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Banking Bill


Banking Bill
Part 3 — Bank Administration

66

 

129     

Consequential provision

(1)   

The Treasury may by order make provision in consequence of this Part.

(2)   

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

(including a fiscal enactment) passed before the commencement of this Part.

(3)   

An order—

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.

Part 3

Bank Administration

10

Introduction

130     

Overview

(1)   

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

(2)   

The main features of bank administration are that—

(a)   

it is used where part of the business of a bank is sold to a commercial

15

purchaser in accordance with section 11 or transferred to a bridge bank

in accordance with section 12 (and it can also be used in certain cases of

multiple transfers under Part 1),

(b)   

the court appoints a bank administrator on the application of the Bank

of England,

20

(c)   

the bank administrator is able and required to ensure that the non-sold

or non-transferred part of the bank (“the residual bank”) provides

services or facilities required to enable the commercial purchaser (“the

private sector purchaser”) or the transferee (“the bridge bank”) to

operate effectively, and

25

(d)   

in other respects the process is the same as for normal administration

under the Insolvency Act 1986, subject to specified modifications.

(3)   

The Table describes the provisions of this Part.

 

Sections

Topic

 
 

Sections 130 to 134

Introduction

 

30

 

Sections 135 to 142

Process

 
 

Sections 143 to 146

Multiple transfers

 
 

Sections 147 and 148

Termination

 
 

Sections 149 to 162

Miscellaneous

 

131     

Objectives

35

(1)   

A bank administrator has two objectives—

 
 

Banking Bill
Part 3 — Bank Administration

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(a)   

Objective 1: support for commercial purchaser or bridge bank (see

section 132), and

(b)   

Objective 2: “normal” administration (see section 134).

(2)   

Objective 1 takes priority over Objective 2 (but a bank administrator is obliged

to begin working towards both objectives immediately upon appointment).

5

132     

Objective 1: supporting private sector purchaser or bridge bank

(1)   

Objective 1 is to ensure the supply to the private sector purchaser or bridge

bank of such services and facilities as are required to enable it, in the opinion

of the Bank of England, to operate effectively.

(2)   

For the purposes of Objective 1—

10

(a)   

the reference to services and facilities includes a reference to acting as

transferor or transferee under a supplemental property transfer

instrument, and

(b)   

the reference to “supply” includes a reference to supply by persons

other than the residual bank.

15

(3)   

In the case of bank administration following a private sector purchase the bank

administrator must co-operate with any request of the Bank of England to enter

into an agreement for the residual bank to provide services or facilities to the

private sector purchaser; and—

(a)   

in pursuing Objective 1 the bank administrator must have regard to the

20

terms of that or any other agreement entered into between the residual

bank and the private sector purchaser,

(b)   

in particular, the bank administrator must avoid action that is likely to

prejudice performance by the residual bank of its obligations in

accordance with those terms,

25

(c)   

if in doubt about the effect of those terms the bank administrator may

apply to the court for directions under paragraph 63 of Schedule B1 to

the Insolvency Act 1986 (applied by section 139 below), and

(d)   

the private sector purchaser may refer to the court a dispute about any

agreement with the residual bank, by applying for directions under

30

paragraph 63 of Schedule B1.

(4)   

In the case of bank administration following transfer to a bridge bank, the bank

administrator must co-operate with any request of the Bank of England to enter

into an agreement for the residual bank to provide services or facilities to the

bridge bank; and—

35

(a)   

the bank administrator must avoid action that is likely to prejudice

performance by the residual bank of its obligations in accordance with

an agreement,

(b)   

the bank administrator must ensure that so far as is reasonably

practicable an agreement entered into includes provision for

40

consideration at market rate,

(c)   

paragraph (b) does not prevent the bank administrator from entering

into an agreement on any terms that the bank administrator thinks

necessary in pursuit of Objective 1, and

(d)   

this subsection does not apply after Objective 1 ceases.

