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Banking Bill


Banking Bill
Part 1 — Special Resolution Regime

37

 

Treasury

73      

International obligation notice: general

(1)   

The Bank of England may not exercise a stabilisation power in respect of a bank

if the Treasury notify the Bank that the exercise would be likely to contravene

an international obligation of the United Kingdom.

5

(2)   

A notice under subsection (1)—

(a)   

must be in writing, and

(b)   

may be withdrawn (generally, partially or conditionally).

(3)   

If the Treasury give a notice under subsection (1) the Bank of England must

consider other exercises of the stabilisation powers with a view to—

10

(a)   

pursuing the special resolution objectives, and

(b)   

avoiding the objections on which the Treasury’s notice was based.

(4)   

The Treasury may by notice to the Bank of England disapply subsection (3) in

respect of a bank; and a notice may be revoked by further notice.

74      

International obligation notice: bridge bank

15

(1)   

This section applies where the Bank of England has transferred all or part of a

bank’s business to a bridge bank.

(2)   

The Bank of England must comply with any notice of the Treasury requiring

the Bank, for the purpose of ensuring compliance by the United Kingdom with

its international obligations—

20

(a)   

to take specified action under this Part in respect of the bridge bank, or

(b)   

not to take specified action under this Part in respect of the bridge bank.

(3)   

A notice under subsection (1)—

(a)   

must be in writing, and

(b)   

may be withdrawn (generally, partially or conditionally).

25

(4)   

A notice may include requirements about timing.

75      

Public funds: general

(1)   

The Bank of England may not exercise a stabilisation power in respect of a bank

without the Treasury’s consent if the exercise would be likely to have

implications for public funds.

30

(2)   

In subsection (1)—

(a)   

“public funds” means the Consolidated Fund and any other account or

source of money which cannot be drawn or spent other than by, or with

the authority of, the Treasury, and

(b)   

action has implications for public funds if it would or might involve or

35

lead to a need for the application of public funds.

(3)   

The Treasury may by order specify considerations which are to be, or not to be,

taken into account in determining whether action has implications for public

funds for the purpose of subsection (1).

(4)   

If the Treasury refuse consent under subsection (1), the Bank of England must

40

consider other exercises of the stabilisation powers with a view to—

 
 

Banking Bill
Part 1 — Special Resolution Regime

38

 

(a)   

pursuing the special resolution objectives, and

(b)   

avoiding the objections on which the Treasury’s refusal was based.

(5)   

The Treasury may by notice to the Bank of England disapply subsection (4) in

respect of a bank; and a notice may be revoked by further notice.

(6)   

An order under subsection (3)—

5

(a)   

shall be made by statutory instrument, and

(b)   

shall be subject to annulment in pursuance of a resolution of the House

of Commons.

76      

Public funds: bridge bank

(1)   

This section applies where the Bank of England has transferred all or part of a

10

bank’s business to a bridge bank.

(2)   

The Bank of England may not take action in respect of the bridge bank without

the Treasury’s consent if the action would be likely to have implications for

public funds.

(3)   

Section 75(2) and (3) have effect for the purposes of this section.

15

77      

Bridge bank: report

(1)   

Where the Bank of England transfers all or part of a bank’s business to a bridge

bank, the Bank must report to the Chancellor of the Exchequer about the

activities of the bridge bank.

(2)   

The first report must be made as soon as is reasonably practicable after the end

20

of one year beginning with the date of the first transfer to the bridge bank.

(3)   

A report must be made as soon as is reasonably practicable after the end of each

subsequent year.

(4)   

The Chancellor of the Exchequer must lay a copy of each report under

subsection (2) or (3) before Parliament.

25

(5)   

The Bank must comply with any request of the Treasury for a report dealing

with specified matters in relation to a bridge bank.

(6)   

A request under subsection (5) may include provision about—

(a)   

the content of the report;

(b)   

timing.

30

Building societies, &c.

78      

Application of Part 1: general

This Part shall apply to building societies (within the meaning of section 119 of

the Building Societies Act 1986) as it applies to banks, subject to the provisions

of the Table.

35

 
 

Banking Bill
Part 1 — Special Resolution Regime

39

 
 

Section

Topic

Modification or note

 
 

11

Private sector

A share transfer instrument may not be made.

 
  

purchaser

  
 

13

Temporary public

The procedure provided by section 79 has effect in place of share

 
  

ownership

transfer orders.

 

5

 

14 to 32

Transfer of securities

The procedure provided by section 79 has effect in place of share

 
   

transfer orders; and—

 
   

(a)   

sections 28 and 30 do not apply, and

 
   

(b)   

section 27 applies following an order under section 79

 
   

as following a share transfer order.

