Banking Bill

House of Commons

Session 2007 - 08
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Other Bills before Parliament

Banking Bill

Banking Bill
Part 6 — Banknotes: Scotland and Northern Ireland
96

Authorisation to issue
198
Repeal of old authorising enactments
The following shall cease to have effect—
(a)
section 1 of the Bank Notes (Scotland) Act 1845 (authorisation to issue
banknotes), and
5
(b)
section 8 of the Bankers (Ireland) Act 1845 (authorisation to issue
banknotes).
199
Saving for existing issuers
An authorised bank may continue to issue banknotes after commencement, but
only—
10
(a)
in accordance with the provisions of this Part, and
(b)
in the Part of the United Kingdom in which it was authorised to issue
banknotes before commencement.
200
Consequential repeals and amendments
(1)
In the Bankers (Ireland) Act 1845—
15
(a)
sections 9 to 23 cease to have effect,
(b)
in section 26 for “except the Bank Notes of such Bankers as are hereby
authorised to continue to issue Bank Notes as aforesaid” substitute
“except banknotes issued in reliance on section 199 of the Banking Act
2008”,
20
(c)
section 28 ceases to have effect, and
(d)
Schedules A and B cease to have effect.
(2)
In the Bank Notes (Scotland) Act 1845—
(a)
every section ceases to have effect except for sections 16, 18, 21 and 22,
and
25
(b)
in section 18 for “except the Bank Notes of such Bankers as are hereby
authorised to continue to issue Bank Notes as aforesaid” substitute
“except banknotes issued in reliance on section 199 of the Banking Act
2008”.
(3)
The following cease to have effect—
30
(a)
section 12 of the Bank Charter Act 1844,
(b)
section 9 of the Currency and Bank Notes Act 1928,
(c)
sections 1 and 3 of, and the Schedule to, the Bankers (Northern Ireland)
Act 1928, and
(d)
in the Coinage Act 1971—
35
(i)
section 12(4)(b) and (c), and
(ii)
in Schedule 2 the entries relating to—
(a)
the Bankers (Ireland) Act 1845,
(b)
the Bank Notes (Scotland) Act 1845, and
(c)
section 3 of the Bankers (Northern Ireland) Act 1928.
40

Banking Bill
Part 6 — Banknotes: Scotland and Northern Ireland
97

Regulations and rules
201
Banknote regulations
(1)
The Treasury shall make regulations about the treatment, holding and issuing
of banknotes by authorised banks (“banknote regulations”).
(2)
Banknote regulations—
5
(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.
202
Banknote rules
(1)
Banknote regulations may require or permit the Bank of England to make rules
10
(“banknote rules”) about any aspect of the treatment, holding or issuing of
banknotes by authorised banks.
(2)
In particular, banknote regulations may require or permit banknote rules to do
anything which banknote regulations may do.
(3)
Banknote rules—
15
(a)
may make provision generally or only for specified purposes, cases or
circumstances, and
(b)
may make different provision for different purposes, cases or
circumstances.
Specific issues
20
203
Backing assets
(1)
Banknote regulations must require authorised banks to have backing assets.
(2)
“Backing assets” means assets of a kind specified by banknote regulations; and
the regulations may, in particular, specify—
(a)
banknotes issued by the Bank of England,
25
(b)
current coins of the United Kingdom, and
(c)
funds in a specified kind of account held with the Bank of England or
with another specified institution or class of institution.
(3)
The regulations must—
(a)
require banknote rules to include provision for determining the value
30
of backing assets to be held,
(b)
require backing assets in the form of banknotes to be held either—
(i)
by the Bank of England, or
(ii)
at one or more locations approved by the Bank of England, and
(c)
require backing assets held in the form of coins to be held at one or
35
more locations approved by the Bank of England.
(4)
The regulations may make other provision about backing assets; including, in
particular—
(a)
provision requiring a proportion of a bank’s backing assets to consist of
assets of a specified kind;
40

