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Banking Bill


Banking Bill
Part 4 — Financial Services Compensation Scheme

87

 

165     

Special resolution regime

(1)   

After section 214A of the Financial Services and Markets Act 2000 (contingency

funding - inserted by section 164 above) insert—

“214B   

     Contribution to costs of special resolution regime

(1)   

This section applies where—

5

(a)   

a stabilisation power under Part 1 of the Banking Act 2008 has

been exercised in respect of a bank, building society or credit

union (within the meaning of that Part), and

(b)   

the Treasury think that the bank, building society or credit

union was, or but for the exercise of the stabilisation power

10

would have become, unable to satisfy claims against it.

(2)   

Where this section applies—

(a)   

the Treasury may require the scheme manager to contribute

towards expenses connected with the exercise of the

stabilisation power, and

15

(b)   

contributions shall be treated as expenditure under the scheme

for all purposes (including levies, contingency funds and

borrowing).

(3)   

The Treasury shall make regulations—

(a)   

specifying what expenses the scheme manager may be required

20

to contribute towards under subsection (2),

(b)   

providing for independent verification of the nature and

amount of expenses incurred (which may include provision

about appointment and payment of an auditor), and

(c)   

providing for the method by which amounts to be contributed

25

are to be determined.

(4)   

The regulations must ensure that contributions required do not exceed

the amount of compensation that would have been payable under the

scheme if the stabilisation power had not been exercised and the bank

had been unable to satisfy claims against it; and for that purpose the

30

amount of compensation that would have been payable does not

include—

(a)   

amounts that would have been likely, at the time when the

stabilisation power was exercised, to be recovered by the

scheme from the bank, or

35

(b)   

any compensation actually paid to an eligible depositor of the

bank.

(5)   

The regulations must provide for the appointment of an independent

valuer (who may be the person appointed as valuer under section 54 of

the Banking Act 2008 in respect of the exercise of the stabilisation

40

power) to calculate the amounts referred to in subsection (4)(a); and the

regulations—

(a)   

must provide for the valuer to be appointed by the Treasury or

by a person designated by the Treasury,

(b)   

must include provision enabling the valuer to reconsider a

45

decision,

(c)   

must provide a right of appeal to a court or tribunal,

(d)   

must provide for payment of the valuer,

 
 

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Part 4 — Financial Services Compensation Scheme

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(e)   

may replicate or apply a provision of section 54 or 55, and

(f)   

may apply or include any provision that is or could be made

under that section.

(6)   

The regulations may include provision—

(a)   

about timing;

5

(b)   

about procedures to be followed;

(c)   

for discretionary functions to be exercised by a specified body

or by persons of a specified class;

(d)   

about the resolution of disputes (which may include provision

conferring jurisdiction on a court or tribunal).

10

(7)   

The compensation scheme may include provision about contributions

under and levies in connection with this section, provided that it is not

inconsistent with this section or regulations under it.”

(2)   

At the end of section 223(3) of the Financial Services and Markets Act 2000

(management expenses) add “;

15

(c)   

under section 214B.”.

166     

Investing in National Loans Fund

After section 223 of the Financial Services and Markets Act 2000 (management

expenses) insert—

“223A   

    Investing in National Loans Fund

20

(1)   

Sums levied for the purpose of maintaining a contingency fund may be

paid to the Treasury.

(2)   

The Treasury may receive sums under subsection (1) and may set terms

and conditions of receipts.

(3)   

Sums received shall be treated as if raised under section 12 of the

25

National Loans Act 1968 (and shall therefore be invested as part of the

National Loans Fund).

(4)   

Interest accruing on the invested sums may be credited to the

contingency fund (subject to any terms and conditions set under

subsection (2)).

30

(5)   

The Treasury shall comply with any request of the scheme manager to

arrange for the return of sums for the purpose of making payments out

of a contingency fund (subject to any terms and conditions set under

subsection (2)).”

167     

Borrowing from National Loans Fund

35

After section 223A of the Financial Services and Markets Act 2000 (investing in

National Loans Fund - inserted by section 166 above) insert—

“223B   

    Borrowing from National Loans Fund

(1)   

The scheme manager may request a loan from the National Loans Fund

for the purpose of funding expenses incurred or expected to be

40

incurred under the scheme.

 
 

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Part 4 — Financial Services Compensation Scheme

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(2)   

The Treasury may arrange for money to be paid out of the National

Loans Fund in pursuance of a request under subsection (1).

(3)   

The Treasury shall determine—

(a)   

the rate of interest on a loan, and

(b)   

other terms and conditions.

