Banking Bill

House of Commons

Session 2007 - 08
Internet Publications
Other Bills before Parliament

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
67

(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
68

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—

Banking Bill
Part 3 — Bank Administration
69

(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
70

(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
71

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
72

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.