Banking Bill

House of Commons

Session 2008 - 09
Internet Publications
Other Bills before Parliament

Banking Bill

Banking Bill
Part 6 — Banknotes: Scotland and Northern Ireland
108

217
Insolvency, &c.
(1)
Banknote regulations may make provision in connection with the application
to an authorised bank of—
(a)
the special resolution regime (under Parts 1 to 3), or
(b)
a provision about insolvency within the meaning of section 214(6).
5
(2)
The regulations may, in particular—
(a)
provide for the destruction of banknotes which have not been issued;
(b)
provide for the destruction of banknotes which have been exchanged in
accordance with section 214(5)(c);
(c)
extinguish a claim to or interest in un-issued or exchanged banknotes.
10
(3)
A right to rely on section 210 cannot be transferred by or acquired from an
authorised bank (and, in particular, cannot be acquired by virtue of or in
connection with anything done under Part 1).
(4)
The fact that an authorised bank is taken into temporary public ownership in
accordance with section 13 does not itself prevent the bank from relying on
15
section 210.
(5)
If an authorised bank enters insolvency (within the meaning of section 214(6))
it loses the right to rely on section 210.
(6)
Transitional provision of banknote regulations (included in reliance on section
249(1)(c)) may include provision for a case where a bank loses the right to rely
20
on section 210; in particular, the regulations may allow the bank to rely on the
section for a specified transitional period or in respect of a specified class of
transitional case.
(7)
A reference in this section to the special resolution regime includes a reference
to any provision of the law of a country or territory outside the United
25
Kingdom which the Treasury identifies, in banknote regulations, as serving a
similar purpose.
Enforcement
218
Offence: unlawful issue
(1)
A person who issues banknotes in Scotland or Northern Ireland otherwise than
30
in reliance on section 210 commits an offence.
(2)
A person guilty of an offence under subsection (1) is liable—
(a)
on conviction on indictment, to imprisonment for a term not exceeding
10 years, to a fine or to both, or
(b)
on summary conviction, to imprisonment for a term not exceeding 12
35
months, to a fine not exceeding the statutory maximum or to both.
(3)
An offence under subsection (1) committed by a body corporate is also
committed by an officer of the body (“O”) if the offence—
(a)
is committed with O’s consent or connivance, or
(b)
is attributable to O’s negligence.
40
(4)
In subsection (3) “officer” means—
(a)
a director,
(b)
a manager,

Banking Bill
Part 6 — Banknotes: Scotland and Northern Ireland
109

(c)
a secretary or similar officer, and
(d)
a person purporting to act as an officer within paragraphs (a) to (c).
(5)
Subsection (3) applies to a partnership constituted under the law of Scotland as
to a body corporate; for which purpose “officer” means—
(a)
a partner, or
5
(b)
a person purporting to act as a partner.
(6)
Proceedings for an offence under subsection (1) may be instituted—
(a)
in England and Wales, only by the Director of Public Prosecutions, and
(b)
in Northern Ireland, only by the Director of Public Prosecutions for
Northern Ireland.
10
219
Financial penalty
(1)
Banknote regulations may enable the Bank of England to impose a penalty on
an authorised bank that fails to comply with banknote regulations or rules.
(2)
A penalty—
(a)
shall be paid to the Bank of England, and
15
(b)
is enforceable by the Bank of England as a debt.
220
Termination of right to issue
(1)
The Treasury may determine—
(a)
that an authorised bank has failed to comply with banknote regulations
or banknote rules, and
20
(b)
that, having regard to the nature of the failure, the authorised bank
should no longer be permitted to issue banknotes in reliance on section
210.
(2)
Before making a determination the Treasury must consult the Bank of England.
(3)
On making a determination the Treasury shall notify the authorised bank.
25
(4)
Upon receipt of the notice the authorised bank loses the right to rely on section
210.
(5)
If an authorised bank ceases to have permission under Part 4 of the Financial
Services and Markets Act 2000 (regulated activities) to carry on the regulated
activity of accepting deposits, it loses the right to rely on section 210 above.
30
(6)
The reference in subsection (5) to Part 4 of the Financial Services and Markets
Act 2000 includes a reference to any provision of the law of another country
which the Treasury identify, in banknote regulations, as serving a similar
purpose.
(7)
Transitional provision of banknote regulations (included in reliance on section
35
249(1)(c)) may include provision for a case where a bank loses the right to rely
on section 210; in particular, the regulations may allow the bank to rely on the
section for a specified transitional period or in respect of a specified class of
transitional case.

