Banking Bill

House of Commons

Session 2007 - 08
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Banking Bill

Banking Bill
Part 1 — Special Resolution Regime
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(2)
An order must provide for the independent valuer to be appointed by a person
appointed by the Treasury (“the appointing person”).
(3)
An order may either—
(a)
require the Treasury to make arrangements to identify a number of
possible independent valuers, one of whom is to be selected by the
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appointing person, or
(b)
require the appointing person to make arrangements to select the
independent valuer, having regard to any criteria specified in the order.
(4)
The independent valuer may be removed only—
(a)
on the grounds of incapacity or serious misconduct, and
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(b)
by a person specified by the Treasury in accordance with the
compensation scheme order.
(5)
An order must include provision for resignation and replacement of the
independent valuer (and subsections (2) and (3) apply to replacement as to the
first appointment).
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55
Independent valuer: supplemental
(1)
An independent valuer may do anything necessary or desirable for the
purposes of or in connection with the performance of the functions of the
office.
(2)
The Treasury may by order confer specific functions on independent valuers;
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in particular, the order may—
(a)
enable an independent valuer to apply to a court or tribunal for an
order requiring the provision of information or the giving of oral or
written evidence;
(b)
enable or require independent valuers to publish, disclose or withhold
25
information.
(3)
Provision under subsection (2) may—
(a)
confer a discretion on independent valuers;
(b)
confer jurisdiction on a court or tribunal;
(c)
make provision about oaths, expenses and other procedural matters
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relating to the giving of evidence or the provision of information;
(d)
create a criminal offence;
(e)
make other provision about enforcement.
(4)
An independent valuer may appoint staff.
(5)
The Treasury may by order make provision about the procedure to be followed
35
by independent valuers.
(6)
The Treasury shall by order make provision for—
(a)
reconsideration of a decision of an independent valuer, and
(b)
appeal to a court or tribunal against a decision of an independent
valuer.
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(7)
Independent valuers (and their staff) are neither servants nor agents of the
Crown (and, in particular, are not civil servants).
(8)
Records of an independent valuer are public records for the purposes of the
Public Records Act 1958.

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(9)
An order under this section—
(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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Independent valuer: money
5
(1)
The Treasury may by order provide for the payment by the Treasury of
remuneration and allowances to—
(a)
independent valuers,
(b)
staff of independent valuers,
(c)
appointing persons, and
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(d)
monitors.
(2)
An order—
(a)
must provide for the appointment by the Treasury of a person to
monitor the operation of the arrangements for remuneration and
allowances for independent valuers;
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(b)
may require, or enable a compensation scheme order or third party
compensation order to require, the monitor’s approval before specified
things may be done in the course of those arrangements;
(c)
may include provision about records and accounts;
(d)
may make provision about numbers of staff and the terms and
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conditions of their appointment (which may include provision
requiring the approval of the Treasury or the monitor).
(3)
In subsection (1) a reference to the payment of allowances to a person includes
a reference to the payment to or in respect of the person of sums by way of or
in respect of pension.
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(4)
Independent valuers (and their staff) are not liable for damages in respect of
anything done in good faith for the purposes of or in connection with the
functions of the office (subject to section 8 of the Human Rights Act 1998).
(5)
An order under this section—
(a)
shall be made by statutory instrument, and
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(b)
shall be subject to annulment in pursuance of a resolution of either
House of Parliament.
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Valuation principles
(1)
A compensation scheme order may specify principles (“valuation principles”)
to be applied in determining the amount of compensation.
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(2)
Valuation principles may, in particular, require an independent valuer—
(a)
to apply, or not to apply, specified methods of valuation;
(b)
to assess values or average values at specified dates or over specified
periods;
(c)
to take specified matters into account in a specified manner;
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(d)
not to take specified matters into account.
(3)
In determining an amount of compensation (whether or not in accordance with
valuation principles) an independent valuer must disregard actual or potential
financial assistance provided by the Bank of England or the Treasury

