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

Bank of England and Financial Services BillPage 30

(2) The quorum is to be determined by the Committee, but it must be
not less than 3 and of those 3—

(a) one must be the Governor of the Bank, the Bank’s Deputy
Governor for financial stability or the Bank’s Deputy
5Governor for markets and banking,

(b) unless both the Governor and the Bank’s Deputy Governor
for financial stability are present, one must be the Bank’s
Deputy Governor for prudential regulation, and

(c) one must be a member appointed under section 30A(2)(g).

(3) 10The chair is to be taken by the Governor of the Bank or, if the
Governor is not present, by the Deputy Governor for financial
stability or the Deputy Governor for markets and banking.

(4) The person chairing the meeting must seek to ensure that
decisions of the Committee are reached by consensus wherever
15possible.

(5) Where that person forms the opinion that consensus cannot be
reached, a decision is to be taken by a vote of all those members
present at the meeting (subject to paragraphs 13 and 14).

(6) In the event of a tie, the person chairing the meeting is to have a
20second casting vote.

13 The chief executive of the Financial Conduct Authority must not
take part in any discussion by or decision of the Committee which
relates to—

(a) the exercise of any functions of the Prudential Regulation
25Authority in relation to a particular person, or

(b) a decision not to exercise those functions.

14 (1) If a member of the Committee (“M”) has any direct or indirect
interest (including any reasonably likely future interest) in any
dealing or business which falls to be considered by the
30Committee—

(a) M must disclose that interest to the Committee when it
considers the dealing or business, and

(b) the Committee must decide whether M is to be permitted
to participate in any proceedings of the Committee relating
35to any question arising from its consideration of the
dealing or business, and if so to what extent and subject to
what conditions (if any).

(2) The Bank must issue and maintain a code of practice describing
how members of the Committee and the Committee are to comply
40with sub-paragraph (1).

(3) The Bank may at any time revise or replace the code.

(4) Before issuing, revising or replacing the code, the Bank must
consult the Treasury.

(5) The Bank must publish the current version of the code in whatever
45manner it sees fit.

(6) The Committee must comply with the code when taking decisions
under sub-paragraph (1)(b).

Bank of England and Financial Services BillPage 31

15 (1) The Committee may determine circumstances in which a member
who is not present at, but is in communication with, a meeting is
to be treated as present at it for the purposes of paragraph 12.

(2) The Committee may invite other persons to attend, or to attend
5and speak at, any meeting of the Committee.

Decisions otherwise than at meetings

16 (1) The Committee may take a decision on a matter without a meeting
if—

(a) a majority of eligible members indicate in writing their
10agreement to the decision,

(b) the eligible members who indicate in writing their
agreement to the decision would have constituted a
quorum at a meeting of the Committee, and

(c) any other requirements determined by the Committee are
15met.

(2) “Eligible members” are members of the Committee who would
have been entitled to vote on the matter if the matter had been
proposed for decision at a meeting of the Committee.

Delegation of functions

17 (1) 20The Committee may delegate such of its functions as it thinks fit
to—

(a) a member of the Committee,

(b) a sub-committee of the Committee consisting of—

(i) members of the Committee, or

(ii) 25one or more members of the Committee and one or
more officers, employees or agents of the Bank,

(c) an officer, employee or agent of the Bank, or

(d) a committee consisting of officers, employees or agents of
the Bank.

30This is subject to sub-paragraphs (2) and (9).

(2) The Committee must delegate to the chief executive for prudential
regulation the following functions—

(a) preparing for consideration by the Committee drafts of a
prudential regulation strategy and any proposed revisions
35to that strategy;

(b) preparing for consideration by the Committee drafts of the
annual budget required by paragraph 18 and any
proposed variations of that budget;

(c) the day to day management of the Bank’s functions as the
40Prudential Regulation Authority;

(d) the day to day implementation of the prudential regulation
strategy.

This is subject to sub-paragraph (9).

(3) A delegation under sub-paragraph (2)

(a) 45must identify any decisions (within sub-paragraph (9) or
otherwise) that are not included in the delegation;

Bank of England and Financial Services BillPage 32

(b) may be on such terms and subject to such conditions as the
Committee thinks fit.