45

(5)   

Where a bank administrator requires the Bank of England’s consent or

approval to any action in accordance with this Part, the Bank may withhold

 
 

Banking Bill
Part 3 — Bank Administration

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consent or approval only on the grounds that the action might prejudice the

achievement of Objective 1.

133     

Objective 1: duration

(1)   

Objective 1 ceases if the Bank of England notifies the bank administrator that

the residual bank is no longer required in connection with the private sector

5

purchaser or bridge bank.

(2)   

A bank administrator who thinks that Objective 1 is no longer required may

apply to the court for directions under paragraph 63 of Schedule B1 to the

Insolvency Act 1986 (applied by section 139 below); and the court may direct

the Bank of England to consider whether to give notice under subsection (1)

10

above.

(3)   

If immediately upon the making of a bank administration order the Bank of

England thinks that the residual bank is not required in connection with the

private sector purchaser or bridge bank, the Bank of England may give a notice

under subsection (1).

15

(4)   

A notice under subsection (1) is referred to in this Part as an “Objective 1

Achievement Notice”.

134     

Objective 2: “normal” administration

(1)   

Objective 2 is to—

(a)   

rescue the residual bank as a going concern (“Objective 2(a)”), or

20

(b)   

achieve a better result for the residual bank’s creditors as a whole than

would be likely if the residual bank were wound up without first being

in bank administration (“Objective 2(b)”).

(2)   

In pursuing Objective 2 a bank administrator must aim to achieve Objective

2(a) unless of the opinion either—

25

(a)   

that it is not reasonably practicable to achieve it, or

(b)   

that Objective 2(b) would achieve a better result for the residual bank’s

creditors as a whole.

(3)   

In pursuing Objective 2(b) in bank administration following transfer to a

bridge bank, the bank administrator may not realise any asset unless—

30

(a)   

the asset is on a list of realisable assets agreed between the bank

administrator and the Bank of England, or

(b)   

the Bank of England has given an Objective 1 Achievement Notice.

Process

135     

Bank administration order

35

(1)   

A bank administration order is an order appointing a person as the bank

administrator of a bank.

(2)   

A person is eligible for appointment as a bank administrator if qualified to act

as an insolvency practitioner.

(3)   

An appointment may be made only if the person has consented to act.

40

(4)   

A bank administration order takes effect in accordance with its terms; and—

 
 

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Part 3 — Bank Administration

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(a)   

the process of a bank administration order having effect may be

described as “bank administration” in relation to the bank, and

(b)   

while the order has effect the bank may be described as being “in bank

administration”.

136     

Application

5

(1)   

An application for a bank administration order may be made to the court by

the Bank of England.

(2)   

An application must nominate a person to be appointed as the bank

administrator.

(3)   

The bank must be given notice of an application, in accordance with rules

10

under section 411 of the Insolvency Act 1986 (as applied by section 154 below).

137     

Grounds for applying

(1)   

The Bank of England may apply for a bank administration order in respect of

a bank if the following conditions are met.

(2)   

Condition 1 is that the Bank of England has made or intends to make a property

15

transfer instrument in respect of the bank in accordance with section 11(2) or

12(2).

(3)   

Condition 2 is that the Bank of England is satisfied that the residual bank —

(a)   

is unable to pay its debts, or

(b)   

is likely to become unable to pay its debts as a result of the property

20

transfer instrument which the Bank intends to make.

138     

Grounds for making

(1)   

The court may make a bank administration order if satisfied that the conditions

in section 137 were met.

(2)   

On an application for a bank administration order the court may—

25

(a)   

grant the application,

(b)   

adjourn the application (generally or to a specified date), or

(c)   

dismiss the application.

139     

General powers, duties and effect

(1)   

A bank administrator may do anything necessary or expedient for the pursuit

30

of the Objectives in section 131.

(2)   

The following provisions of this section provide for—

(a)   

general powers and duties of bank administrators (by application of

provisions about administrators), and

(b)   

the general process and effects of bank administration (by application

35

of provisions about administration).

