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

Bank of England and Financial Services BillPage 20

(2) Before section 58 insert—

57A Duty of Bank to provide information required by Treasury

(1) The Treasury may by notice in writing require the Bank of England to
provide it with information specified, or of a description specified, in
5the notice.

(2) The information must be information which the Treasury consider is
material to the Bank’s assessment of the implications for public funds
of a bank, building society, credit union or investment firm failing.

(3) The information must be provided before the end of such reasonable
10period as may be specified in the notice.

(4) The Bank’s duty to provide information under this section does not
apply to information which the Bank does not have in its possession.

(5) For the purposes of this section, the cases in which a bank, building
society, credit union or investment firm (“the institution”) is to be
15regarded as failing include those where—

(a) the institution enters insolvency,

(b) any of the stabilisation options in Part 1 of the Banking Act 2009
is achieved in relation to the institution, or

(c) the institution falls to be taken for the purposes of the Financial
20Services Compensation Scheme (within the meaning given by
section 213 of FSMA 2000) to be unable, or likely to be unable,
to satisfy claims against the institution.

(6) In subsection (5)(a) “insolvency” includes—

(a) bankruptcy;

(b) 25liquidation;

(c) bank insolvency;

(d) building society insolvency;

(e) investment bank insolvency;

(f) administration;

(g) 30bank administration;

(h) building society special administration;

(i) receivership;

(j) a composition between the institution and the institution’s
creditors;

(k) 35a scheme of arrangement of the institution’s affairs.

(7) For the purposes of this section—

  • “bank” has the meaning given by section 2 of the Banking Act
    2009,

  • “bank administration” has the same meaning as in that Act (see
    40section 136 of that Act),

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

  • “building society”, “building society insolvency” and “building
    society special administration” have the same meaning as in the
    45Building Societies Act 1986 (see section 119 of that Act),

  • Bank of England and Financial Services BillPage 21

  • “credit union” means a credit union as defined by section 31 of the
    Credit Unions Act 1979 or a credit union as defined by Article
    2(2) of the Credit Unions (Northern Ireland) Order 1985,

  • “investment bank insolvency” means any procedure established
    5by regulations under section 233 of the Banking Act 2009,

  • “investment firm” has the same meaning as in that Act (see section
    258A of that Act),

  • “public funds” means the Consolidated Fund and any other
    account or source of money which cannot be drawn or spent
    10other than by, or with the authority of, the Treasury,

and an event has implications for public funds if it would or might
involve or lead to a need for the application of public funds.

57B Duty of Bank to inform Treasury about resolution plans

(1) This section applies in relation to—

(a) 15a resolution plan which includes one or more options for the
exercise of a stabilisation power by the Bank of England in
relation to an institution (“the institution”), and

(b) a group resolution plan which includes one or more options for
the exercise of a stabilisation power by the Bank of England in
20relation to a group entity (“the entity”).

(2) Unless otherwise directed under subsection (5), before adopting the
plan the Bank must provide the Treasury with—

(a) a copy of the plan,

(b) the Bank’s assessment of the systemic risk of the institution or
25the entity failing,

(c) the Bank’s assessment of the implications for public funds—

(i) of the exercise by the Bank of a stabilisation power in
relation to the institution or the entity in accordance
with the option (or each of the options) for the exercise
30of such a power included in the plan, and

(ii) if the plan includes one or more options for the use of an
insolvency or administration procedure in relation to
the institution or the entity, of the use of such a
procedure in accordance with that option (or each of
35those options), and

(d) any analysis considered by the Bank (whether or not prepared
by the Bank) to be material in making the assessments
mentioned in paragraph (c).

(3) Unless otherwise directed under subsection (5), the Bank must provide
40the Treasury with details of—

(a) any material changes to the plan, before those changes are
adopted,

(b) any material changes to the Bank’s assessments of the matters
mentioned in subsection (2)(b) or (c), and

(c) 45any further analysis considered by the Bank (whether or not
prepared by the Bank) to be material to revising the assessments
mentioned in subsection (2)(c).

Bank of England and Financial Services BillPage 22

(4) Where reasonably practicable the Bank must comply with subsections
(2) and (3) before the Bank exercises any of its powers under section 3A
of the Banking Act 2009 in relation to the institution or the entity.

(5) The Treasury may by notice in writing—

(a) 5direct the Bank not to provide it under this section with
information in relation to institutions specified, or of a
description specified, in the notice (“specified institutions”);

(b) revoke a direction given under paragraph (a).