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(disregarding ordinary market assistance offered by the Bank on its usual
terms).
(4)
Valuation principles may require or permit an independent valuer to make
assumptions; such as, for example, that the bank—
(a)
has had a permission under Part 4 of the Financial Services and Markets
5
Act 2000 (regulated activities) varied or cancelled,
(b)
is unable to continue as a going concern,
(c)
is in administration, or
(d)
is being wound up.
(5)
There is nothing to prevent the application of the valuation principles in an
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order from resulting in no compensation being payable to a transferor.
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Resolution fund
(1)
A resolution fund order must include provision for determining—
(a)
who will be entitled to a share of the proceeds on disposal of things
transferred,
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(b)
the way in which the proceeds will be calculated, and
(c)
the way in which shares will be calculated.
(2)
Provision under subsection (1)(b) may, in particular, provide for proceeds to be
calculated net of—
(a)
amounts required for the repayment of loans from public funds or for
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other payments in respect of public financial assistance;
(b)
some or all of the administrative or other expenses incurred in
connection with the provisions of this Part.
(3)
A resolution fund order may include provision for—
(a)
an independent valuer to make a determination under the order (in
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which case sections 54(2) to (5), 55 and 56 shall apply);
(b)
valuation principles to be applied in making a determination (in which
case section 57(2) shall apply).
(4)
A resolution fund order may confer a discretionary function on—
(a)
a Minister of the Crown,
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(b)
the Treasury,
(c)
the Bank of England, or
(d)
any other specified person.
(5)
A resolution fund order may include provision for the determination of
disputes about the application of its provisions (whether by conferring
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jurisdiction on a court or tribunal or otherwise).
(6)
A resolution fund order may require the Bank of England in managing a bridge
bank to aim to maximise the proceeds available for distribution in accordance
with the order; and an order which includes a requirement must—
(a)
subserviate it to pursuit of the special resolution objectives and
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compliance with the code of practice under section 5,
(b)
specify its extent, and
(c)
include provision about how the Bank is to comply with it.
(7)
A resolution fund order may require the Treasury to ensure that a bank in
temporary public ownership in accordance with section 13(2) is managed with
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the aim of maximising the proceeds available for distribution in accordance
with the order; and an order which includes a requirement must—
(a)
subserviate it to pursuit of the special resolution objectives and
compliance with the code of practice under section 5,
(b)
specify its extent, and
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(c)
include provision about how the Treasury is to comply with it.
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Third party compensation: discretionary provision
(1)
A power or duty in this Part to make a third party compensation order is a
power or duty to make provision establishing a scheme for paying
compensation to persons other than a transferor.
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(2)
A third party compensation order may—
(a)
form part of a compensation scheme order or resolution fund order, or
(b)
be a separate order.
(3)
A third party compensation order may include provision for—
(a)
an independent valuer (in which case sections 54 to 56 shall apply);
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(b)
valuation principles (in which case section 57(2) to (5) shall apply).
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Third party compensation: mandatory provision
(1)
The Treasury may make regulations about third party compensation
arrangements in the case of partial property transfers.
(2)
In making regulations the Treasury shall, in particular, have regard to the
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desirability of ensuring that if a residual bank is wound up after transfer, pre-
transfer creditors do not receive less favourable treatment than they would
have received had it been wound up immediately before transfer.
(3)
In subsection (2)—
(a)
“residual bank” means a bank that is a transferor under a property
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transfer instrument,
(b)
“pre-transfer creditor” means a person who—
(i)
is a creditor of a residual bank immediately before a property
transfer instrument takes effect, and
(ii)
satisfies conditions specified by the regulations, and
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(c)
the reference to winding-up includes a reference to winding-up
through insolvency or bank insolvency.
(4)
The regulations may—
(a)
require a compensation scheme order or a resolution fund order to
include a third party compensation order;
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(b)
require a third party compensation order to include provision of a
specified kind or to specified effect;
(c)
make provision which is to be treated as forming part of a third party
compensation order (whether (i) generally, (ii) only if applied, (iii)
unless disapplied, or (iv) subject to express modification).
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(5)
Regulations may provide for whether compensation is to be paid, and if so
what amount is to be paid, to be determined by reference to any factors or
combination of factors; in particular, the regulations may provide for
entitlement—