(4) Those terms and conditions—

(a) may include provision about the manner of the exercise of
5the delegated functions;

(b) may be revised by the Committee from time to time.

(5) Sub-paragraph (2) does not apply in the event of a vacancy in the
office of Deputy Governor for prudential regulation.

(6) The Bank must publish a statement setting out—

(a) 10the functions which the Committee has delegated to the
chief executive for prudential regulation,

(b) the terms and conditions on which each delegation is
made, and

(c) any decisions (within sub-paragraph (9) or otherwise) that
15are not included in the delegations.

(7) If there is a material change to any of those matters, the Bank must
publish a revised statement.

(8) The requirement to delegate the functions mentioned in sub-
paragraph (2) to the chief executive for prudential regulation does
20not prevent further delegation of those functions by the chief
executive.

(9) The Committee may not delegate the following functions—

(a) reporting to the Treasury under paragraph 19;

(b) making rules under the Financial Services and Markets Act
252000;

(c) determining, reviewing and revising the prudential
regulation strategy under section 2E of that Act;

(d) giving and reviewing guidance under section 2I of that
Act;

(e) 30giving and revoking directions under section 3I, 3J, 3M,
316 or 318 of that Act;

(f) issuing statements under section 63ZD, 63C, 69, 142V,
192H, 192N, 210 or 345D of that Act;

(g) issuing statements under section 80 of the Financial
35Services Act 2012.

Prudential regulation budget

18 (1) The Committee must, with the approval of the court of directors,
for each of the Bank’s financial years adopt an annual budget for
the Bank’s functions as the Prudential Regulation Authority.

(2) 40The budget must be adopted before the start of the financial year
to which it relates.

(3) The Committee may, with the approval of the court of directors,
vary the budget for a financial year at any time after its adoption.

(4) The Bank must publish each budget, and each variation of a
45budget, in whatever way it thinks appropriate.

Bank of England and Financial Services BillPage 33

Annual reports

19 At least once a year the Committee must make a report to the
Chancellor of the Exchequer on—

(a) the adequacy of the resources allocated, in the period to
5which the report relates, to the Bank’s functions as the
Prudential Regulation Authority, and

(b) the extent to which the exercise of the Bank’s functions as
the Prudential Regulation Authority is independent of the
exercise of its other functions.”

Section 16

10SCHEDULE 2 Amendments relating to Part 1

Part 1 Bank of England Act 1998

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

2 15In section 2 (functions of court of directors), for subsection (5) substitute—

(5) Subsections (2) to (4) are subject to—

(a) section 2A (Financial Stability Objective);

(b) section 11 (objectives in relation to monetary policy);

(c) Part 1A of the Financial Services and Markets Act 2000
20(objectives and strategy of the Prudential Regulation
Authority).”

3 In section 2A(2) (financial stability objective) for “, the Financial Conduct
Authority and the Prudential Regulation Authority)” substitute “and the
Financial Conduct Authority)”.

4 (1) 25Section 3A (oversight functions) is amended as follows.

(2) In subsection (2)(a)—

(a) in sub-paragraph (i), after “Act” insert “, the objectives specified in
relation to the Prudential Regulation Authority in Part 1A of the
Financial Services and Markets Act 2000”;

(b) 30omit the “and” at the end of sub-paragraph (ii);

(c) for sub-paragraph (iii) substitute—

(“iii) the Bank’s strategy determined under section
2,

(iv) the Bank’s financial stability strategy
35determined under section 9A, and

(v) the strategy of the Prudential Regulation
Authority determined under section 2E of the
Financial Services and Markets Act 2000;”.

(3) In subsection (4) omit paragraphs (c) to (h).

5 (1) 40Section 3C (reviews) is amended as follows.

Bank of England and Financial Services BillPage 34

(2) In subsection (1)—

(a) after “of its” insert “oversight”;

(b) for “Oversight Committee” substitute “court of directors”;

(c) in paragraphs (a) and (b) for “Committee” substitute “court of
5directors”.

