Banking Bill

House of Commons

Session 2008 - 09
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Other Bills before Parliament

Banking Bill

Banking Bill
Part 3 — Bank Administration
87

162
Co-operation between courts
(1)
Provisions of or by virtue of this Part are “insolvency law” for the purposes of
section 426 of the Insolvency Act 1986 (co-operation between courts).
(2)
At the end of that section (after the subsection added by section 126) add—
“(14)
Section 162 of the Banking Act 2008 provides for provisions of that Act
5
about bank administration to be “insolvency law” for the purposes of
this section.”
163
Interpretation: general
(1)
In this Part “the court” means—
(a)
in England and Wales, the High Court,
10
(b)
in Scotland, the Court of Session, and
(c)
in Northern Ireland, the High Court.
(2)
In this Part “the FSA” means the Financial Services Authority.
(3)
For the purposes of a reference in this Part to inability to pay debts—
(a)
a bank that is in default on an obligation to pay a sum due and payable
15
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
making or performance of which constitutes or is part of a regulated activity
20
carried on by the bank.
(4)
Expressions used in this Part and in the Insolvency Act 1986 have the same
meaning as in that Act.
(5)
Expressions used in this Part and in the Companies Act 2006 have the same
meaning as in that Act.
25
(6)
A reference in this Part to action includes a reference to inaction.
164
Northern Ireland
In the application of this Part to Northern Ireland—
(a)
a reference to an enactment is to be treated as a reference to the
equivalent enactment having effect in relation to Northern Ireland,
30
(b)
where this Part amends an enactment an equivalent amendment
(incorporating any necessary modification) is made to the equivalent
enactment having effect in relation to Northern Ireland,
(c)
the reference in section 156 to section 31 of the Credit Unions Act 1979
is to be treated as a reference to Article 2 of the Credit Unions (Northern
35
Ireland) Order 1985, and
(d)
in section 160—
(i)
the reference to the Secretary of State is to be treated as a
reference to the Department for Enterprise, Trade and
Investment, and
40
(ii)
the reference to the Lord Chief Justice is a reference to the Lord
Chief Justice in Northern Ireland.

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Part 4 — Financial Services Compensation Scheme
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165
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 4
Financial Services Compensation Scheme
10
166
Overview
This Part makes a number of amendments in connection with the Financial
Services Compensation Scheme provided for by Part 15 of the Financial
Services and Markets Act 2000.
167
Contingency funding
15
(1)
After section 214 of the Financial Services and Markets Act 2000 (compensation
scheme: general) insert—
“214A
    Contingency funding
(1)
The Treasury may make regulations (“contingency fund regulations”)
permitting the scheme manager to impose levies under section 213 for
20
the purpose of maintaining contingency funds from which possible
expenses may be paid.
(2)
Contingency fund regulations may make provision about the
establishment and management of contingency funds; in particular, the
regulations may make provision about—
25
(a)
the number and size of funds;
(b)
the circumstances and timing of their establishment;
(c)
the classes of person from whom contributions to the funds may
be levied;
(d)
the amount and timing of payments into and out of funds
30
(which may include provision for different levies for different
classes of person);
(e)
refunds;
(f)
the ways in which funds’ contents may be invested (including
(i) the extent of reliance on section 223A, and (ii) the application
35
of investment income);
(g)
the purposes for which funds may be applied, but only so as to
determine whether a fund is to be used (i) for the payment of
compensation, (ii) for the purposes of co-operating with a bank
liquidator in accordance with section 96 of the Banking Act
40
2008, or (iii) for contributions under section 214B;
(h)
procedures to be followed in connection with funds, including
the keeping of records and the provision of information.

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(3)
The compensation scheme may include provision about contingency
funds provided that it is not inconsistent with contingency fund
regulations.”
(2)
At the end of section 213(7) (compensation scheme: further provision) add
“(except where limitations are expressly stated)”.
5
(3)
In section 218 (compensation scheme: annual report)—
(a)
in subsection (1) after “to the Authority” insert “and the Treasury”, and
(b)
at the end of subsection (2)(b) add “or in contingency fund regulations.”
168
Special resolution regime
(1)
After section 214A of the Financial Services and Markets Act 2000 (contingency
10
funding - inserted by section 167 above) insert—
“214B
     Contribution to costs of special resolution regime
(1)
This section applies where—
(a)
a stabilisation power under Part 1 of the Banking Act 2008 has
been exercised in respect of a bank, building society or credit
15
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
would have become, unable to satisfy claims against it.
(2)
Where this section applies—
20
(a)
the Treasury may require the scheme manager to make
payments in connection with the exercise of the stabilisation
power, and
(b)
payments shall be treated as expenditure under the scheme for
all purposes (including levies, contingency funds and
25
borrowing).
(3)
The Treasury shall make regulations—
(a)
specifying what expenses the scheme manager may be required
to incur under subsection (2),
(b)
providing for independent verification of the nature and
30
amount of expenses incurred in connection with the exercise of
the stabilisation power (which may include provision about
appointment and payment of an auditor), and
(c)
providing for the method by which amounts to be paid are to be
determined.
35
(4)
The regulations must ensure that payments 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
amount of compensation that would have been payable does not
40
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
(b)
any compensation actually paid to an eligible depositor of the
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bank.

