after subsection (6) insert—

(7) In this section “director”, in relation to an authorised person,
means a member of the board of directors, or if there is no such
board, the equivalent body responsible for the management of
the authorised person concerned.”

(3) 40In section 64B (responsibilities of authorised persons in relation to rules of
conduct)—

(a) omit the “and” at the end of subsection (4)(a);

(b) after subsection (4)(b) insert , and

(c) any person who is a director of the authorised person.”;

(c) 45omit subsection (5);

Bank of England and Financial Services BillPage 18

(d) after subsection (6) insert—

(6A) In this section “director”, in relation to an authorised person,
has the same meaning as in section 64A.”

22 Misconduct

(1) 5The Financial Services and Markets Act 2000 is amended as follows.

(2) In section 66A (misconduct: action by FCA)—

(a) omit the “or” at the end of subsection (2)(b)(i);

(b) at the end of subsection (2)(b)(ii) insert , or

(iii) a director of an authorised person.”;

(c) 10omit the “or” at the end of subsection (3)(b)(i);

(d) at the end of subsection (3)(b)(ii) insert , or

(iii) a director of the authorised person.”;

(e) omit the “and” at the end of subsection (5)(b);

(f) at the end of subsection (5)(c) insert , and

(d) 15the senior manager did not take such steps as a person
in the senior manager’s position could reasonably be
expected to take to avoid the contravention occurring
(or continuing).”;

(g) omit subsection (6);

(h) 20in subsection (8) after the definition of “approved person” insert—

  • ““director”, in relation to an authorised person, has the
    same meaning as in section 64A.”

(3) In section 66B (misconduct: action by PRA)—

(a) omit the “or” at the end of subsection (2)(b)(i);

(b) 25at the end of subsection (2)(b)(ii) insert , or

(iii) a director of a PRA-authorised person.”;

(c) omit the “or” at the end of subsection (3)(b)(i);

(d) at the end of subsection (3)(b)(ii) insert , or

(iii) a director of the PRA-authorised person.”;

(e) 30omit the “and” at the end of subsection (5)(b);

(f) at the end of subsection (5)(c) insert , and

(d) the senior manager did not take such steps as a person
in the senior manager’s position could reasonably be
expected to take to avoid the contravention occurring
35(or continuing).”;

(g) omit subsection (6);

(h) in subsection (8) after the definition of “approved person” insert—

  • ““director”, in relation to an authorised person, has the
    same meaning as in section 64A.”

23 40Decisions causing a financial institution to fail: meaning of insolvency

(1) Section 37 of the Financial Services (Banking Reform) Act 2013 (interpretation
of section 36) is amended as follows.

(2) In subsection (10)—

Bank of England and Financial Services BillPage 19

(a) after paragraph (c) insert—

(ca) building society insolvency,

(cb) investment bank insolvency,”;

(b) after paragraph (e) insert—

(ea) 5building society special administration,”.

(3) After subsection (10) insert—

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

  • “bank administration” has the same meaning as in the Banking
    Act 2009 (see section 136 of that Act);

  • 10“bank insolvency” has the same meaning as in that Act (see section
    90 of that Act);

  • “building society insolvency” and “building society special
    administration” have the same meaning as in the Building
    Societies Act 1986 (see section 119 of that Act);

  • 15“investment bank insolvency” means any procedure established
    by regulations under section 233 of the Banking Act 2009.”

Pensions guidance

24 Pensions guidance

(1) Section 333A of the Financial Services and Markets Act 2000 (meaning of
20“pensions guidance” in Part 20A of that Act) is amended as follows.

(2) In subsection (2)—

(a) the words from “guidance”, in the second place it occurs, to the end
become paragraph (a);

(b) after that paragraph insert “, and

(b) 25guidance given for the purpose of helping an individual who
has a relevant interest in relation to a relevant annuity to make
decisions in connection with transferring or otherwise dealing
with the right to payments under that annuity.”

(3) After subsection (2) insert—

(2A) 30The Treasury may by regulations specify—

(a) the annuities that are relevant annuities for the purposes of
subsection (2)(b), and

(b) the interests (which may include contingent interests) that are
relevant interests for the purposes of that subsection.”

35Information about resolution planning

25 Duty of Bank to provide information to Treasury

(1) The Financial Services Act 2012 is amended as follows.