(3)   

The provisions set out in the Tables apply in relation to bank administration as

in relation to administration, with—

(a)   

the modifications set out in subsection (4),

(b)   

any other modification specified in the Tables, and

40

 
 

Banking Bill
Part 3 — Bank Administration

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(c)   

any other necessary modification.

(4)   

The modifications are that—

(a)   

a reference to the administrator is a reference to the bank administrator,

(b)   

a reference to administration is a reference to bank administration,

(c)   

a reference to an administration order is a reference to a bank

5

administration order,

(d)   

a reference to a company is a reference to the bank,

(e)   

a reference to the purpose of administration is a reference to the

Objectives in section 131, and

(f)   

in relation to provisions of the Insolvency Act 1986 other than Schedule

10

B1, the modifications in section 97 above apply (but converting

references into references to bank administration or administrators

rather than to bank insolvency or liquidators).

(5)   

Powers conferred by this Act, by the Insolvency Act 1986 (as applied) and the

Companies Acts are in addition to, and not in restriction of, any existing

15

powers of instituting proceedings against a contributory or debtor of a bank,

or the estate of any contributory or debtor, for the recovery of any call or other

sum.

(6)   

A reference in an enactment or other document to anything done under a

provision applied by this Part includes a reference to the provision as applied.

20

TABLE 1 OF APPLIED PROVISIONS

SCHEDULE B1 TO THE INSOLVENCY ACT 1986

 

Provision of

Subject

Modification or comment

 
 

Schedule B1

   
 

Para.

Dismissal of pending winding-

  

25

 

40(1)(a)

up petition

  
 

Para. 41

Dismissal of administrative or

  
  

other receiver

  
 

Para. 42

Moratorium on insolvency

Ignore sub-paras. (4) and (5).

 
  

proceedings

  

30

 

Para. 43

Moratorium on other legal

(a)   

In the case of bank administration

 
  

process

following transfer to a bridge bank,

 
   

unless the Bank of England has

 
   

given an Objective 1 Achievement

 
   

Notice consent of the bank

 

35

   

administrator may not be given for

 
   

the purposes of para. 43 without the

 
   

approval of the Bank of England.

 
   

(b)   

In the case of bank administration

 
   

following transfer to a bridge bank,

 

40

   

unless the Bank of England has

 
   

given an Objective 1 Achievement

 
   

Notice, in considering whether to

 
   

give permission under sub-para. (6)

 
   

to a winding-up the court must have

 

45

   

regard to the Objectives in section

 
   

131.

 
   

(c)   

In considering whether to give

 
   

permission for the purposes of para.

 
   

43 the court must have regard to the

 

50

   

Objectives in section 131.

 
 
 

Banking Bill
Part 3 — Bank Administration

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Provision of

Subject

Modification or comment

 
 

Schedule B1

   
 

Para.

Interim moratorium

  
 

44(1)(a) and

   
 

(5)

   

5

 

Para. 46

Announcement of appointment

Ignore sub-para. (6)(b) and (c).

 
 

Paras. 47 &

Statement of affairs

  
 

48

   
 

Para. 49

Administrator’s proposals

(a)   

Para. 49 does not apply unless the

 
   

Bank of England has given an

 

10

   

Objective 1 Achievement Notice; for

 
   

bank administrator’s proposals before

 
   

the Bank of England has given an

 
   

Objective 1 Achievement Notice, see

 
   

section 141.

 

15

   

(b)   

Treat the reference in sub-para. (1) to

 
   

the purpose of administration as a

 
   

reference to Objective 2.

 
   

(c)   

Before making proposals under sub-

 
   

para. (1) in the case of bank

 

20

   

administration following transfer to

 
   

a bridge bank, the bank

 
   

administrator must consult the Bank

 
   

of England about the chances of a

 
   

payment to the residual bank from a

 

25

   

scheme established by resolution

 
   

fund order under section 49(3).

 
   

(d)   

Treat the reference in sub-para.

