Banking Bill

House of Commons

Session 2007 - 08
Internet Publications
Other Bills before Parliament

Banking Bill

Banking Bill
Part 3 — Bank Administration
78

(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.
(4)
Provision made under or by virtue of this Part may make special provision in
5
relation to the application of this Part to building societies.
146
Credit unions
(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.
10
(2)
An order may—
(a)
amend the Credit Union Act 1979, the Industrial and Providential
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;
15
(c)
replicate, with or without modifications, a 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 credit unions.
(3)
An order—
(a)
shall be made by statutory instrument, and
20
(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 credit unions.
147
Rules
25
(1)
Section 411 of the Insolvency Act 1986 (company insolvency rules) is amended
as follows.
(2)
In subsection (1) after “Part 2 of the Banking Act 2008 (bank insolvency orders)”
(inserted by section 112 above) insert “, Part 3 of that Act (bank
administration)”.
30
(3)
After subsection (2C) (inserted by section 112 above) insert—
“(2D)
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
includes a reference to doing anything under or for the purposes of Part
3 of the Banking Act 2008.”
35
(4)
In subsection (3)—
(a)
after “bank liquidator” (inserted by section 112 above) insert “or
administrator”, and
(b)
after “Part 2” (inserted by section 112 above) insert “or 3”.
148
Fees
40
After section 414(8A) of the Insolvency Act 1986 (fees orders - inserted by

Banking Bill
Part 3 — Bank Administration
79

section 113 above) insert—
“(8B)
This section applies in relation to Part 3 of the Banking Act 2008 (bank
administration) as in relation to Parts I to VII of this Act.”
149
Partnerships
(1)
The Lord Chancellor may, by order made with the concurrence of the Secretary
5
of State and the Lord Chief Justice, modify provisions of this Part in their
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).
10
(3)
This section does not apply in relation to partnerships constituted under the
law of Scotland.
150
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.
15
(2)
An order—
(a)
shall be made by statutory instrument, and
(b)
shall be subject to annulment in pursuance of a resolution of either
House of Parliament.
151
Co-operation between courts
20
(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 (after the subsection added by section 116) add—
“(14)
Section 151 of the Banking Act 2008 provides for provisions of that Act
about bank administration to be “insolvency law” for the purposes of
25
this section.”
152
Interpretation: general
(1)
In this Part “the court” means—
(a)
in England and Wales, the High Court,
(b)
in Scotland, the Court of Session, and
30
(c)
in Northern Ireland, the High Court.
(2)
In this Part “the FSA” means the Financial Services Authority.
(3)
For the purposes of a reference in this Part to inability to pay debts—
(a)
a bank that is in default on an obligation to pay a sum due and payable
under an agreement, is to be treated as unable to pay its debts, and
35
(b)
section 123 of the Insolvency Act 1986 (inability to pay debts) also
applies; and

for the purposes of paragraph (a) “agreement” means an agreement the
making or performance of which constitutes or is part of a regulated activity
carried on by the bank.
40

Banking Bill
Part 4 — Financial Services Compensation Scheme
80

(4)
Expressions used in this Part and in the Insolvency Act 1986 have the same
meaning as in that Act.
(5)
Expressions used in this Part and in the Companies Act 2006 have the same
meaning as in that Act.
(6)
A reference in this Part to action includes a reference to inaction.
5
153
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
equivalent enactment having effect in relation to Northern Ireland,
(b)
where this Part amends an enactment an equivalent amendment
10
(incorporating any necessary modification) is made to the equivalent
enactment having effect in relation to Northern Ireland,
(c)
the reference in section 146 to section 31 of the Credit Unions Act 1979
is to be treated as a reference to Article 2 of the Credit Unions (Northern
Ireland) Order 1985, and
15
(d)
in section 149—
(i)
the reference to the Secretary of State is to be treated as a
reference to the Department for Enterprise, Trade and
Investment, and
(ii)
the reference to the Lord Chief Justice is a reference to the Lord
20
Chief Justice in Northern Ireland.
154
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
(including a fiscal enactment and an Act of the Scottish Parliament) passed
25
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
resolution of each House of Parliament.
30
Part 4
Financial Services Compensation Scheme
155
Overview
This Part makes a number of amendments in connection with the Financial
Services Compensation Scheme provided for by Part 15 of the Financial
35
Services and Markets Act 2000.
156
Contingency funding
(1)
After section 214 of the Financial Services and Markets Act 2000 (compensation