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(a)
to depend in part upon the amounts which are or may be payable under
a resolution fund order;
(b)
to be contingent upon the occurrence or non-occurrence of specified
events;
(c)
to be determined wholly or partly by an independent valuer (within the
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meaning of sections 54 to 56) appointed in accordance with a
compensation scheme order or resolution fund order.
(6)
Regulations may make provision about payment including, in particular,
provision for payments—
(a)
on account subject to terms and conditions;
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(b)
by instalment;
(c)
by the Treasury;
(d)
by the Financial Services Compensation Scheme.
(7)
Regulations—
(a)
shall be made by statutory instrument, and
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(b)
may not be made unless a draft has been laid before and approved by
resolution of each House of Parliament.
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Procedure
(1)
This section applies to—
(a)
compensation scheme orders,
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(b)
resolution fund orders, and
(c)
third party compensation orders.
(2)
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
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resolution of each House of Parliament.
Incidental functions
62
General continuity obligation: property transfers
(1)
In this section and section 63—
(a)
“residual bank” means a bank all or part of whose business has been
30
transferred in accordance with section 11(2)(b) or 12(2),
(b)
“group company” means a company which is a group undertaking in
relation to a residual bank,
(c)
“group undertaking” has the meaning given by section 1161(5) of the
Companies Act 2006 (interpretation),
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(d)
“the transferred business” means the part of the bank’s business that
has been transferred, and
(e)
“transferee” means a commercial purchaser or bridge bank to whom
the transferred business has been transferred.
(2)
The residual bank and each group company must provide such services and
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facilities as are required to enable a transferee to operate the transferred
business effectively.

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(3)
The duty under subsection (2) (the “continuity obligation”) may be enforced as
if created by contract between the residual bank or group company and the
transferee.
(4)
The duty to provide services and facilities in pursuance of the continuity
obligation is subject to a right to receive reasonable consideration.
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(5)
The continuity obligation is not limited to the provision of services or facilities
directly to a transferee.
(6)
The Bank of England may, with the consent of the Treasury, by notice to the
residual bank or a group company state that in the Bank’s opinion—
(a)
specified activities are required to be undertaken in accordance with
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the continuity obligation;
(b)
activities are required be undertaken in accordance with the continuity
obligation on specified terms.
(7)
A notice under subsection (6) shall be determinative of the nature and extent of
the continuity obligation as from the time when the notice is given.
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63
Special continuity obligations: property transfers
(1)
Expressions in this section have the same meaning as in section 62.
(2)
The Bank of England may—
(a)
cancel a contract or other arrangement between the residual bank and
a group company (whether or not rights or obligations under it have
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been transferred to a transferee);
(b)
modify the terms of a contract or other arrangement between the
residual bank and a group company (whether or not rights or
obligations under it have been transferred to a transferee);
(c)
add or substitute a transferee as a party to a contract or other
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arrangement between the residual bank and a group company;
(d)
confer and impose rights and obligations on a group company and a
transferee, which shall have effect as if created by contract between
them;
(e)
confer and impose rights and obligations on the residual bank and a
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transferee which shall have effect as if created by contract between
them.
(3)
In modifying or setting terms under subsection (2) the Bank of England shall
aim, so far as is reasonably practicable, to preserve or include—
(a)
provision for reasonable consideration, and
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(b)
any other provision that would be expected in arrangements concluded
between parties dealing at arm’s length.
(4)
The power under subsection (2)—
(a)
may be exercised only in so far as the Bank of England thinks it
necessary to ensure the provision of such services and facilities as are
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required to enable the transferee to operate the transferred business
effectively,
(b)
may be exercised only with the consent of the Treasury, and
(c)
must be exercised by way of provision in a property transfer
instrument (or supplemental instrument).
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