Banking Bill
Part 6 — Banknotes: Scotland and Northern Ireland
98

(b)
provision about the manner in which backing assets may or must be
held;
(c)
provision about ownership of and interests in backing assets;
(d)
provision permitting backing assets to be held by an agent of an
authorised bank.
5
(5)
Banknote regulations may make provision about the treatment of backing
assets in relation to insolvency processes; in particular, the regulations may—
(a)
modify or disapply a provision or rule of law about an insolvency
process;
(b)
protect backing assets from being treated in the same way as other
10
assets of the bank;
(c)
provide for banknotes to be exchanged by bearers within a specified
period;
(d)
allow the Treasury to extend the period for exchange;
(e)
provide for exchange to be funded from backing assets;
15
(f)
provide for the Bank of England to acquire or control a bank’s backing
assets for the purpose of administering arrangements for exchange.
(6)
In subsection (5) “insolvency process” means—
(a)
insolvency,
(b)
bank insolvency,
20
(c)
administration,
(d)
bank administration,
(e)
receivership,
(f)
a composition between a bank and its creditors,
(g)
a scheme of arrangement of a bank’s affairs, and
25
(h)
a process under the law of a country or territory outside the United
Kingdom which the Treasury identify, in banknote regulations, as
serving a similar purpose to any of the processes listed in paragraphs
(a) to (g).
204
Information
30
(1)
Banknote regulations or rules may make provision about—
(a)
reports to be made by an authorised bank in respect of the treatment,
holding or issue of banknotes or in respect of compliance with
banknote regulations or rules, and
(b)
information to be given by an authorised bank or an agent of an
35
authorised bank.
(2)
Banknote regulations may make provision enabling the publication or
disclosure of information provided in accordance with banknote regulations or
rules.
(3)
Her Majesty’s Revenue and Customs shall transfer to the Bank of England any
40
information acquired or held in connection with functions in respect of the
issue of banknotes in Scotland or Northern Ireland.
(4)
The Bank of England may use information received in accordance with
subsection (3) only for the purposes of its functions under or by virtue of this
Part.
45

Banking Bill
Part 6 — Banknotes: Scotland and Northern Ireland
99

205
Ceasing the business of issuing notes
(1)
If an authorised bank at any time after commencement stops issuing
banknotes, it may not resume issuing banknotes in reliance on section 199.
(2)
Banknote regulations or rules—
(a)
may specify procedures to be followed by an authorised bank that
5
intends to stop issuing banknotes, and
(b)
may apply to an authorised bank for two years after it stops issuing
banknotes.
206
Insolvency, &c.
(1)
Banknote regulations may make provision in connection with the application
10
to an authorised bank of—
(a)
the special resolution regime (under Parts 1 to 3), or
(b)
an insolvency process within the meaning of section 203(6).
(2)
The regulations may, in particular—
(a)
provide for the destruction of banknotes which have not been issued;
15
(b)
provide for the destruction of banknotes which have been exchanged in
accordance with section 203(5)(c);
(c)
extinguish a claim to or interest in un-issued or exchanged banknotes.
(3)
If a property transfer instrument is made in respect of a bank for the purpose
of a sale or transfer in accordance with section 10 or 11—
20
(a)
the bank loses the right to rely on section 199, and
(b)
the purchaser or transferee cannot acquire that right (whether by virtue
of the property transfer instrument or otherwise).
(4)
The fact that an authorised bank is taken into temporary public ownership in
accordance with section 12 does not itself prevent the bank from relying on
25
section 199.
(5)
If an authorised bank enters bank insolvency or insolvency it loses the right to
rely on section 199.
(6)
Transitional provision of banknote regulations (included in reliance on section
234(1)(c)) may include provision for a case where a bank loses the right to rely
30
on section 199; in particular, the regulations may allow the bank to rely on the
section for a specified transitional period or in respect of a specified class of
transitional case.
(7)
A reference in this section to the special resolution regime, to bank insolvency
or to insolvency includes a reference to any provision of the law of a country
35
or territory outside the United Kingdom which the Treasury identifies, in
banknote regulations, as serving a similar purpose.
Enforcement
207
Offence: unlawful issue
(1)
A person who issues banknotes in Scotland or Northern Ireland otherwise than
40
in reliance on section 199 commits an offence.
(2)
A person guilty of an offence under subsection (1) is liable—