Banking Bill
Part 4 — Financial Services Compensation Scheme
81

scheme: general) insert—
“214A
    Contingency funding
(1)
The Treasury may make regulations (“contingency fund regulations”)
permitting the scheme manager to impose levies under section 213 for
the purpose of maintaining contingency funds from which possible
5
expenses may be paid.
(2)
Contingency fund regulations may make provision about the
establishment and management of contingency funds; in particular, the
regulations may make provision about—
(a)
the number and size of funds;
10
(b)
the circumstances and timing of their establishment;
(c)
the classes of person from whom contributions to the funds may
be levied;
(d)
the amount and timing of payments into and out of funds
(which may include provision for different levies for different
15
classes of person);
(e)
refunds;
(f)
the ways in which funds’ contents may be invested (including
(i) the extent of reliance on section 223A, and (ii) the application
of investment income);
20
(g)
the purposes for which funds may be applied, but only so as to
determine whether a fund is to be used (i) for the payment of
compensation, (ii) for the purposes of co-operating with a bank
liquidator in accordance with section 86 of the Banking Act
2008, or (iii) for contributions under section 214B;
25
(h)
procedures to be followed in connection with funds, including
the keeping of records and the provision of information.
(3)
The compensation scheme may include provision about contingency
funds provided that it is not inconsistent with contingency fund
regulations.”
30
(2)
At the end of section 213(7) (compensation scheme: further provision) add
“(except where limitations are expressly stated)”.
(3)
In section 218 (compensation scheme: annual report)—
(a)
in subsection (1) after “to the Authority” insert “and the Treasury”, and
(b)
at the end of subsection (2)(b) add “or in contingency fund regulations.”
35
157
Special resolution regime
After section 214A of the Financial Services and Markets Act 2000 (contingency
funding - inserted by section 156 above) insert—
“214B
     Contribution to costs of special resolution regime
(1)
This section applies where—
40
(a)
a stabilisation power under Part 1 of the Banking Act 2008 has
been exercised in respect of a bank (within the meaning of that
Part), and
(b)
the Treasury think that the bank was, or but for the exercise of
the stabilisation power would have become, unable to satisfy
45
claims against it.

Banking Bill
Part 4 — Financial Services Compensation Scheme
82

(2)
Where this section applies—
(a)
the Treasury may require the scheme manager to contribute
towards expenses connected with the exercise of the
stabilisation power, and
(b)
contributions shall be treated as expenditure under the scheme
5
for all purposes (including levies, contingency funds and
borrowing).
(3)
The Treasury shall make regulations—
(a)
specifying what expenses the scheme manager may be required
to contribute towards under subsection (2),
10
(b)
providing for independent verification of the nature and
amount of expenses incurred (which may include provision
about appointment and payment of an auditor), and
(c)
providing for the method by which amounts to be contributed
are to be determined.
15
(4)
The regulations must ensure that contributions required do not exceed
the amount of compensation that would have been payable under the
scheme if the stabilisation power had not been exercised and the bank
had been unable to satisfy claims against it; and for that purpose the
amount of compensation that would have been payable does not
20
include—
(a)
amounts that would have been likely, at the time when the
stabilisation power was exercised, to be recovered by the
scheme from the bank, or
(b)
any compensation actually paid to an eligible depositor of the
25
bank.
(5)
The regulations must provide for the appointment of an independent
valuer (who may be the person appointed as valuer under section 49 of
the Banking Act 2008 in respect of the exercise of the stabilisation
power) to calculate the amounts referred to in subsection (4)(a); and the
30
regulations—
(a)
must provide for the valuer to be appointed by the Treasury or
by a person designated by the Treasury,
(b)
must include provision enabling the valuer to reconsider a
decision,
35
(c)
must provide a right of appeal to a court or tribunal,
(d)
must provide for payment of the valuer,
(e)
may replicate or apply a provision of section 49 or 50, and
(f)
may apply or include any provision that is or could be made
under that section.
40
(6)
The regulations may include provision—
(a)
about timing;
(b)
about procedures to be followed;
(c)
for discretionary functions to be exercised by a specified body
or by persons of a specified class;
45
(d)
about the resolution of disputes (which may include provision
conferring jurisdiction on a court or tribunal).

Banking Bill
Part 4 — Financial Services Compensation Scheme
83

(7)
The compensation scheme may include provision about contributions
under and levies in connection with this section, provided that it is not
inconsistent with this section or regulations under it.”
158
Investing in National Loans Fund
After section 223 of the Financial Services and Markets Act 2000 (management
5
expenses) insert—
“223A
    Investing in National Loans Fund
(1)
Sums levied for the purpose of maintaining a contingency fund may be paid to
the Treasury.
(2)
The Treasury may receive sums under subsection (1) and may set terms and
10
conditions of receipts.
(3)
Sums received shall be treated as if raised under section 12 of the National
Loans Act 1968 (and shall therefore be invested as part of the National Loans
Fund).
(4)
Interest accruing on the invested sums may be credited to the contingency
15
fund (subject to any terms and conditions set under subsection (2)).
(5)
The Treasury shall comply with any request of the scheme manager to arrange
for the return of sums for the purpose of making payments out of a contingency
fund (subject to any terms and conditions set under subsection (2)).”
159
Borrowing from National Loans Fund
20
After section 223A of the Financial Services and Markets Act 2000 (investing in
National Loans Fund - inserted by section 158 above) insert—
“223B
    Borrowing from National Loans Fund
(1)
The scheme manager may request a loan from the National Loans Fund for the
purpose of funding expenses incurred or expected to be incurred under the
25
scheme.
(2)
The Treasury may arrange for money to be paid out of the National Loans
Fund in pursuance of a request under subsection (1).
(3)
The Treasury shall determine—
(a)
the rate of interest on a loan, and
30
(b)
other terms and conditions.
(4)
The Treasury may make regulations—
(a)
about the amounts that may be borrowed under this section;
(b)
permitting the scheme manager to impose levies under section 213 for
the purpose of meeting expenses in connection with loans under this
35
section;
(c)
about the classes of person on whom those levies may be imposed;
(d)
about the amounts and timing of those levies.
(5)
The compensation scheme may include provision about borrowing under this
section provided that it is not inconsistent with regulations under this
40
section.”