(3) In subsection (3)(a) for “Committee” substitute “court of directors”.

(4) Omit subsection (4).

(5) In subsection (5) for “Committee” substitute “court of directors”.

6 In section 3D(1) (publication of reports of performance reviews) for
10“Oversight Committee” substitute “court of directors”.

7 In section 3E(2) (recommendations resulting from review) for “Oversight
Committee” substitute “court of directors”.

8 (1) Section 3F (oversight: further provisions) is amended as follows.

(2) In subsection (1)—

(a) 15for “Oversight Committee” substitute “court of directors”;

(b) after “of its” insert “oversight”;

(c) for “or the Monetary Policy Committee” substitute “, the Monetary
Policy Committee or the Prudential Regulation Committee”.

(3) In subsection (2)—

(a) 20for “Oversight Committee” substitute “court of directors”;

(b) for “or the Monetary Policy Committee” substitute “, the Monetary
Policy Committee or the Prudential Regulation Committee for the
purposes of exercising its oversight functions”.

(4) After subsection (2) insert—

(2A) 25But a member of the court of directors who has any direct or indirect
interest (including any reasonably likely future interest) in any
dealing or business which falls to be considered by the Prudential
Regulation Committee may not, under the powers conferred by this
section—

(a) 30obtain access to any documents relating to the dealing or
business, or

(b) attend any proceedings of the Prudential Regulation
Committee relating to any question arising from its
consideration of the dealing or business.”

(5) 35In subsection (3)—

(a) in paragraph (a)—

(i) after “Policy Committee” insert “, the Monetary Policy
Committee or the Prudential Regulation Committee”;

(ii) for “Oversight Committee” substitute “court of directors”;

(b) 40omit the “or” at the end of paragraph (b);

(c) at the end of paragraph (c) insert , or

(d) the powers of the Prudential Regulation Committee
under paragraph 15(2) of Schedule 6A.”

(6) In the heading, for “Committee” substitute “functions”.

Bank of England and Financial Services BillPage 35

9 (1) Section 4 (annual report by the Bank) is amended as follows.

(2) For subsection (2)(a) substitute—

(a) a report by the court of directors on the matters which it
reviews, monitors or otherwise considers in the performance
5of its oversight functions (as defined by section 3A(2)),”.

(3) In subsection (2)(b)—

(a) for “statement” substitute “statements”;

(b) after “7(2)” insert “and (2A)”;

(c) for “it” substitute “them”.

(4) 10Omit subsection (3).

(5) After subsection (6) insert—

(7) The Chancellor may comply with subsection (6) by laying a
document containing a report under this section together with a
report by the Prudential Regulation Authority under paragraph 19 of
15Schedule 1ZB to the Financial Services and Markets Act 2000.”

10 Omit section 7A(9)(a) (definition of “qualifying company”).

11 In section 9B(4) (Financial Policy Committee) for “Oversight Committee”
substitute “court of directors of the Bank”.

12 In section 9O (FPC recommendations within the Bank), after subsection (4)
20insert—

(5) Recommendations by the Committee to the PRA are to be made
under section 9Q (and not under this section).”

13 (1) Section 9Y (directions requiring information or documents) is amended as
follows.

(2) 25In subsection (2)(a) for “or the PRA (“the regulator”) requiring the regulator”
substitute “requiring it”.

(3) In subsection (3) for “regulator”, in each place it occurs, substitute “FCA”.

(4) In subsection (4) omit—

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

(b) 30paragraph (b).

(5) In the italic heading before section 9Y, omit “or PRA”.

14 (1) Section 9Z (further provisions about directions under section 9Y) is
amended as follows.

(2) In subsection (2)—

(a) 35omit “or the PRA (“the regulator”)”;

(b) for “regulator”, in the second place it occurs, substitute “FCA”.

(3) In subsection (4), for “regulator to which it is given” substitute “FCA”.

15 In section 14 (publications of statements about decisions)—

(a) in subsection (1) after “As soon as” insert “reasonably”;

(b) 40in subsection (5) after “As soon as” insert “reasonably”.