(6) Where a direction given under subsection (5)(a) is revoked—

(a) 10the Bank must provide the Treasury with the matters listed in
subsection (2)(a) to (d) in relation to the specified institutions as
soon as reasonably practicable after the date of the revocation,
and

(b) subsection (3) applies in relation to the specified institutions,

15but this is subject to any further direction under subsection (5)(a).

(7) For the purposes of this section—

  • “failing” has the same meaning as in section 57A,

  • “insolvency or administration procedure” means—

    (a)

    bank insolvency,

    (b)

    20building society insolvency,

    (c)

    investment bank insolvency,

    (d)

    bank administration, or

    (e)

    building society special administration,

    (and those terms have the same meaning as in section 57A);

  • 25“public funds” has the same meaning as in section 57A,

  • “systemic risk” means risk to the stability of the financial system
    in the United Kingdom or in other EEA states,

and action has implications for public funds if it would or might
involve or lead to a need for the application of public funds.”

(3) 30In section 65 (memorandum of understanding)—

(a) in subsection (1), after “in relation to” insert—

(a) the sharing of information by the Bank about any
proposals to include in a resolution plan or a group
resolution plan an option for the exercise of a
35stabilisation power by the Bank in relation to an
institution or group entity;

(b) ”;

(b) in subsection (2), at the beginning insert “For the purposes of
subsection (1)(b),”;

(c) 40in the heading, after “understanding:” insert “resolution planning and”.

(4) In section 67 (interpretation), after subsection (5) insert—

(6) “Group entity” has the same meaning as in the Bank Recovery and
Resolution (No. 2) Order 2014 (S.I. 2014/3348S.I. 2014/3348).

(7) “Group resolution plan” means a group resolution plan drawn up by
45the Bank under Part 5 of that Order.

Bank of England and Financial Services BillPage 23

(8) “Resolution plan” means a resolution plan drawn up by the Bank under
Part 5 of that Order.

(9) “Stabilisation power” has the same meaning as in section 1(4) of the
Banking Act 2009.”

5Part 3 Miscellaneous and general

Banknotes in Scotland and Northern Ireland

26 Banks authorised to issue banknotes in Scotland and Northern Ireland

(1) The Banking Act 2009 is amended as follows.

(2) 10In section 207(b) (overview of Part 6) for the words from “banks” to the end
substitute “authorised banks (see section 210).”

(3) In section 210 (authorised bank)—

(a) the words from “a bank” to the end become paragraph (a);

(b) at the end of that paragraph insert “(unless by virtue of regulations
15under section 214A it is no longer an authorised bank for the purposes
of this Part), or”;

(c) after that paragraph insert—

(b) a bank which is designated as an authorised bank for the
purposes of this Part by regulations under section
20214A(1)(a).”

(4) In section 213 (saving for existing issuers)—

(a) the existing text becomes subsection (1);

(b) in that subsection, after “bank” insert “within section 210(a)”;

(c) after that subsection insert—

(2) 25An authorised bank within section 210(b) may issue banknotes,
but only—

(a) in accordance with the provisions of this Part, and

(b) in the part of the United Kingdom which is specified in
relation to the bank in regulations under section
30214A(1)(b).”;

(d) for the heading substitute “Authorisation to issue banknotes”.

(5) After section 214 insert—

214A Power to designate banks as “authorised banks”

(1) The Treasury may by regulations—

(a) 35specify a bank which on and after the designation date is
designated as an authorised bank for the purposes of this Part,

(b) specify a part of the United Kingdom in which the bank may
issue banknotes, and

(c) make provision about how the bank is to be identified on those
40banknotes.

(2) Regulations under subsection (1)

Bank of England and Financial Services BillPage 24

(a) may only specify under paragraph (a) a bank (the newly
authorised bank) which is in the same group as an authorised
bank (the previously authorised bank) which has the right to
rely on section 213;

(b) 5may only specify under paragraph (b) the part of the United
Kingdom in which the previously authorised bank is
authorised to issue banknotes;

(c) must procure that on and after the designation date the
previously authorised bank is no longer an authorised bank for
10the purposes of this Part by—

(i) in the case of a previously authorised bank within
section 210(a), providing that it is no longer an
authorised bank for the purposes of this Part;

(ii) in the case of a previously authorised bank within
15section 210(b), revoking its designation;

(d) must provide for the newly authorised bank to be treated as
having issued any banknotes in circulation which were issued
by the previously authorised bank;

(e) must provide for the transfer of any rights or liabilities in
20relation to those banknotes to the newly authorised bank from
the previously authorised bank;

(f) may provide for anything done by or in relation to the
previously authorised bank in connection with those banknotes
to be treated as having been done by or in relation to the newly
25authorised bank for the purposes specified in the regulations;

(g) may make further provision about banknotes issued by the
previously authorised bank;

(h) may make provision about banknotes held by or on behalf of
the previously authorised bank which are not in circulation.

