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Banking Bill
Part 2 — Bank Insolvency

57

 

108     

Disqualification of directors

(1)   

In this section “the Disqualification Act” means the Company Directors

Disqualification Act 1986.

(2)   

In the Disqualification Act—

(a)   

a reference to liquidation includes a reference to bank insolvency,

5

(b)   

a reference to winding up includes a reference to making or being

subject to a bank insolvency order,

(c)   

a reference to becoming insolvent includes a reference to becoming

subject to a bank insolvency order, and

(d)   

a reference to a liquidator includes a reference to a bank liquidator.

10

(3)   

For the purposes of the application of section 7(3) of the Disqualification Act

(disqualification order or undertaking) to a bank which is subject to a bank

insolvency order, the responsible office-holder is the bank liquidator.

(4)   

After section 21 of the Disqualification Act (interaction with Insolvency Act)

insert—

15

“21A    

Bank insolvency

Section 108 of the Banking Act 2008 provides for this Act to apply in

relation to bank insolvency as it applies in relation to liquidation.”

109     

Application of insolvency law

(1)   

The Secretary of State and the Treasury may by order made jointly—

20

(a)   

provide for an enactment about insolvency to apply to bank insolvency

(with or without specified modifications);

(b)   

amend, or modify the application of, an enactment about insolvency in

consequence of this Part.

(2)   

In subsection (1) “enactment” includes—

25

(a)   

subordinate legislation,

(b)   

an Act of the Scottish Parliament and an instrument under an Act of the

Scottish Parliament, and

(c)   

Northern Ireland legislation.

(3)   

An order under subsection (1)—

30

(a)   

shall be made by statutory instrument, and

(b)   

may not be made unless a draft has been laid before and approved by

resolution of each House of Parliament.

Miscellaneous

110     

Role of FSCS

35

(1)   

For the purpose of co-operating in the pursuit of Objective 1 in section 86 the

FSCS—

(a)   

may make or arrange for payments to or in respect of eligible

depositors of the bank, and

(b)   

may make money available to facilitate the transfer of accounts of

40

eligible depositors of the bank.

 
 

Banking Bill
Part 2 — Bank Insolvency

58

 

(2)   

The FSCS may include provision about expenditure under this section; and, in

particular—

(a)   

money may be raised through the imposition of a levy under Part 15 of

the Financial Services and Markets Act in respect of expenditure or

possible expenditure under this section, and

5

(b)   

sums raised in connection with the scheme (whether or not under

paragraph (a)) may be expended under this section.

(3)   

In section 220(3)(a) of the Financial Services and Markets Act 2000

(Compensation Scheme: information) after “liquidator” insert “, bank

liquidator”.

10

(4)   

The FSCS is entitled to participate in proceedings for or in respect of a bank

insolvency order.

(5)   

A bank liquidator must—

(a)   

comply with a request of the FSCS for the provision of information, and

(b)   

provide the FSCS with any other information which the bank liquidator

15

thinks might be useful for the purpose of co-operating in the pursuit of

Objective 1.

(6)   

A bank liquidator may enter into an agreement under section 221A of the

Financial Services and Markets Act 2000 (Compensation Scheme: delegation of

functions) for the bank liquidator to exercise functions of the scheme manager

20

for the purpose of facilitating the pursuit of Objective 1.

(7)   

Where a bank insolvency order is made in respect of a bank, the fact that it later

ceases to be an authorised person does not prevent the operation of the

compensation scheme in respect of it; and for that purpose the bank is a

relevant person within the meaning of section 213(9) of the Financial Services

25

and Markets Act 2000 despite the lapse of authorisation.

111     

Transfer of accounts

(1)   

This section applies where a bank liquidator arranges, in pursuit of Objective

1 in section 86, for the transfer of eligible depositors’ accounts from the bank to

another financial institution.

30

(2)   

The arrangements may disapply, or provide that they shall have effect despite,

any restriction arising by virtue of contract or legislation or in any other way.

(3)   

In subsection (2) “restriction” includes—

(a)   

any restriction, inability or incapacity affecting what can and cannot be

assigned or transferred (whether generally or by a particular person),

35

and

(b)   

a requirement for consent (by any name).

(4)   

In making the arrangements mentioned in subsection (1) the bank liquidator

must ensure that eligible depositors will be able to remove money from

transferred accounts as soon as is reasonably practicable after transfer.

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112     

Rules

(1)   

Section 411 of the Insolvency Act 1986 (company insolvency rules) is amended

as follows.

 
 

Banking Bill
Part 2 — Bank Insolvency

59

 

(2)   

In subsection (1) after “Parts I to VII of this Act” insert “, Part 2 of the Banking

Act 2008 (bank insolvency orders)”.

(3)   

After subsection (2B) insert—

“(2C)   

For the purposes of subsection (2), a reference in Schedule 8 to this Act

to doing anything under or for the purposes of a provision of this Act

5

includes a reference to doing anything under or for the purposes of Part

2 of the Banking Act 2008.”

(4)   

In subsection (3)—

(a)   

after “provisional liquidator” insert “or bank liquidator”, and

(b)   

after “Parts I to VII of this Act” insert “or Part 2 of the Banking Act

10

2008”.

