Banking Bill

House of Commons

Session 2007 - 08
Internet Publications
Other Bills before Parliament

Banking Bill

Banking Bill
Part 6 — Banknotes: Scotland and Northern Ireland
104

212
Information
(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
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(b)
information to be given by an authorised bank or an agent of an
authorised bank.
(2)
Banknote regulations may make provision enabling the publication or
disclosure of information provided in accordance with banknote regulations or
rules.
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(3)
Her Majesty’s Revenue and Customs shall transfer to the Bank of England any
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
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Part.
213
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 207.
(2)
Banknote regulations or rules—
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(a)
may specify procedures to be followed by an authorised bank that
intends to stop issuing banknotes, and
(b)
may apply to an authorised bank for two years after it stops issuing
banknotes.
214
Insolvency, &c.
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(1)
Banknote regulations may make provision in connection with the application
to an authorised bank of—
(a)
the special resolution regime (under Parts 1 to 3), or
(b)
a provision about insolvency within the meaning of section 211(6).
(2)
The regulations may, in particular—
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(a)
provide for the destruction of banknotes which have not been issued;
(b)
provide for the destruction of banknotes which have been exchanged in
accordance with section 211(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
35
of a sale or transfer in accordance with section 11 or 12—
(a)
the bank loses the right to rely on section 207, 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
40
accordance with section 13 does not itself prevent the bank from relying on
section 207.

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Part 6 — Banknotes: Scotland and Northern Ireland
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(5)
If an authorised bank enters insolvency (within the meaning of section 211(6))
it loses the right to rely on section 207.
(6)
Transitional provision of banknote regulations (included in reliance on section
246(1)(c)) may include provision for a case where a bank loses the right to rely
on section 207; in particular, the regulations may allow the bank to rely on the
5
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 includes a reference
to any provision of the law of a country or territory outside the United
Kingdom which the Treasury identifies, in banknote regulations, as serving a
10
similar purpose.
Enforcement
215
Offence: unlawful issue
(1)
A person who issues banknotes in Scotland or Northern Ireland otherwise than
in reliance on section 207 commits an offence.
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(2)
A person guilty of an offence under subsection (1) is liable—
(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.
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(3)
An offence under subsection (1) committed by a body corporate is also
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—
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(a)
a director,
(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
30
to a body corporate; for which purpose “officer” means—
(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
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(b)
in Northern Ireland, only by the Director of Public Prosecutions for
Northern Ireland.
216
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.
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(2)
A penalty—
(a)
shall be paid to the Bank of England, and

Banking Bill
Part 6 — Banknotes: Scotland and Northern Ireland
106

(b)
is enforceable by the Bank of England as a debt.
217
Termination of right to issue
(1)
The Treasury may determine—
(a)
that an authorised bank has failed to comply with banknote regulations
or banknote rules, and
5
(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
207.
(2)
Before making a determination the Treasury must consult the Bank of England.
(3)
On making a determination the Treasury shall notify the authorised bank.
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(4)
Upon receipt of the notice the authorised bank loses the right to rely on section
207.
(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
activity of accepting deposits, it loses the right to rely on section 207 above.
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(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
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246(1)(c)) may include provision for a case where a bank loses the right to rely
on section 207; 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.
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Application to court
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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
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with a provision of banknote regulations or rules.
Bank of England
219
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
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the Issue Department.
220
Discretionary functions
(1)
Banknote regulations may confer a discretionary function on the Bank of
England.
(2)
In particular, banknote regulations—
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Banking Bill
Part 7 — Miscellaneous
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(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
5
circumstances).
(3)
Subsection (2) is in addition to express references in this Part to Bank of
England approval.
221
Exemption
Section 215(1) does not prohibit the issue of banknotes by the Bank of England.
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Part 7
Miscellaneous
Treasury support for banks
222
Consolidated Fund
(1)
There shall be paid out of money provided by Parliament expenditure incurred
15
by the 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 bank or other financial institution (other than in respect of
loans made in accordance with section 223), or
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(c)
in respect of financial assistance to the Bank of England.
(2)
In this section “financial assistance” includes giving guarantees or indemnities
and any other kind of financial assistance (actual or contingent).
(3)
This section has effect in relation to expenditure whether incurred—
(a)
before or after Royal Assent, and
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(b)
in pursuance of obligations entered into before or after Royal Assent.
223
National Loans Fund
(1)
Where the Treasury propose to make a loan to or in respect of a bank or other
financial institution, they may arrange for money to be paid out of the National
Loans Fund.
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(2)
The Treasury may make arrangements under subsection (1) only where they
think it necessary to make the loan urgently in order to protect the stability of
the financial systems of the United Kingdom.
(3)
The Treasury shall determine—
(a)
the rate of interest on a loan, and
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(b)
other terms and conditions.
(4)
Sums received by the Treasury in respect of loans by virtue of this section shall
be paid into the National Loans Fund.