(3) 30The reference in subsection (2)(d) and (g) to banknotes issued by the
previously authorised bank includes a reference to banknotes which
are to be treated as having been issued by that bank as a result of
regulations made under subsection (1) (or any other enactment).

(4) Regulations under subsection (1) must—

(a) 35specify a date as the designation date, or

(b) if no such date is specified, make provision for the designation
date to be determined and published by the Treasury.

(5) Before specifying a bank under subsection (1)(a) the Treasury must
obtain the consent of the Bank of England.

(6) 40The Bank of England must prepare and publish a statement of the
matters which it intends to take into account in deciding whether to
give its consent.

(7) The power to make regulations under this section—

(a) is exercisable by statutory instrument;

(b) 45includes a power to make transitory or saving provision;

(c) includes a power to apply (with or without modifications) or
disapply any provision of an Act or subordinate legislation
whenever passed or made.

Bank of England and Financial Services BillPage 25

(8) A statutory instrument containing regulations under this section may
not be made unless a draft of the instrument has been laid before and
approved by a resolution of each House of Parliament.

(9) For the purposes of this section—

  • 5“bank” has the same meaning as in Part 1 (see section 2),

  • “designation date” in relation to regulations under subsection (1)
    means the date specified or determined, as the case may be, in
    accordance with subsection (4),

  • “group” has the meaning given by section 421 of the Financial
    10Services and Markets Act 2000, and

a banknote is in circulation from the time that it is issued by an
authorised bank until the time that it is returned to the bank (or a bank
which is treated as having issued it as a result of regulations made
under subsection (1) or any other enactment).”

(6) 15In section 259(3) (statutory instruments), in Part 6 of the Table, before the entry
relating to section 215 insert—

“214A Issuers of
banknotes:
Scotland and
Northern
Ireland
Draft
affirmative
resolution”
20

General

27 Consequential provision

(1) The Treasury may by regulations make the provision in subsection (2) in
25consequence of any provision made by or under this Act.

(2) The provision referred to in subsection (1) is provision amending, repealing,
revoking or applying with modifications any provision of primary or
secondary legislation to which this section applies.

(3) This section applies to primary and secondary legislation passed or made—

(a) 30before the passing of this Act, or

(b) on or before the last day of the session in which this Act is passed.

(4) Regulations under this section—

(a) may make saving, transitory or transitional provision;

(b) may make different provision for different purposes.

(5) 35The power to make regulations under this section is exercisable by statutory
instrument.

(6) A statutory instrument containing regulations under this section—

(a) if it contains (whether alone or with other provision) provision which
amends or repeals any provision of primary legislation, may not be
40made unless a draft of the instrument has been laid before, and
approved by a resolution of, each House of Parliament, and

Bank of England and Financial Services BillPage 26

(b) otherwise, is subject to annulment in pursuance of a resolution of either
House of Parliament.

(7) In this section—

  • “primary legislation” means an Act, an Act of the Scottish Parliament, a
    5Measure or Act of the National Assembly for Wales, or Northern
    Ireland legislation;

  • “secondary legislation” means an instrument made under primary
    legislation.

28 Extent

(1) 10Subject to subsection (2) this Act extends to England and Wales, Scotland and
Northern Ireland.

(2) An amendment or repeal made by this Act has the same extent as the provision
amended or repealed.

29 Commencement

(1) 15Sections 27 to 30 come into force on the day on which this Act is passed.

(2) The other provisions of this Act come into force on such day as the Treasury
may by regulations appoint.

(3) The Treasury may by regulations make saving, transitory or transitional
provision in connection with the coming into force of any provision made by
20or under this Act.

(4) Regulations under this section may make different provision for different
purposes.

(5) The power to make regulations under this section is exercisable by statutory
instrument.

30 25Short title

This Act may be cited as the Bank of England and Financial Services Act 2015.

Bank of England and Financial Services BillPage 27

SCHEDULES

Section 13

SCHEDULE 1 Prudential Regulation Committee

Section 30A

Schedule 1 5Prudential Regulation Committee

Interpretation

1 In this Schedule—

  • “chief executive for prudential regulation” means the Deputy
    Governor for prudential regulation, acting in his or her
    10capacity as a member of the Committee or by virtue of a
    delegation under paragraph 17;

  • “the Committee” means the Prudential Regulation
    Committee;

  • “prudential regulation strategy” means the strategy
    15determined by the Prudential Regulation Authority under
    section 2E of the Financial Services and Markets Act 2000.