5

(4)   

The Treasury may make regulations—

(a)   

about the amounts that may be borrowed under this section;

(b)   

permitting the scheme manager to impose levies under section

213 for the purpose of meeting expenses in connection with

loans under this section (and the regulations may have effect

10

despite any provision of this Act);

(c)   

about the classes of person on whom those levies may be

imposed;

(d)   

about the amounts and timing of those levies.

(5)   

The compensation scheme may include provision about borrowing

15

under this section provided that it is not inconsistent with regulations

under this section.”

168     

Procedure for claims

(1)   

After section 214(1) of the Financial Services and Markets Act 2000 (the

compensation scheme: powers) insert—

20

“(1A)   

Rules by virtue of subsection (1)(h) may, in particular, allow the scheme

manager to treat persons who are or may be entitled to claim under the

scheme as if they had done so.

(1B)   

A reference in any enactment or instrument to a claim or claimant

under this Part includes a reference to a deemed claim or claimant in

25

accordance with subsection (1A).

(1C)   

Rules by virtue of subsection (1)(j) may, in particular, allow, or be

subject to rules which allow, the scheme manager to settle a class of

claim by payment of sums fixed without reference to, or by

modification of, the normal rules for calculation of maximum

30

entitlement for individual claims.”

(2)   

In section 417(1) (definitions) at the appropriate place insert—

““claim”, in relation to the Financial Services Compensation

Scheme under Part XV, is to be construed in accordance with

section 214(1B);”.

35

169     

Rights in insolvency

(1)   

This section amends section 215 of the Financial Services and Markets Act 2000

(rights of scheme following insolvency).

(2)   

For section 215(1) substitute—

“(1)   

The compensation scheme may make provision—

40

(a)   

about the effect of a payment of compensation under the

scheme on rights or obligations arising out of matters in

connection with which the compensation was paid;

 
 

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Part 4 — Financial Services Compensation Scheme

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(b)   

giving the scheme manager a right of recovery in respect of

those rights or obligations.”

(3)   

In section 215(2) for “the relevant person’s insolvency” substitute “a person’s

insolvency”.

(4)   

The heading of section 215 becomes “Rights of the scheme in insolvency”.

5

170     

Information

(1)   

Before section 219 of the Financial Services and Markets Act 2000 (scheme

manager’s power to require information) insert—

“218A   

   Authority’s power to require information

(1)   

The Authority may make rules enabling the Authority to require

10

authorised persons to provide information, which may then be made

available to the scheme manager by the Authority.

(2)   

A requirement may be imposed only if the Authority thinks the

information is of a kind that may be of use to the scheme manager in

connection with functions in respect of the scheme.

15

(3)   

A requirement under this section may apply—

(a)   

to authorised persons generally or only to specified persons or

classes of person;

(b)   

to the provision of information at specified periods, in

connection with specified events or in other ways.

20

(4)   

In addition to requirements under this section, a notice under section

165 may relate to information or documents which the Authority thinks

are reasonably required by the scheme manager in connection with the

performance of functions in respect of the scheme; and section 165(4) is

subject to this subsection.

25

(5)   

Rules under subsection (1) shall be prepared, made and treated in the

same way as (and may be combined with) the Authority’s general

rules.”

(2)   

Section 219 is amended as follows.

(3)   

In subsection (1) for “given to the relevant person in respect of whom a claim

30

is made under the scheme or to a person otherwise involved, require that

person” substitute “require a person”.

(4)   

After subsection (1) insert—

“(1A)   

A requirement may be imposed only—

(a)   

on a person (P) against whom a claim has been made under the

35

scheme,

(b)   

on a person (P) who is unable or likely to be unable to satisfy

claims under the scheme against P,

(c)   

on a person (“the Third Party”) whom the scheme manager

thinks was knowingly involved in matters giving rise to a claim

40

against another person (P) under the scheme, or

(d)   

on a person (“the Third Party”) whom the scheme manager

thinks was knowingly involved in matters giving rise to the

 
 

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Part 4 — Financial Services Compensation Scheme

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actual or likely inability of another person (P) to satisfy claims

under the scheme.

(1B)   

For the purposes of subsection (1A)(b) and (d) whether P is unable or

likely to be unable to satisfy claims shall be determined in accordance

with provision to be made by the scheme (which may, in particular—

5

(a)   

apply or replicate, with or without modifications, a provision of

an enactment;

(b)   

confer discretion on a specified person).”

(5)   

In subsection (3) for paragraphs (a) and (b) substitute “to be necessary (or likely

to be necessary) for the fair determination of claims which have been or may

10

be made against P”.

(6)   

After subsection (3) insert—

“(3A)   

Where a stabilisation power under Part 1 of the Banking Act 2008 has

been exercised in respect of a bank, the scheme manager may by notice

in writing require the bank or the Bank of England to provide

15

information that the scheme manager requires for the purpose of

applying regulations under section 214B(3) above.”