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Part 7 — Miscellaneous
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(5)
Neither section 16 of the Banking (Special Provisions) Act 2008 (finance) nor
any other enactment restricts the breadth of application of this section.
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“Financial institution”
(1)
The Treasury may by order provide that a specified institution, or an
institution of a specified class, is or is not to be treated as a financial institution
5
for the purposes of section 222 or 223.
(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.
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Bank of England
225
UK financial stability
(1)
After section 2 of the Bank of England Act 1998 (functions of court of directors)
insert—
“2A
Financial Stability Objective
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(1)
An objective of the Bank shall be to contribute to protecting and
enhancing the stability of the financial systems of the United Kingdom
(the “Financial Stability Objective”).
(2)
The court of directors shall, consulting the Treasury, determine and
review the Bank’s strategy in relation to the Financial Stability
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Objective.
2B
Financial Stability Committee
(1)
There shall be a sub-committee of the court of directors of the Bank (the
“Financial Stability Committee”) consisting of—
(a)
the Governor of the Bank, who shall chair the Committee (when
25
present),
(b)
the Deputy Governors of the Bank, and
(c)
4 directors of the Bank, appointed by the chair of the court of
directors (designated under paragraph 13 of Schedule 1).
(2)
The Committee shall have the following functions—
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(a)
to make recommendations to the court of directors, which they
shall consider, about the nature and implementation of the
Bank’s strategy in relation to the Financial Stability Objective,
(b)
to give advice about whether and how the Bank should act in
respect of an institution, where the issue appears to the
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Committee to be relevant to the Financial Stability Objective,
(c)
in particular, to give advice about whether and how the Bank
should use stabilisation powers under Part 1 of the Banking Act
2008 in particular cases,
(d)
to monitor the Bank’s use of the stabilisation powers,
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(e)
to monitor the Bank’s exercise of its functions under Part 5 of
the Banking Act 2008 (inter-bank payment systems), and

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Part 7 — Miscellaneous
109

(f)
any other functions delegated to the Committee by the court of
directors for the purpose of pursuing the Financial Stability
Objective.
(3)
The Treasury may appoint a person to represent the Treasury at
meetings of the Committee; and the Treasury’s representative—
5
(a)
may not vote in proceedings of the Committee,
(b)
shall in all other respects be a member of the Committee, and
(c)
may be replaced by the Treasury.
(4)
The Committee may co-opt other non-voting members.
(5)
The chair of the court of directors may replace members of the
10
Committee appointed under subsection (1)(c).
2C
Financial Stability Committee: supplemental
(1)
The Committee shall determine its own procedure (including quorum).
(2)
If a member of the Committee has any direct or indirect interest in any
dealing or business with the Bank which falls to be considered by the
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Committee—
(a)
he shall disclose his interest to the Committee when it considers
the dealing or business, and
(b)
he shall have no vote in proceedings of the Committee in
relation to any question arising from its consideration of the
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dealing or business, unless the Committee has resolved that the
interest does not give rise to a conflict of interest.
(3)
In any proceedings of the Committee, a member shall have no vote in
relation to any question arising which touches or concerns him but
shall withdraw and be absent during the debate of any matter in which
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he is concerned.
(4)
The Committee may delegate a function under section 2B(2)(b) to (e) to
two or more of its members, excluding—
(a)
the Treasury representative, and
(b)
co-opted non-voting members.”
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(2)
At the end of section 2 of the Bank of England Act 1998 add—
“(5)
Sections 2A and 11 set objectives for the Bank in relation to financial
stability and monetary policy; and subsections (2) to (4) above are
subject to those sections.”
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Number of directors
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(1)
Section 1 of the Bank of England Act 1998 (court of directors) is amended as
follows.
(2)
In subsection (2) omit “16”.
(3)
After subsection (2) insert—
“(2A)
The number of directors must not exceed 9.”
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(4)
The directors immediately before the day on which this section comes into
force shall vacate office on that day (without prejudice to re-appointment).