Banking Bill

House of Commons

Session 2007 - 08
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Banking Bill

Banking Bill
Part 4 — Financial Services Compensation Scheme
84

160
Procedure for claims
(1)
After section 214(1) of the Financial Services and Markets Act 2000 (the
compensation scheme: powers) insert—
“(1A)
Rules by virtue of subsection (1)(h) may, in particular, allow the scheme
manager to treat persons who are or may be entitled to claim under the
5
scheme as if they had done so.
(1B)
A reference in any enactment or instrument to a claim or claimant
under this Part includes a reference to a deemed claim or claimant in
accordance with subsection (1A).
(1C)
Rules by virtue of subsection (1)(j) may, in particular, allow, or be
10
subject to rules which allow, the scheme manager to settle a class of
claim by payment of sums fixed without reference to, or by
modification of, the normal rules for calculation of maximum
entitlement for individual claims.”
(2)
In section 417(1) (definitions) at the appropriate place insert—
15
““claim”, in relation to the Financial Services Compensation
Scheme under Part XV, is to be construed in accordance with
section 214(1B);”.
161
Rights in insolvency
(1)
This section amends section 215 of the Financial Services and Markets Act 2000
20
(rights of scheme following insolvency).
(2)
For section 215(1) substitute—
“(1)
The compensation scheme may make provision—
(a)
about the effect of a payment of compensation under the
scheme on rights or obligations arising out of matters in
25
connection with which the compensation was paid;
(b)
giving the scheme manager a right of recovery in respect of
those rights or obligations.”
(3)
In section 215(2) for “the relevant person’s insolvency” substitute “a person’s
insolvency”.
30
(4)
The heading of section 215 becomes “Rights of the scheme in insolvency”.
162
Information
(1)
Before section 219 of the Financial Services and Markets Act 2000 (scheme
manager’s power to require information) insert—
“218A
   Authority’s power to require information
35
(1)
The Authority may make rules enabling the Authority to require
authorised persons to provide information, which may then be made
available to the scheme manager by the Authority.
(2)
A requirement may be imposed only if the Authority thinks the
information is of a kind that may be of use to the scheme manager in
40
connection with functions in respect of the scheme.
(3)
A requirement under this section may apply—

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Part 4 — Financial Services Compensation Scheme
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(a)
to authorised persons generally or only to specified persons or
classes of person;
(b)
to the provision of information at specified periods, in
connection with specified events or in other ways.
(4)
In addition to requirements under this section, a notice under section
5
165 may relate to information or documents which the Authority thinks
are reasonably required by the scheme manager in connection with the
performance of functions in respect of the scheme; and section 165(4) is
subject to this subsection.
(5)
Rules under subsection (1) shall be prepared, made and treated in the
10
same way as (and may be combined with) the Authority’s general
rules.”
(2)
Section 219 is amended as follows.
(3)
In subsection (1) for “given to the relevant person in respect of whom a claim
is made under the scheme or to a person otherwise involved, require that
15
person” substitute “require a person”.
(4)
After subsection (1) insert—
“(1A)
A requirement may be imposed only—
(a)
on a person (P) against whom a claim has been made under the
scheme,
20
(b)
on a person (P) who is unable or likely to be unable to satisfy
claims under the scheme against P,
(c)
on a person (“the Third Party”) whom the scheme manager
thinks was knowingly involved in matters giving rise to a claim
against another person (P) under the scheme, or
25
(d)
on a person (“the Third Party”) whom the scheme manager
thinks was knowingly involved in matters giving rise to the
actual or likely inability of another person (P) to satisfy claims
under the scheme.
(1B)
For the purposes of subsection (1A)(b) and (d) whether P is unable or
30
likely to be unable to satisfy claims shall be determined in accordance
with provision to be made by the scheme (which may, in particular—
(a)
apply or replicate, with or without modifications, a provision of
an enactment;
(b)
confer discretion on a specified person).”
35
(5)
In subsection (3) for paragraphs (a) and (b) substitute “to be necessary (or likely
to be necessary) for the fair determination of claims which have been or may
be made against P”.
(6)
After subsection (3) insert—
“(3A)
Where a stabilisation power under Part 1 of the Banking Act 2008 has
40
been exercised in respect of a bank, the scheme manager may by notice
in writing require the bank or the Bank of England to provide
information that the scheme manager requires for the purpose of
applying regulations under section 214B(3) above.”
(7)
In subsection (6) for “the relevant person” substitute “P”.
45
(8)
Omit subsection (8).

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Part 4 — Financial Services Compensation Scheme
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(9)
Omit subsection (10).
163
Payments in error
After section 223B of the Financial Services and Markets Act 2000 (borrowing
from National Loans Fund - inserted by section 159 above) insert—
“223C
     Payments in error
5
(1)
Payments made by the scheme manager in error may be provided for
in setting a levy by virtue of section 213, 214A, 214B or 223B.
(2)
This section does not apply to payments made in bad faith.”
164
Regulations
In section 429(2) of the Financial Services and Markets Act 2000 (parliamentary
10
control of subordinate legislation: affirmative resolution) after “90B” insert “,
214A, 214B”.
165
Delegation of functions
(1)
Before section 222 of the Financial Services and Markets Act 2000 (scheme
manager: statutory immunity) insert—
15
“221A
     Delegation of functions
(1)
The scheme manager may arrange for any of its functions to be
discharged on its behalf by another person (a “scheme agent”).
(2)
Before entering into arrangements the scheme manager must be
satisfied that the scheme agent—
20
(a)
is competent to discharge the function, and
(b)
has been given sufficient directions to enable the agent to take
any decisions required in the course of exercising the function
in accordance with policy determined by the scheme manager.
(3)
Arrangements may include provision for payments to be made by the
25
scheme manager to the scheme agent (which payments are
management expenses of the scheme manager).”
(2)
In section 222(1) of that Act after “officer” insert “, scheme agent”.
166
Functions under this Act
At the end of Part 15 of the Financial Services and Markets Act 2000 add—
30
“224A
    Functions under the Banking Act 2008
A reference in this Part to functions of the scheme manager (including
a reference to functions conferred by or under this Part) includes a
reference to functions conferred by or under the Banking Act 2008.”