 
   

(2)(b) to the objective mentioned in

 
   

para. 3(1)(a) or (b) as a reference to

 

30

   

Objective 2(a).

 
   

(e)   

Ignore sub-para.(3)(b).

 
   

(f)   

Treat references in sub-para. (5) to

 
   

the company’s entering

 
   

administration as references to

 

35

   

satisfaction of the condition in para.

 
   

(a) above.

 
 

Paras. 50 -

Creditors’ meeting

(a)   

Treat references in para. 51(2) to the

 
 

58

 

company’s entering administration

 
   

as references to the giving of an

 

40

   

Objective 1 Achievement Notice.

 
   

(b)   

The bank administrator may comply

 
   

with a request under para. 56(1)(a)

 
   

only if satisfied that it will not

 
   

prejudice pursuit of Objective 1 in

 

45

   

section 131.

 
   

(c)   

A creditors’ meeting may not

 
   

establish a creditors’ committee in

 
   

reliance on para. 57 until the Bank of

 
   

England has given an Objective 1

 

50

   

Achievement Notice.

 
   

(d)   

Until that time the Bank of England

 
   

shall have the functions of the

 
   

creditors’ committee.

 
 

Para. 59

General powers

A bank administrator may not rely on para.

 

55

   

59 (or subsection (1) above) for the purpose of

 
   

recovering property transferred by property

 
   

transfer instrument.

 
 
 

Banking Bill
Part 3 — Bank Administration

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Provision of

Subject

Modification or comment

 
 

Schedule B1

   
 

Para. 60 and

General powers

(a)   

The exercise of powers under

 
 

Schedule 1

 

Schedule 1 is subject to section

 
   

131(2).

 

5

   

(b)   

In the case of bank administration

 
   

following transfer to a bridge bank,

 
   

until the Bank of England has given

 
   

an Objective 1 Achievement Notice

 
   

powers under the following

 

10

   

paragraphs of Schedule 1 may be

 
   

exercised only with the Bank of

 
   

England’s consent: 2, 3, 11, 14, 15,

 
   

16, 17, 18 and 21.

 
 

Para. 61

Directors

  

15

 

Para. 62

Power to call meetings of

  
  

creditors

  
 

Para. 63

Application to court for

(a)   

Before the Bank of England has

 
  

directions

given an Objective 1 Achievement

 
   

Notice, the bank administrator may

 

20

   

apply for directions if unsure

 
   

whether a proposed action would

 
   

prejudice the pursuit of Objective 1;

 
   

and before making an application in

 
   

reliance on this paragraph the bank

 

25

   

administrator must give notice to

 
   

the Bank of England, which shall be

 
   

entitled to participate in the

 
   

proceedings.

 
   

(b)   

In making directions the court must

 

30

   

have regard to the Objectives in

 
   

section 131.

 
 

Para. 64.

Management powers.

  
 

Para. 65

Distribution to creditors

(a)   

In the case of administration

 
   

following transfer to a bridge bank,

 

35

   

until the Bank of England has given

 
   

an Objective 1 Achievement Notice a

 
   

bank administrator may make a

 
   

distribution only with the Bank of

 
   

England’s consent.

 

40

   

(b)   

Ignore sub para. (3).

 
 

Para. 66

Payments

  
 

Para. 67

Taking custody of property

  
 

Para. 68

Management

Before the approval of proposals under para.

 
   

53 a bank administrator shall manage the

 

45

   

bank’s affairs, business and property in

 
   

accordance with principles agreed between

 
   

the bank administrator and the Bank of

 
   

England.

 
 

Para. 69

Agency

  

50

 

Para. 70

Floating charges

The bank administrator may take action only

 
   

if satisfied that it will not prejudice pursuit of

 
   

Objective 1 in section 131.

 
 

Para. 71

Fixed charges

The court may make an order only if satisfied

 
   

that it will not prejudice pursuit of Objective

 

55

   

1 in section 131.

 
 
 

 
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