Banking Bill
Part 6 — Banknotes: Scotland and Northern Ireland
100

(a)
on conviction on indictment, to imprisonment for a term not exceeding
10 years, to a fine or to both, or
(b)
on summary conviction, to imprisonment for a term not exceeding 12
months, to a fine not exceeding the statutory maximum or to both.
(3)
An offence under subsection (1) committed by a body corporate is also
5
committed by an officer of the body (“O”) if the offence—
(a)
is committed with O’s consent or connivance, or
(b)
is attributable to O’s negligence.
(4)
In subsection (3) “officer” means—
(a)
a director,
10
(b)
a manager,
(c)
a secretary or similar officer, and
(d)
a person purporting to act as an officer within paragraphs (a) to (c).
(5)
Subsection (3) applies to a partnership constituted under the law of Scotland as
to a body corporate; for which purpose “officer” means—
15
(a)
a partner, or
(b)
a person purporting to act as a partner.
(6)
Proceedings for an offence under subsection (1) may be instituted—
(a)
in England and Wales, only by the Director of Public Prosecutions, and
(b)
in Northern Ireland, only by the Director of Public Prosecutions for
20
Northern Ireland.
208
Financial penalty
(1)
Banknote regulations may enable the Bank of England to impose a penalty on
an authorised bank that fails to comply with banknote regulations or rules.
(2)
A penalty—
25
(a)
shall be paid to the Bank of England, and
(b)
is enforceable by the Bank of England as a debt.
209
Termination of right to issue
(1)
The Treasury may determine—
(a)
that an authorised bank has failed to comply with banknote regulations
30
or banknote rules, and
(b)
that, having regard to the nature of the failure, the authorised bank
should no longer be permitted to issue banknotes in reliance on section
199.
(2)
Before making a determination the Treasury must consult the Bank of England.
35
(3)
On making a determination the Treasury shall notify the authorised bank.
(4)
Upon receipt of the notice the authorised bank loses the right to rely on section
199.
(5)
If an authorised bank ceases to have permission under Part 4 of the Financial
Services and Markets Act 2000 (regulated activities) to carry on the regulated
40
activity of accepting deposits, it loses the right to rely on section 199 above.

Banking Bill
Part 6 — Banknotes: Scotland and Northern Ireland
101

(6)
The reference in subsection (5) to Part 4 of the Financial Services and Markets
Act 2000 includes a reference to any provision of the law of another country
which the Treasury identify, in banknote regulations, as serving a similar
purpose.
(7)
Transitional provision of banknote regulations (included in reliance on section
5
234(1)(c)) may include provision for a case where a bank loses the right to rely
on section 199; in particular, the regulations may allow the bank to rely on the
section for a specified transitional period or in respect of a specified class of
transitional case.
210
Application to court
10
Banknote regulations may enable the Bank of England to apply to the High
Court or Court of Session for—
(a)
relief in respect of failure to comply with banknote regulations or rules,
or
(b)
any order designed to ensure, or facilitate monitoring of, compliance
15
with a provision of banknote regulations or rules.
Bank of England
211
Organisation
Expenses incurred and sums received by the Bank of England in connection
with its functions under this Part are to be treated as expenses and receipts of
20
the Issue Department.
212
Discretionary functions
(1)
Banknote regulations may confer a discretionary function on the Bank of
England.
(2)
In particular, banknote regulations—
25
(a)
may require compliance with conditions to be imposed (whether
generally or only for specified cases or circumstances) by the Bank of
England, and
(b)
may make a permission or option subject to the approval of the Bank of
England (which may be general or only for specified cases or
30
circumstances).
(3)
Subsection (2) is in addition to express references in this Part to Bank of
England approval.
213
Exemption
Section 207(1) does not prohibit the issue of banknotes by the Bank of England.
35

Banking Bill
Part 7 — Miscellaneous
102

Part 7
Miscellaneous
Treasury support for banks
214
Consolidated Fund
(1)
There shall be paid out of money provided by Parliament expenditure incurred by the
5
Treasury—
(a)
for any purpose in connection with Parts 1 to 3 of this Act,
(b)
in respect of, or in connection with giving, financial assistance to or in respect
of a UK authorised institution (other than in respect of loans made in
accordance with section 215), or
10
(c)
in respect of financial assistance to the Bank of England.
(2)
In this section—
(a)
“financial assistance” includes giving guarantees or indemnities and
any other kind of financial assistance (actual or contingent),
(b)
“UK authorised institution” means a UK institution which has, or used
15
to have, permission under Part 4 of the Financial Services and Markets
Act 2000 to carry on the regulated activity of accepting deposits (within
the meaning of section 22 of that Act, taken with Schedule 2 and any
order under section 22), and
(c)
“UK institution” means an institution which is incorporated in, or
20
formed under the law of any part of, the United Kingdom.
(3)
This section has effect in relation to expenditure whether incurred—
(a)
before or after Royal Assent, and
(b)
in pursuance of obligations entered into before or after Royal Assent.
215
National Loans Fund
25
(1)
Where the Treasury propose to make a loan to or in respect of a UK authorised
institution, they may arrange for money to be paid out of the National Loans Fund.
(2)
In subsection (1) “UK authorised institution” has the same meaning as in
section 214.
(3)
The Treasury may make arrangements under subsection (1) only where they
30
think it necessary to make the loan urgently in order to protect the stability of
the financial systems of the United Kingdom.
(4)
The Treasury shall determine—
(a)
the rate of interest on a loan, and
(b)
other terms and conditions.
35
(5)
Sums received by the Treasury in respect of loans by virtue of this section shall be paid
into the National Loans Fund.
(6)
Neither section 16 of the Banking (Special Provisions) Act 2008 (finance) nor
any other enactment restricts the breadth of application of this section.