Banking Bill
Part 7 — Miscellaneous
110

221
Application to court
Banknote regulations may enable the Bank of England to apply to the High
Court or Court of Session for—
(a)
relief in respect of failure to comply with banknote regulations or rules,
or
5
(b)
any order designed to ensure, or facilitate monitoring of, compliance
with a provision of banknote regulations or rules.
Bank of England
222
Organisation
Expenses incurred and sums received by the Bank of England in connection
10
with its functions under this Part are to be treated as expenses and receipts of
the Issue Department.
223
Discretionary functions
(1)
Banknote regulations may confer a discretionary function on the Bank of
England.
15
(2)
In particular, banknote regulations—
(a)
may require compliance with conditions to be imposed (whether
generally or only for specified cases or circumstances) by the Bank of
England, and
(b)
may make a permission or option subject to the approval of the Bank of
20
England (which may be general or only for specified cases or
circumstances).
(3)
Subsection (2) is in addition to express references in this Part to Bank of
England approval.
224
Exemption
25
Section 218(1) does not prohibit the issue of banknotes by the Bank of England.
Part 7
Miscellaneous
Treasury support for banks
225
Consolidated Fund
30
(1)
There shall be paid out of money provided by Parliament expenditure incurred
by the Treasury—
(a)
for any purpose in connection with Parts 1 to 3 of this Act,
(b)
in respect of, or in connection with giving, financial assistance to or in
respect of a bank or other financial institution (other than in respect of
35
loans made in accordance with section 226), or
(c)
in respect of financial assistance to the Bank of England.
(2)
In this section “financial assistance” has the meaning given by section 247.

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Part 7 — Miscellaneous
111

(3)
This section has effect in relation to expenditure whether incurred—
(a)
before or after Royal Assent, and
(b)
in pursuance of obligations entered into before or after Royal Assent.
226
National Loans Fund
(1)
Where the Treasury propose to make a loan to or in respect of a bank or other
5
financial institution, they may arrange for money to be paid out of the National
Loans Fund.
(2)
The Treasury may make arrangements under subsection (1) only where they
think it necessary to make the loan urgently in order to protect the stability of
the financial systems of the United Kingdom.
10
(3)
The Treasury shall determine—
(a)
the rate of interest on a loan, and
(b)
other terms and conditions.
(4)
Sums received by the Treasury in respect of loans by virtue of this section shall
be paid into the National Loans Fund.
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(5)
Neither section 16 of the Banking (Special Provisions) Act 2008 (finance) nor
any other enactment restricts the breadth of application of this section.
227
“Financial institution”
(1)
The Treasury may by order provide that a specified institution, or an
institution of a specified class, is or is not to be treated as a financial institution
20
for the purposes of section 225 or 226.
(2)
An order—
(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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Bank of England
228
UK financial stability
(1)
After section 2 of the Bank of England Act 1998 (functions of court of directors)
insert—
“2A
Financial Stability Objective
30
(1)
An objective of the Bank shall be to contribute to protecting and
enhancing the stability of the financial systems of the United Kingdom
(the “Financial Stability Objective”).
(2)
The court of directors shall, consulting the Treasury, determine and
review the Bank’s strategy in relation to the Financial Stability
35
Objective.
2B
Financial Stability Committee
(1)
There shall be a sub-committee of the court of directors of the Bank (the
“Financial Stability Committee”) consisting of—

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Part 7 — Miscellaneous
112

(a)
the Governor of the Bank, who shall chair the Committee (when
present),
(b)
the Deputy Governors of the Bank, and
(c)
4 directors of the Bank, appointed by the chair of the court of
directors (designated under paragraph 13 of Schedule 1).
5
(2)
The Committee shall have the following functions—
(a)
to make recommendations to the court of directors, which they
shall consider, about the nature and implementation of the
Bank’s strategy in relation to the Financial Stability Objective,
(b)
to give advice about whether and how the Bank should act in
10
respect of an institution, where the issue appears to the
Committee to be relevant to the Financial Stability Objective,
(c)
in particular, to give advice about whether and how the Bank
should use stabilisation powers under Part 1 of the Banking Act
2008 in particular cases,
15
(d)
to monitor the Bank’s use of the stabilisation powers,
(e)
to monitor the Bank’s exercise of its functions under Part 5 of
the Banking Act 2008 (inter-bank payment systems), and
(f)
any other functions delegated to the Committee by the court of
directors for the purpose of pursuing the Financial Stability
20
Objective.
(3)
The Treasury may appoint a person to represent the Treasury at
meetings of the Committee; and the Treasury’s representative—
(a)
may not vote in proceedings of the Committee,
(b)
shall in all other respects be a member of the Committee, and
25
(c)
may be replaced by the Treasury.
(4)
The Committee may co-opt other non-voting members.
(5)
The chair of the court of directors may replace members of the
Committee appointed under subsection (1)(c).
2C
Financial Stability Committee: supplemental
30
(1)
The Committee shall determine its own procedure (including quorum).
(2)
If a member of the Committee has any direct or indirect interest in any
dealing or business with the Bank which falls to be considered by the
Committee—
(a)
he shall disclose his interest to the Committee when it considers
35
the dealing or business, and
(b)
he shall have no vote in proceedings of the Committee in
relation to any question arising from its consideration of the
dealing or business, unless the Committee has resolved that the
interest does not give rise to a conflict of interest.
40
(3)
In any proceedings of the Committee, a member shall have no vote in
relation to any question arising which touches or concerns him but
shall withdraw and be absent during the debate of any matter in which
he is concerned.
(4)
The Committee may delegate a function under section 2B(2)(b) to (e) to
45
two or more of its members, excluding—
(a)
the Treasury representative, and

