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prohibit
banks and building societies lending on the basis of demand deposits
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without the permission of
the account holder; and for connected purposes. |
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Be
it enacted by the Queen’s most Excellent Majesty,
by and with the advice and |
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consent of the Lords Spiritual
and Temporal, and Commons, in this present |
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Parliament assembled, and
by the authority of the same, as follows:— |
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1 |
Types
of deposit accounts |
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(1) |
Banks or building societies
that accept deposits from retail customers must |
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offer those customers a choice
of at least one lending intermediary services |
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account and at least one
custodial deposit account. |
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(2) |
A lending intermediary services
account must be established on the following |
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(a) |
the customer is the lender
and the bank or building society is the |
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(b) |
the lender relinquishes title
to the lent funds, which may be lent by the |
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bank or building society to
third parties or be used as a basis on which |
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such loans can be made, and |
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(c) |
the bank or building society
must repay the funds to the lender on |
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request, with interest on
such terms as agreed by the lender and the |
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bank or building society at
the time of the deposit. |
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(3) |
Bank deposit insurance will
not be available for any funds in lending |
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intermediary services accounts. |
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(4) |
For all lending intermediary
services accounts the bank or building society |
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must provide to the lender
information on the nature of the loan and other |
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risks associated with the
bank’s or building society’s obligation and ability
to |
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repay the loan, including,
so far as they apply— |
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(a) |
the possibility of partial
or complete default, |
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(b) |
the possibility of late repayment, |
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(c) |
the possibility of runs on
the bank or building society, |
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(d) |
the existence of any suspension
clauses or similar limitations on or |
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exceptions to the bank’s
or building society’s obligation to repay, |
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(e) |
the
bank’s or building society’s reserve ratio policies,
and |
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(f) |
the requirements of subsection
(3). |
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(5) |
Custodial deposit accounts
must be established on the following terms— |
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(a) |
the bank or building society
will act as depositary and custodian of the |
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deposited funds, which, being
fungible, may be commingled, |
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(b) |
depositors of such accounts
retain ownership of the commingled funds, |
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each depositor having a pro
rata interest in the funds based on the |
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amount of their own deposit, |
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(c) |
the bank or building society
must not lend on the basis of the funds, or |
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lend or otherwise dispose
of the funds, and |
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(d) |
the bank or building society
must make any or all of the share of the |
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depositor’s funds available
for withdrawal on demand. |
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(1) |
A penalty may be imposed
by the Bank of England or the Financial Services |
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Authority on a bank or building
society which fails to offer accounts in |
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accordance with section 1. |
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(2) |
The penalty which may be
imposed for an offence under subsection (1) is an |
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3 |
Commencement
and transitional provision etc |
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(1) |
This Act comes into force
on such day as the Chancellor of the Exchequer may |
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by order made by statutory
instrument appoint. |
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(2) |
The Chancellor of the Exchequer
may by regulations made by statutory |
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instrument make such transitional,
transitory or saving provision as he |
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considers appropriate, subject
to the provisions of subsection (3). |
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(3) |
The Chancellor of the Exchequer
must by regulations made by statutory |
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instrument make provision
for accounts opened before the day on which this |
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Act comes into force to continue
to exist on the following terms— |
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(a) |
funds can be withdrawn but
no further deposits can be made, |
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(b) |
interest accrued must be
held in escrow on behalf of the customer until |
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the customer elects whether
to hold the interest in a lending |
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intermediary services account,
a custodial deposit account, or |
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(4) |
Regulations made under subsections
(2) and (3) are subject to annulment in |
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pursuance of a resolution
of either House of Parliament. |
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(1) |
This Act may be cited as
the Financial Services (Regulation of Deposits and |
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(2) |
This Act extends to England
and Wales and Scotland. |
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