113     

Fees

After section 414(8) of the Insolvency Act 1986 (fees orders) insert—

“(8A)   

This section applies in relation to Part 2 of the Banking Act 2008 (bank

insolvency) as in relation to Parts I to VII of this Act.”

15

114     

Insolvency Services Account

A bank liquidator who obtains money by realising assets in the course of the

bank insolvency must pay it into the Insolvency Services Account (kept by the

Secretary of State).

115     

Evidence

20

In section 433(1) of the Insolvency Act 1986 (admissibility of statements of

affairs) after paragraph (a) insert (before the “and”)—

“(aa)   

a statement made in pursuance of a requirement imposed by or

under Part 2 of the Banking Act 2008 (bank insolvency),”.

116     

Co-operation between courts

25

(1)   

Provisions of or by virtue of this Part are “insolvency law” for the purposes of

section 426 of the Insolvency Act 1986 (co-operation between courts).

(2)   

At the end of that section add—

“(13)   

Section 116 of the Banking Act 2008 provides for provisions of that Act

about bank insolvency to be “insolvency law” for the purposes of this

30

section.”

117     

Building societies

(1)   

The Treasury may by order provide for this Part to apply to building societies

(within the meaning of section 119 of the Building Societies Act 1986) as it

applies to banks, subject to modifications set out in the order.

35

(2)   

An order may—

(a)   

amend the Building Societies Act 1986 or any other enactment which

relates, or in so far as it relates, to building societies;

(b)   

amend an enactment amended by this Part;

 
 

Banking Bill
Part 2 — Bank Insolvency

60

 

(c)   

replicate, with or without modifications, any provision of this Part;

(d)   

apply a provision made under or by virtue of this Part, with or without

modifications, to this Part as it applies to building societies.

(3)   

An order—

(a)   

shall be made by statutory instrument, and

5

(b)   

may not be made unless a draft has been laid before and approved by

resolution of each House of Parliament.

(4)   

Provision made under or by virtue of this Part may make special provision in

relation to the application of this Part to building societies.

118     

Credit unions

10

(1)   

The Treasury may by order provide for this Part to apply to credit unions

(within the meaning of section 31 of the Credit Unions Act 1979) as it applies

to banks, subject to modifications set out in the order.

(2)   

An order may—

(a)   

amend the Credit Union Act 1979, the Industrial and Providential

15

Societies Act 1965 or any other enactment which relates, or in so far as

it relates, to credit unions;

(b)   

amend an enactment amended by this Part;

(c)   

replicate, with or without modifications, any provision of this Part;

(d)   

apply a provision made under or by virtue of this Part, with or without

20

modifications, to this Part as it applies to credit unions.

(3)   

An order—

(a)   

shall be made by statutory instrument, and

(b)   

may not be made unless a draft has been laid before and approved by

resolution of each House of Parliament.

25

(4)   

Provision made under or by virtue of this Part may make special provision in

relation to the application of this Part to credit unions.

119     

Partnerships

(1)   

The Lord Chancellor may, by order made with the concurrence of the Secretary

of State and the Lord Chief Justice, modify provisions of this Part in their

30

application to partnerships.

(2)   

For procedural purposes an order under subsection (1) shall be treated in the

same way as an order under section 420 of the Insolvency Act 1986

(partnerships).

(3)   

This section does not apply in relation to partnerships constituted under the

35

law of Scotland.

120     

Scottish partnerships

(1)   

The Secretary of State may by order modify provisions of this Part in their

application to partnerships constituted under the law of Scotland.

(2)   

An order—

40

(a)   

shall be made by statutory instrument, and

 
 

Banking Bill
Part 3 — Bank Administration

61

 

(b)   

shall be subject to annulment in pursuance of a resolution of either

House of Parliament.

121     

Northern Ireland

In the application of this Part to Northern Ireland—

(a)   

a reference to an enactment is to be treated as a reference to the

5

equivalent enactment having effect in relation to Northern Ireland,

(b)   

where this Part amends an enactment an equivalent amendment

(incorporating any necessary modification) is made to the equivalent

enactment having effect in relation to Northern Ireland,

(c)   

references to the Secretary of State, except in section 109, are to be

10

treated as references to the Department of Enterprise, Trade and

Investment,

(d)   

a reference to the Insolvency Services Account is to be treated as a

reference to the Insolvency Account,

(e)   

a reference to section 31 of the Credit Unions Act 1979 is to be treated

15

as a reference to Article 2 of the Credit Unions (Northern Ireland) Order

1985,

(f)   

the Judgments Enforcement (Northern Ireland) Order 1981 has effect in

place of sections 183 and 184 of the Insolvency Act 1986 (applied by

section 90 above), and

20

(g)   

the reference in section 119 to the Lord Chief Justice is a reference to the

Lord Chief Justice in Northern Ireland.

122     

Consequential provision

(1)   

The Treasury may by order make provision in consequence of this Part.

(2)   

An order may, in particular, amend or modify the effect of an enactment

25

(including a fiscal enactment and an Act of the Scottish Parliament) passed

before the commencement of this Part.