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Part 5 — Inter-Bank Payment Systems
87

Part 5
Inter-Bank Payment Systems
Introduction
167
Overview
This Part enables the Bank of England to oversee certain systems for payments
5
between financial institutions.
168
Interpretation: “inter-bank payment system”
(1)
In this Part “inter-bank payment system” means arrangements designed to
facilitate or control the transfer of money between financial institutions who
participate in the arrangements.
10
(2)
The fact that persons other than financial institutions can participate does not
prevent arrangements from being an inter-bank payment system.
(3)
In subsection (1) “financial institutions” means—
(a)
banks, and
(b)
building societies.
15
(4)
In subsection (1) “money” includes credit.
(5)
A system is an inter-bank payment system for the purposes of this Part
whether or not it operates wholly or partly in relation to persons or places
outside the United Kingdom.
169
Interpretation: other expressions
20
In this Part—
(a)
a reference to the “operator” of an inter-bank payment system is a
reference to any person with responsibility under the system for
managing or operating it,
(b)
a reference to the operation of a system includes a reference to its
25
management,
(c)
“the UK financial system” has the meaning given to “the financial
system” by section 3(2) of the Financial Services and Markets Act 2000
(market confidence),
(d)
a reference to the Bank of England’s role as a monetary authority is to
30
be construed in accordance with section 222(2)(c), and
(e)
“the FSA” means the Financial Services Authority.
Recognised systems
170
Recognition order
(1)
The Treasury may by order (“recognition order”) specify an inter-bank
35
payment system as a recognised system for the purposes of this Part.
(2)
A recognition order must specify in as much detail as is reasonably practicable
the arrangements which constitute the inter-bank payment system.

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Part 5 — Inter-Bank Payment Systems
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(3)
The Treasury may not specify an inter-bank system operated solely by the
Bank of England.
171
Recognition criteria
(1)
The Treasury may make a recognition order in respect of an inter-bank
payment system only if satisfied that any deficiencies in the design of the
5
system, or any disruption of its operation, would be likely—
(a)
to threaten the stability of, or confidence in, the UK financial system, or
(b)
to have serious consequences for business or other interests throughout
the United Kingdom.
(2)
In considering whether to specify a system the Treasury must have regard to—
10
(a)
the number and value of the transactions that the system presently
processes or is likely to process in the future,
(b)
the nature of the transactions that the system processes,
(c)
whether those transactions or their equivalent could be handled by
other systems,
15
(d)
the relationship between the system and other systems, and
(e)
whether the system is used by the Bank of England in the course of its
role as a monetary authority.
172
Procedure
(1)
Before making a recognition order in respect of a payment system the Treasury
20
must—
(a)
consult the Bank of England,
(b)
notify the operator of the system, and
(c)
consider any representations made.
(2)
The Treasury must also consult the FSA before making a recognition order in
25
respect of a payment system the operator of which—
(a)
is, or has applied to become, a recognised investment exchange within
the meaning of section 285 of the Financial Services and Markets Act
2000,
(b)
is, or has applied to become, a recognised clearing house within the
30
meaning of that section, or
(c)
has, or has applied for, permission under Part 4 of that Act (regulated
activities).
(3)
In considering whether to make a recognition order in respect of a payment
system the Treasury may rely on information provided by the Bank of England
35
or the FSA.
173
De-recognition
(1)
The Treasury may revoke a recognition order.
(2)
The Treasury must revoke a recognition order if not satisfied that the criteria
in section 171 are met in respect of the recognised inter-bank payment system.
40
(3)
Before revoking a recognition order the Treasury must—
(a)
consult the Bank of England,
(b)
notify the operator of the recognised inter-bank payment system, and

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Part 5 — Inter-Bank Payment Systems
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(c)
consider any representations made.
(4)
The Treasury must also consult the FSA before revoking a recognition order in
respect of a payment system the operator of which—
(a)
is, or has applied to become, a recognised investment exchange within
the meaning of section 285 of the Financial Services and Markets Act
5
2000,
(b)
is, or has applied to become, a recognised clearing house within the
meaning of that section, or
(c)
has, or has applied for, permission under Part 4 of that Act (regulated
activities).
10
(5)
The Treasury must consider any request by the operator of a recognised
payment system for the revocation of its recognition order.
Regulation
174
Principles
(1)
The Bank of England may publish principles to which operators of recognised
15
inter-bank payment systems are to have regard in operating the systems.
(2)
Before publishing principles the Bank must obtain the approval of the
Treasury.
175
Codes of practice
The Bank of England may publish codes of practice about the operation of
20
recognised inter-bank payment systems.
176
System rules
(1)
The Bank of England may require the operator of a recognised inter-bank
payment system—
(a)
to establish rules for the operation of the system;
25
(b)
to change the rules in a specified way or so as to achieve a specified
purpose;
(c)
to notify the Bank of any proposed change to the rules;
(d)
not to change the rules without the approval of the Bank.
(2)
A requirement under subsection (1)(c) or (d) may be general or specific.
30
177
Directions
(1)
The Bank of England may give directions to the operator of a recognised inter-
bank payment system.
(2)
A direction may—
(a)
require or prohibit the taking of specified action in the operation of the
35
system;
(b)
set standards to be met in the operation of the system.