16 (1) Section 16 (functions of Oversight Committee) is amended as follows.

Bank of England and Financial Services BillPage 36

(2) In subsection (1) for “Oversight Committee” substitute “court of directors of
the Bank”.

(3) In subsection (2) for “the function of the Oversight Committee” substitute
“the court’s function”.

(4) 5In the heading, for “Oversight Committee” substitute “court of directors”.

17 In section 18(6) (reports) after “as soon as” insert “reasonably”.

18 In section 40(2) (orders) after “under—” insert—

  • “section 1A(1),”.

19 (1) Schedule 1 (court of directors) is amended as follows.

(2) 10In paragraph 8(2) for “Chief Executive of the Prudential Regulation
Authority” substitute “chief executive for prudential regulation (see
Schedule 6A)”.

(3) In paragraph 11(1), after paragraph (c) insert—

(“d) a committee consisting of officers, employees
15or agents of the Bank.”

20 (1) Schedule 2A (Financial Policy Committee) is amended as follows.

(2) In paragraph 5 for “Oversight Committee” substitute “court of directors of
the Bank”.

(3) In paragraph 6 for sub-paragraph (2) substitute—

(2) 20The following persons are disqualified for appointment under
section 9B(1)(e)—

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

(b) a member of the Prudential Regulation Committee of the
25Bank appointed under section 30A(2)(g).”

(4) In paragraph 9—

(a) in sub-paragraph (1) for “Oversight Committee” substitute “court of
directors of the Bank”;

(b) in sub-paragraph (2) for “Oversight Committee” substitute “court of
30directors”.

(5) In paragraph 11—

(a) in sub-paragraph (2)(b) for “either” substitute “one”;

(b) omit sub-paragraph (8).

(6) In paragraph 14—

(a) 35the existing text becomes sub-paragraph (1);

(b) after that sub-paragraph insert—

(2) The Bank must issue and maintain a code of practice
describing how members of the Committee and the
Committee are to comply with sub-paragraph (1).

(3) 40The Bank may at any time revise or replace the code.

(4) Before issuing, revising or replacing the code, the Bank
must consult the Treasury.

Bank of England and Financial Services BillPage 37

(5) The Bank must publish the current version of the code in
whatever manner it sees fit.

(6) The Committee must comply with the code when taking
decisions under sub-paragraph (1)(b).”

(7) 5After paragraph 14 insert—

“Decisions otherwise than at meetings

15 (1) The Committee may take a decision on a matter without a meeting
if—

(a) a majority of eligible members indicate in writing their
10agreement to the decision,

(b) the eligible members who indicate in writing their
agreement to the decision would have constituted a
quorum at a meeting of the Committee, and

(c) any other requirements determined by the Committee are
15met.

(2) “Eligible members” are members of the Committee who would
have been entitled to vote on the matter if the matter had been
proposed for decision at a meeting of the Committee.

Power to determine own procedure

16 20Subject to paragraphs 11, 14 and 15, the Committee is to determine
its own procedure.”

21 (1) Schedule 3 (Monetary Policy Committee) is amended as follows.

(2) In paragraph 4(2) for “Oversight Committee” substitute “court of directors
of the Bank”.

(3) 25For paragraph 5A substitute—

5A The following persons are disqualified for appointment under
section 13(2)(c)—

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

(b) 30a member of the Prudential Regulation Committee of the
Bank appointed under section 30A(2)(g).”

(4) In paragraph 8—

(a) for “have executive responsibility” substitute “carry out monetary
policy analysis”;

(b) 35omit the words from “for” to the end.

(5) In paragraph 9(1)—

(a) for “Oversight Committee” substitute “court of directors of the
Bank”;

(b) in paragraph (a) for “the meetings of the Monetary Policy Committee
40for more than 3 months” substitute “3 or more meetings of the
Monetary Policy Committee”.

Bank of England and Financial Services BillPage 38

(6) After paragraph 9(1) insert—

(1A) The court of directors may, with the consent of the Chancellor of
the Exchequer, also remove a member appointed under section
13(2)(c) if it is satisfied that in all the circumstances his financial or
5other interests are such as substantially to affect the functions as
member which it would be proper for him to discharge.”