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Part 7 — Miscellaneous
113

(b)
co-opted non-voting members.”
(2)
At the end of section 2 of the Bank of England Act 1998 add—
“(5)
Sections 2A and 11 set objectives for the Bank in relation to financial
stability and monetary policy; and subsections (2) to (4) above are
subject to those sections.”
5
229
Number of directors
(1)
Section 1 of the Bank of England Act 1998 (court of directors) is amended as
follows.
(2)
In subsection (2) omit “16”.
(3)
After subsection (2) insert—
10
“(2A)
The number of directors must not exceed 9.”
(4)
The directors immediately before the day on which this section comes into
force shall vacate office on that day (without prejudice to re-appointment).
230
Meetings
(1)
Paragraph 12 of Schedule 1 to the Bank of England 1998 (court of directors:
15
meetings) is amended as follows.
(2)
In sub-paragraph (1) for “once a month” substitute “7 times in each calendar
year”.
(3)
For sub-paragraph (2) substitute—
    “(2)
Either of the following may summon a meeting at any time on giving
20
such notice as the circumstances appear to require—
(a)
the Governor of the Bank (or in his absence a Deputy
Governor), and
(b)
the chair of the court.”
231
Chair of court
25
(1)
For paragraph 13(3) of Schedule 1 to the Bank of England Act 1998 (court of
directors: chairing meetings) substitute—
    “(3)
The Chancellor of the Exchequer may designate—
(a)
a member of the court to chair its meetings (“the chair of the
court”), and
30
(b)
one or more members of the court as deputies to chair its
meetings in the absence of the chair of the court.”
(2)
For section 3(4) of that Act (sub-committee: chair) substitute—
“(4)
The chair of the court (designated under paragraph 13 of Schedule 1)
shall chair meetings of the sub-committee (when present).”
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232
Quorum
(1)
The Bank of England Act 1998 is amended as follows.

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Part 7 — Miscellaneous
114

(2)
In section 3 (functions delegated to sub-committee)—
(a)
omit subsection (3),
(b)
in subsection (7) for “(3)” substitute “(4)”, and
(c)
at the end of subsection (7) add “(including quorum)”.
(3)
In paragraph 13 of Schedule 1 (court of directors: proceedings)—
5
(a)
omit sub-paragraph (2),
(b)
in sub-paragraph (6) for “(2)” substitute “(3)”, and
(c)
at the end of sub-paragraph (6) add “(including quorum)”.
233
Tenure
(1)
At the end of paragraph 1 of Schedule 1 to the Bank of England Act 1998
10
(Governor and Deputies: appointment) add—
    “(3)
A person may not be appointed as Governor more than twice.
      (4)
A person may not be appointed as Deputy Governor more than
twice.”
(2)
At the end of paragraph 6 of that Schedule (re-appointment) insert “(subject to
15
paragraph 1(3) and (4))”.
(3)
After paragraphs 1 and 2 of Schedule 3 to that Act (Monetary Policy
Committee: appointment) insert—
“2A
A person may not be appointed as a member of the Committee under
section 13(2)(c) more than twice.”
20
(4)
At the end of paragraph 6 of that Schedule (re-appointment) insert “(subject to
paragraph 2A)”.
234
Immunity
(1)
The Bank of England has immunity in its capacity as a monetary authority.
(2)
In this section—
25
(a)
a reference to the Bank of England is a reference to the Bank and anyone
who acts or purports to act as a director, officer, servant or agent of the
Bank,
(b)
“immunity” means immunity from liability in damages in respect of
action or inaction, and
30
(c)
a reference to the Bank’s capacity as a monetary authority includes a
reference to functions exercised by the Bank for the purpose of or in
connection with—
(i)
acting as the central bank of the United Kingdom, or
(ii)
protecting or enhancing the stability of the financial systems of
35
the United Kingdom.
(3)
The immunity does not extend to action or inaction—
(a)
in bad faith, or
(b)
in contravention of section 6(1) of the Human Rights Act 1998.