(3)   

An order—

(a)   

shall be made by statutory instrument, and

(b)   

may not be made unless a draft has been laid before and approved by

30

resolution of each House of Parliament.

Part 3

Bank Administration

Introduction

123     

Overview

35

(1)   

This Part provides for a procedure to be known as bank administration.

(2)   

The main features of bank administration are that—

(a)   

it is used where part of the business of a bank is sold to a commercial

purchaser in accordance with section 10 or transferred to a bridge bank

in accordance with section 11 (and it can also be used in certain cases of

40

multiple transfers under Part 1),

 
 

Banking Bill
Part 3 — Bank Administration

62

 

(b)   

the court appoints a bank administrator on the application of the Bank

of England,

(c)   

the bank administrator is able and required to ensure that the non-sold

or non-transferred part of the bank (“the residual bank”) provides

services or facilities required to enable the commercial purchaser (“the

5

private sector purchaser”) or the transferee (“the bridge bank”) to

operate effectively, and

(d)   

in other respects the process is the same as for normal administration

under the Insolvency Act 1986, subject to specified modifications.

(3)   

The Table describes the provisions of this Part.

10

 

Sections

Topic

 
 

Sections 123 to 127

Introduction

 
 

Sections 128 to 135

Process

 
 

Sections 136 to 139

Multiple transfers

 
 

Sections 140 and 141

Termination

 

15

 

Sections 142 to 154

Miscellaneous

 

124     

Objectives

(1)   

A bank administrator has two objectives—

(a)   

Objective 1: support for commercial purchaser or bridge bank (see

section 125), and

20

(b)   

Objective 2: “normal” administration (see section 127).

(2)   

Objective 1 takes priority over Objective 2 (but a bank administrator is obliged

to begin working towards both objectives immediately upon appointment).

125     

Objective 1: supporting private sector purchaser or bridge bank

(1)   

Objective 1 is to ensure the supply to the private sector purchaser or bridge

25

bank of such services and facilities as are required to enable it, in the opinion

of the Bank of England, to operate effectively.

(2)   

For the purposes of Objective 1—

(a)   

the reference to services and facilities includes a reference to acting as

transferor or transferee under a supplemental property transfer

30

instrument, and

(b)   

the reference to “supply” includes a reference to supply by persons

other than the residual bank.

(3)   

In the case of bank administration following a private sector purchase the bank

administrator must co-operate with any request of the Bank of England to enter

35

into an agreement for the residual bank to provide services or facilities to the

private sector purchaser; and—

(a)   

in pursuing Objective 1 the bank administrator must have regard to the

terms of that or any other agreement entered into between the residual

bank and the private sector purchaser,

40

 
 

Banking Bill
Part 3 — Bank Administration

63

 

(b)   

in particular, the bank administrator must avoid action that is likely to

prejudice performance by the residual bank of its obligations in

accordance with those terms,

(c)   

if in doubt about the effect of those terms the bank administrator may

apply to the court for directions under paragraph 63 of Schedule B1 to

5

the Insolvency Act 1986 (applied by section 132 below), and

(d)   

the private sector purchaser may refer to the court a dispute about any

agreement with the residual bank, by applying for directions under

paragraph 63 of Schedule B1.

(4)   

In the case of bank administration following transfer to a bridge bank, the bank

10

administrator must co-operate with any request of the Bank of England to enter

into an agreement for the residual bank to provide services or facilities to the

bridge bank; and—

(a)   

the bank administrator must avoid action that is likely to prejudice

performance by the residual bank of its obligations in accordance with

15

an agreement,

(b)   

the bank administrator must ensure that so far as is reasonably

practicable an agreement entered into includes provision for

consideration at market rate,

(c)   

paragraph (b) does not prevent the bank administrator from entering

20

into an agreement on any terms that the bank administrator thinks

necessary in pursuit of Objective 1, and

(d)   

this subsection does not apply after Objective 1 ceases.

(5)   

Where a bank administrator requires the Bank of England’s consent or

approval to any action in accordance with this Part, the Bank may withhold

25

consent or approval only on the grounds that the action might prejudice the

achievement of Objective 1.

126     

Objective 1: duration

(1)   

Objective 1 ceases if the Bank of England notifies the bank administrator that

the residual bank is no longer required in connection with the private sector

30

purchaser or bridge bank.

(2)   

A bank administrator who thinks that Objective 1 is no longer required may

apply to the court for directions under paragraph 63 of Schedule B1 to the

Insolvency Act 1986 (applied by section 132 below); and the court may direct

the Bank of England to consider whether to give notice under subsection (1)

35

above.

(3)   

If immediately upon the making of a bank administration order the Bank of

England thinks that the residual bank is not required in connection with the

private sector purchaser or bridge bank, the Bank of England may give a notice

under subsection (1).

40

(4)   

A notice under subsection (1) is referred to in this Part as an “Objective 1

Achievement Notice”.

127     

Objective 2: “normal” administration

(1)   

Objective 2 is to—

(a)   

rescue the residual bank as a going concern (“Objective 2(a)”), or

45

 
 

 
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