 

10

 

33

Property transfer

A property transfer instrument in respect of a building society

 
  

instrument: nature

may—

 
   

(a)   

cancel shares in the building society;

 
   

(b)   

confer rights and impose liabilities in place of cancelled

 
   

shares (whether by way of actual or deemed shares in a

 

15

   

transferee building society or by way of other rights

 
   

and liabilities in relation to a transferee bank).

 
 

33 and

Property transfer

A property transfer instrument in respect of a bank which

 
 

36

instrument: continuity

provides for transfer to a building society may confer rights and

 
   

impose liabilities by way of actual or deemed shares in the

 

20

   

building society.

 
 

34

Property transfer

A property transfer instrument may, in particular, have effect

 
  

instrument: effect

without causing sections 93 to 102D of the Building Societies Act

 
   

1986 (mergers and transfers) to apply.

 
 

42

Supplemental

A supplemental property transfer instrument in respect of a

 

25

  

property transfer

building society may—

 
  

instrument

(a)   

cancel shares in the building society;

 
   

(b)   

confer rights and impose liabilities in place of cancelled

 
   

shares (whether by way of actual or deemed shares in a

 
   

transferee building society or by way of other rights

 

30

   

and liabilities in relation to a transferee bank).

 
 

45

Temporary public

(a)   

Section 45 applies following an order under section 79

 
  

ownership: property

as following a share transfer order.

 
  

transfer

(b)   

A property transfer order in respect of a building

 
   

society may cancel shares in the building society.

 

35

 

49 to 61

Compensation

(a)   

A reference to a share transfer order includes a

 
   

reference to an order under section 79.

 
   

(b)   

A resolution fund order may not be made under

 
   

section 51(2)(b).

 
   

(c)   

If and in so far as an order under section 79 provides

 

40

   

for the issue of new deferred shares, section 51(2) shall

 
   

not apply.

 
 

62 to 72

Incidental functions

A reference to a share transfer order includes a reference to an

 
   

order under section 79.

 

79      

Temporary public ownership

45

(1)   

For the purpose of exercising the third stabilisation option in respect of a

building society the Treasury may make one or more orders for the purposes

of—

(a)   

arranging for deferred shares of a building society to be publicly

owned,

50

(b)   

cancelling private membership rights in the building society,

 
 

Banking Bill
Part 1 — Special Resolution Regime

40

 

(c)   

allowing the building society to continue in business while in public

ownership, and

(d)   

eventually either winding up or dissolving the building society.

(2)   

For the purpose specified in subsection (1)(a) an order may—

(a)   

arrange for the transfer of existing deferred shares;

5

(b)   

provide for new deferred shares.

(3)   

For the purpose of arranging for the transfer of existing deferred shares an

order may—

(a)   

provide for deferred shares to be transferred;

(b)   

make other provision for the purposes of, or in connection with, the

10

transfer of deferred shares (whether or not the transfer has been or is to

be effected by the order, by another order under this section or

otherwise);

(c)   

relate to all or any specified class or description of deferred shares

issued by the building society.

15

(4)   

For the purpose of providing for new deferred shares an order may—

(a)   

issue or allow the Treasury to issue new deferred shares on behalf of the

building society;

(b)   

specify or allow the Treasury to specify the terms and effect of new

deferred shares;

20

(c)   

specify or allow the Treasury to specify the recipient of new deferred

shares.

(5)   

For the purpose specified in subsection (1)(b) an order may—

(a)   

cancel or permit the cancellation of shares (whether or not deferred) in

the building society;

25

(b)   

confer rights and impose liabilities, or allow them to be conferred and

imposed, in place of cancelled shares;

(c)   

prevent the issue or acquisition of shares in or other rights in respect of

the building society otherwise than in accordance with the order.

(6)   

For the purpose specified in subsection (1)(c) an order may make any provision

30

which the Treasury think desirable to facilitate the business of the building

society after the making of provision in accordance with subsections (3) to (5).

(7)   

An order in respect of a building society may—

(a)   

make provision expressly or impliedly disapplying or modifying the

memorandum or rules of the building society;

35

(b)   

disapply or modify an enactment about, or in its application to,

building societies.

(8)   

The following sections apply to orders under this section as to share transfer

orders: sections 17, 18, 20, 21, 22, 23, 25, 68, 69 and 70.

80      

Distribution of assets on dissolution or winding up

40

(1)   

The Treasury may by order make provision about the distribution of surplus

assets of a building society which—

(a)   

is the subject of a property transfer instrument or order, and

(b)   

is later wound up or dissolved by consent.

 
 

Banking Bill
Part 1 — Special Resolution Regime

41

 

(2)   

An order under section 79 may include provision about the distribution of

surplus assets of the building society if it is later wound up or dissolved by

consent.

(3)   

“Surplus” means remaining after the satisfaction of liabilities to creditors and

shareholders.