Appointment of members by Chancellor

2 Before appointing a person as a member of the Committee under
section 30A(2)(g), the Chancellor of the Exchequer must—

(a) 20be satisfied that the person has knowledge or experience
which is likely to be relevant to the Committee’s functions,
and

(b) consider whether the person has any financial or other
interests that could substantially affect the functions as
25member that it would be proper for the person to
discharge.

Term of office of appointed members

3 (1) Appointment as a member of the Committee under section
30A(2)(f) or (g) is to be for a period of 3 years, but this is subject to
30sub-paragraph (2) and to paragraph 4.

(2) Initially some appointments may be for shorter and different
periods so as to secure that appointments expire at different times.

4 (1) A person may not be appointed as a member of the Committee
under section 30A(2)(g) more than twice.

Bank of England and Financial Services BillPage 28

(2) For this purpose an appointment which by virtue of paragraph
3(2) is for a period of less than 3 years is to be disregarded.

5 (1) If it appears to the Chancellor of the Exchequer that in the
circumstances it is desirable to do so, the Chancellor may, before
5the end of the term for which a person is appointed as a member
of the Committee under section 30A(2)(g), extend the person’s
term of office on one occasion for a specified period of not more
than 6 months.

(2) The term being extended may be the person’s first or second term
10or, in a case where paragraph 4(2) allows a third term, the person’s
third term.

(3) If a person whose first term of office is extended is subsequently
re-appointed under section 30A(2)(g)

(a) the length of the second term is to be reduced by a period
15equal to the extension of the first term, but

(b) the second term may itself be extended under sub-
paragraph (1).

(4) In a case where a person’s second term of office is extended and
paragraph 4(2) allows a third term, sub-paragraph (3) is to be read
20as if the references to first and second terms were references to
second and third terms respectively.

6 (1) A person appointed under section 30A(2)(f) or (g) may resign the
office by written notice to the Bank.

(2) Where the notice relates to a person appointed under section
2530A(2)(g) the Bank must give a copy of the notice to the Treasury.

Terms and conditions of appointment

7 (1) The terms on which a person is appointed as a member of the
Committee under section 30A(2)(g) must be such as—

(a) to secure that the member is not subject to direction by the
30Bank or the Treasury,

(b) to require the member not to act in accordance with the
directions of any other person, and

(c) to prohibit the member from acquiring any financial or
other interests that have a material effect on the extent of
35the functions as member that it would be proper for the
member to discharge.

(2) The terms and conditions on which a person holds office as a
member of the Committee appointed under section 30A(2)(g) are
to be determined by the court of directors.

40Qualification for appointment

8 (1) The following persons are disqualified for appointment under
section 30A(2)(f) or (g)

(a) a minister of the Crown;

Bank of England and Financial Services BillPage 29

(b) a person serving in a government department in
employment in respect of which remuneration is paid out
of money provided by Parliament.

(2) The following persons are disqualified for appointment under
5section 30A(2)(g)

(a) a member of the Financial Policy Committee of the Bank
appointed under section 9B(1)(e);

(b) a member of the Monetary Policy Committee of the Bank
appointed under section 13(2)(c).

10Removal of appointed members

9 (1) A person appointed under section 30A(2)(f) or (g) vacates office on
becoming a person to whom paragraph 8(1) applies.

(2) The court of directors of the Bank may, with the consent of the
Chancellor of the Exchequer, remove a member appointed under
15section 30A(2)(f) or (g) (“M”) if it is satisfied—

(a) that M has been absent from 3 or more meetings of the
Prudential Regulation Committee without the
Committee’s consent,

(b) that M has become bankrupt, that a debt relief order
20(under Part 7A of the Insolvency Act 1986) has been made
in respect of M, that M’s estate has been sequestrated or
that M has made an arrangement with or granted a trust
deed for M’s creditors, or

(c) that M is unable or unfit to discharge M’s functions as a
25member.

(3) The court of directors may, with the consent of the Chancellor of
the Exchequer, also remove a member appointed under section
30A(2)(g) (“M”) if it is satisfied that in all the circumstances M’s
financial or other interests are such as substantially to affect the
30functions as member which it would be proper for M to discharge.

Decision making

10 (1) Decisions of the Committee must be taken either—

(a) at a meeting of the Committee in accordance with
paragraphs 11 to 15, or

(b) 35in writing in accordance with paragraph 16.

(2) Subject to paragraphs 11 to 16, the Committee is to determine its
own procedure.

Meetings

11 The Governor of the Bank or any Deputy Governor of the Bank
40who is a member of the Committee may summon a meeting at any
time by giving such notice as the person giving the notice thinks
the circumstances require.

12 (1) At a meeting of the Committee, the proceedings are to be
regulated as follows.