22 (1) Schedule 7 (restriction on disclosure of information) is amended as follows.

(2) In paragraph 2(1)—

(a) omit the “or” at the end of sub-paragraph (b);

(b) 10at the end of sub-paragraph (c) insert or

(d) its functions as the Prudential Regulation
Authority.”

(3) In paragraph 3(1), in column 1 of the table, in the entry for the Financial
Conduct Authority or the Prudential Regulation Authority omit “or the
15Prudential Regulation Authority”.

Part 2 Other Acts

Bank of England Act 1946 (c. 27)Bank of England Act 1946 (c. 27)

23 In section 4(1) of the Bank of England Act 1946 (power of Treasury to give
20directions to the Bank)—

(a) the words “monetary policy” become paragraph (a);

(b) after that paragraph insert—

(b) the exercise by the Bank of its functions as the
Prudential Regulation Authority (see section 2A of
25the Financial Services and Markets Act 2000).”

House of Commons Disqualification Act 1975 (c. 24)House of Commons Disqualification Act 1975 (c. 24)

24 In Part 3 of Schedule 1 to the House of Commons Disqualification Act 1975
(other disqualifying offices)—

(a) omit “Member of the governing body of the Prudential Regulation
30Authority;”;

(b) at the appropriate place insert—

“Member of the Prudential Regulation Committee of the Bank of
England appointed under section 30A(2)(f) or (g) of the Bank of
England Act 1998”.

35Northern Ireland Assembly Disqualification Act 1975 (c. 25)Northern Ireland Assembly Disqualification Act 1975 (c. 25)

25 In Part 3 of Schedule 1 to the Northern Ireland Assembly Disqualification
Act 1975 (other disqualifying offices)—

(a) omit “Member of the governing body of the Prudential Regulation
Authority;”;

(b) 40at the appropriate place insert—

Bank of England and Financial Services BillPage 39

“Member of the Prudential Regulation Committee of the Bank of
England appointed under section 30A(2)(f) or (g) of the Bank of
England Act 1998”.

Financial Services and Markets Act 2000 (c. 8)Financial Services and Markets Act 2000 (c. 8)

26 5The Financial Services and Markets Act 2000 is amended as follows.

27 Omit section 2O (independent reviews of PRA).

28 Omit section 2P (right to obtain documents etc for purposes of section 2O).

29 In section 3C (duty to follow principles of good governance), for “each
regulator” substitute “the FCA”.

30 (1) 10Section 3Q (co-operation by FCA and PRA with Bank of England) is
amended as follows.

(2) In the heading, omit “and PRA”.

(3) In subsection (1), for “Each regulator” substitute “The FCA”.

(4) In subsection (2), for “regulator” substitute “FCA”.

31 15In section 3R(2) (arrangements for provision of services by and to Bank of
England)—

(a) for “Either regulator” substitute “The FCA”;

(b) in paragraphs (a) and (b), for “regulator” substitute “FCA”.

32 After section 3S insert—

20“Interpretation
3T Interpretation

In this Part “enactment” includes—

(a) an enactment contained in subordinate legislation within the
meaning of the Interpretation Act 1978;

(b) 25an enactment contained in, or in an instrument made under,
an Act of the Scottish Parliament;

(c) an enactment contained in, or in an instrument made under,
a Measure or Act of the National Assembly for Wales;

(d) an enactment contained in, or in an instrument made under,
30Northern Ireland legislation.”

33 (1) Section 137J (rules about recovery plans) is amended as follows.

(2) In subsection (1), for paragraphs (a) and (b) substitute “the Treasury”.

(3) After subsection (1) insert—

(1A) The FCA must also consult the Bank of England.”

34 (1) 35Section 137K (rules about resolution packs) is amended as follows.

(2) In subsection (1), for paragraphs (a) and (b) substitute “the Treasury”.

(3) After subsection (1) insert—

(1A) The FCA must also consult the Bank of England.”