5

(4)   

An order under or by virtue of this section—

(a)   

may include any provision of a kind that may be made by order under

section 90B of the Building Societies Act 1986 (power to alter priorities

on dissolution or winding up),

(b)   

may be made whether or not the power under that section has been

10

exercised, and

(c)   

shall be treated for all procedural purposes in the same way as an order

under that section.

81      

Interpretation

(1)   

Expressions used in this group of sections and in the Building Societies Act

15

1986 have the same meaning in this group of sections as in that Act.

(2)   

An order under section 119(1) of that Act defining “deferred shares”—

(a)   

may make special provision for the meaning of that expression in the

application of this group of sections, and

(b)   

shall otherwise apply to this group of sections as to that Act.

20

82      

Consequential provision

(1)   

The Treasury may by order make provision, in addition to the provisions of

this group of sections, in consequence of the application of this Part to building

societies.

(2)   

An order may, in particular, amend or modify the effect of an enactment

25

(including a fiscal enactment) passed 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

83      

Credit unions

(1)   

The Treasury may by order provide for the application of this Part to credit

unions (within the meaning of section 31 of the Credit Unions Act 1979) subject

to modifications set out in the order.

(2)   

An order may disapply, modify or apply (with or without modifications) any

35

enactment which relates, or in so far as it relates, to credit unions.

(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.

40

(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.

 
 

Banking Bill
Part 2 — Bank Insolvency

42

 

(5)   

In the application of this section to Northern Ireland the reference 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.

Part 2

Bank Insolvency

5

Introduction

84      

Overview

(1)   

This Part provides for a procedure to be known as bank insolvency.

(2)   

The main features of bank insolvency are that—

(a)   

a bank enters the process by court order,

10

(b)   

the order appoints a bank liquidator,

(c)   

the bank liquidator aims to arrange for the bank’s eligible depositors to

have their accounts transferred or to receive their compensation from

the FSCS,

(d)   

the bank liquidator then winds up the bank, and

15

(e)   

for those purposes, the bank liquidator has powers and duties of

liquidators, as applied and modified by the provisions of this Part.

(3)   

The Table describes the provisions of this Part.

 

Sections

Topic

 
 

Sections 84 to 87

Introduction

 

20

 

Sections 88 to 92

Bank insolvency order

 
 

Sections 93 to 99

Process of bank liquidation

 
 

Sections 100 to 106

Tenure of bank liquidator

 
 

Sections 107 to 110

Termination of process, &c.

 
 

Sections 111 to 116

Other processes

 

25

 

Sections 117 to 129

Miscellaneous

 

85      

Interpretation: “bank”

(1)   

In this Part “bank” means a UK institution which has 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,

30

taken with Schedule 2 and any order under section 22).

(2)   

But “bank” does not include—

(a)   

a building society within the meaning of section 119 of the Building

Societies Act 1986,

(b)   

a credit union within the meaning of section 31 of the Credit Unions Act

35

1979, or

 
 

Banking Bill
Part 2 — Bank Insolvency

43

 

(c)   

any other class of institution excluded by an order made by the

Treasury.

(3)   

In subsection (1) “UK institution” means an institution which is incorporated

in, or formed under the law of any part of, the United Kingdom.

(4)   

An order under subsection (2)(c)—

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.

(5)   

Section 124 makes provision for the application of this Part to building

societies.

10

(6)   

Section 125 makes provision for the application of this Part to credit unions.

86      

Interpretation: “the court”

In this Part “the court” means—

(a)   

in England and Wales, the High Court,

(b)   

in Scotland, the Court of Session, and

15

(c)   

in Northern Ireland, the High Court.

87      

Interpretation: other expressions

(1)   

In this Part “the FSA” means the Financial Services Authority.

(2)   

In this Part a reference to “the FSCS” is a reference to—

(a)   

the Financial Services Compensation Scheme (established under Part

20

15 of the Financial Services and Markets Act 2000), or

(b)   

where appropriate, the scheme manager of that Scheme.

(3)   

In this Part “eligible depositors” means depositors who are eligible for

compensation under the FSCS.

(4)   

For the purposes of a reference in this Part to inability to pay debts—

25

(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

(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

30

making or performance of which constitutes or is part of a regulated activity

carried on by the bank.

(5)   

Expressions used in this Part and in the Insolvency Act 1986 have the same

meaning as in that Act.

(6)   

Expressions used in this Part and in the Companies Act 2006 have the same

35

meaning as in that Act.

(7)   

A reference in this Part to action includes a reference to inaction.

(8)   

The expression “fair” is used in this Part as a shorter modern equivalent of the

expression “just and equitable” (and is not therefore intended to exclude the

application of any judicial or other practice relating to the construction and

40

application of that expression).

 
 

 
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