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(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
power) to calculate the amounts referred to in subsection (4)(a); and the
regulations—
5
(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
decision,
(c)
must provide a right of appeal to a court or tribunal,
10
(d)
must provide for payment of the valuer,
(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)
Payments required to be made by the scheme by virtue of section 61 of
15
the Banking Act 2008 (special resolution regime: compensation) shall
be treated for the purposes of subsection (4) as if required to be made
under this section.
(7)
The regulations may include provision for payments (including
payments under those provisions of the Banking Act 2008) to be
20
made—
(a)
before verification in accordance with subsection (3)(b), and
(b)
before the calculation of the limit imposed by subsection (4), by
reference to estimates of that limit and subject to any necessary
later adjustment.
25
(8)
The regulations may include provision—
(a)
about timing;
(b)
about procedures to be followed;
(c)
for discretionary functions to be exercised by a specified body
or by persons of a specified class;
30
(d)
about the resolution of disputes (which may include provision
conferring jurisdiction on a court or tribunal).
(9)
The compensation scheme may include provision about payments
under and levies in connection with this section, provided that it is not
inconsistent with this section or regulations under it.”
35
(2)
At the end of section 2 23(3) of the Financial Services and Markets Act 2000
(management expenses) add “;
(c)
under section 214B.”.
169
Investing in National Loans Fund
After section 223 of the Financial Services and Markets Act 2000 (management
40
expenses) insert—
“223A
    Investing in National Loans Fund
(1)
Sums levied for the purpose of maintaining a contingency fund may be
paid to the Treasury.

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(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
National Loans Act 1968 (and shall therefore be invested as part of the
National Loans Fund).
5
(4)
Interest accruing on the invested sums may be credited to the
contingency fund (subject to any terms and conditions set under
subsection (2)).
(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
10
of a contingency fund (subject to any terms and conditions set under
subsection (2)).”
170
Borrowing from National Loans Fund
After section 223A of the Financial Services and Markets Act 2000 (investing in
National Loans Fund - inserted by section 169 above) insert—
15
“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
incurred under the scheme.
(2)
The Treasury may arrange for money to be paid out of the National
20
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.
(4)
The Treasury may make regulations—
25
(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
despite any provision of this Act);
30
(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
under this section provided that it is not inconsistent with regulations
35
under this section.”
171
Procedure for claims
(1)
After section 214(1) of the Financial Services and Markets Act 2000 (the
compensation scheme: powers) insert—
“(1A)
Rules by virtue of subsection (1)(h) may, in particular, allow the scheme
40
manager to treat persons who are or may be entitled to claim under the
scheme as if they had done so.

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(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
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
5
claim by payment of sums fixed without reference to, or by
modification of, the normal rules for calculation of maximum
entitlement for individual claims.”
(2)
In section 417(1) (definitions) at the appropriate place insert—
““claim”, in relation to the Financial Services Compensation
10
Scheme under Part XV, is to be construed in accordance with
section 214(1B);”.
172
Rights in insolvency
(1)
This section amends section 215 of the Financial Services and Markets Act 2000
(rights of scheme following insolvency).
15
(2)
For section 215(1) substitute—
“(1)
The compensation scheme may make provision—
(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;
20
(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”.
25
173
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
30
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.
35
(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.
40
(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

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performance of functions in respect of the scheme; and section 165(4) is
subject to this subsection.
(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.”
5
(2)
Section 219 is amended as follows.
(3)
In subsection (1) for “given to the relevant person in respect of whom a claim
is made under the scheme or to a person otherwise involved, require that
person” substitute “require a person”.
(4)
After subsection (1) insert—
10
“(1A)
A requirement may be imposed only—
(a)
on a person (P) against whom a claim has been made under the
scheme,
(b)
on a person (P) who is unable or likely to be unable to satisfy
claims under the scheme against P,
15
(c)
on a person (“the Third Party”) whom the scheme manager
thinks was knowingly involved in matters giving rise to a claim
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
20
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—
25
(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
30
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
35
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).
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174
Payments in error
After section 223B of the Financial Services and Markets Act 2000 (borrowing