(7)   

In subsection (6) for “the relevant person” substitute “P”.

(8)   

Omit subsection (8).

(9)   

Omit subsection (10).

20

171     

Payments in error

After section 223B of the Financial Services and Markets Act 2000 (borrowing

from National Loans Fund - inserted by section 167 above) insert—

“223C   

     Payments in error

(1)   

Payments made by the scheme manager in error may be provided for

25

in setting a levy by virtue of section 213, 214A, 214B or 223B.

(2)   

This section does not apply to payments made in bad faith.”

172     

Regulations

In section 429(2) of the Financial Services and Markets Act 2000 (parliamentary

control of subordinate legislation: affirmative resolution) after “90B” insert “,

30

214A, 214B”.

173     

Delegation of functions

(1)   

Before section 222 of the Financial Services and Markets Act 2000 (scheme

manager: statutory immunity) insert—

“221A   

     Delegation of functions

35

(1)   

The scheme manager may arrange for any of its functions to be

discharged on its behalf by another person (a “scheme agent”).

(2)   

Before entering into arrangements the scheme manager must be

satisfied that the scheme agent—

 
 

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(a)   

is competent to discharge the function, and

(b)   

has been given sufficient directions to enable the agent to take

any decisions required in the course of exercising the function

in accordance with policy determined by the scheme manager.

(3)   

Arrangements may include provision for payments to be made by the

5

scheme manager to the scheme agent (which payments are

management expenses of the scheme manager).”

(2)   

In section 222(1) of that Act after “officer” insert “, scheme agent”.

174     

Functions under this Act

At the end of Part 15 of the Financial Services and Markets Act 2000 add—

10

“224A   

    Functions under the Banking Act 2008

A reference in this Part to functions of the scheme manager (including

a reference to functions conferred by or under this Part) includes a

reference to functions conferred by or under the Banking Act 2008.”

Part 5

15

Inter-Bank Payment Systems

Introduction

175     

Overview

This Part enables the Bank of England to oversee certain systems for payments

between financial institutions.

20

176     

Interpretation: “inter-bank payment system”

(1)   

In this Part “inter-bank payment system” means arrangements designed to

facilitate or control the transfer of money between financial institutions who

participate in the arrangements.

(2)   

The fact that persons other than financial institutions can participate does not

25

prevent arrangements from being an inter-bank payment system.

(3)   

In subsection (1) “financial institutions” means—

(a)   

banks, and

(b)   

building societies.

(4)   

In subsection (1) “money” includes credit.

30

(5)   

A system is an inter-bank payment system for the purposes of this Part

whether or not it operates wholly or partly in relation to persons or places

outside the United Kingdom.

177     

Interpretation: other expressions

In this Part—

35

 
 

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Part 5 — Inter-Bank Payment Systems

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(a)   

a reference to the “operator” of an inter-bank payment system is a

reference to any person with responsibility under the system for

managing or operating it,

(b)   

a reference to the operation of a system includes a reference to its

management,

5

(c)   

“the UK financial system” has the meaning given to “the financial

system” by section 3(2) of the Financial Services and Markets Act 2000

(market confidence),

(d)   

a reference to the Bank of England’s role as a monetary authority is to

be construed in accordance with section 231(2)(c), and

10

(e)   

“the FSA” means the Financial Services Authority.

Recognised systems

178     

Recognition order

(1)   

The Treasury may by order (“recognition order”) specify an inter-bank

payment system as a recognised system for the purposes of this Part.

15

(2)   

A recognition order must specify in as much detail as is reasonably practicable

the arrangements which constitute the inter-bank payment system.

(3)   

The Treasury may not specify an inter-bank system operated solely by the

Bank of England.

179     

Recognition criteria

20

(1)   

The Treasury may make a recognition order in respect of an inter-bank

payment system only if satisfied that any deficiencies in the design of the

system, or any disruption of its operation, would be likely—

(a)   

to threaten the stability of, or confidence in, the UK financial system, or

(b)   

to have serious consequences for business or other interests throughout

25

the United Kingdom.

(2)   

In considering whether to specify a system the Treasury must have regard to—

(a)   

the number and value of the transactions that the system presently

processes or is likely to process in the future,

(b)   

the nature of the transactions that the system processes,

30

(c)   

whether those transactions or their equivalent could be handled by

other systems,

(d)   

the relationship between the system and other systems, and

(e)   

whether the system is used by the Bank of England in the course of its

role as a monetary authority.

35

180     

Procedure

(1)   

Before making a recognition order in respect of a payment system the Treasury

must—

(a)   

consult the Bank of England,

(b)   

notify the operator of the system, and

40

(c)   

consider any representations made.

 
 

 
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