Banking reform: towards the right structure - Parliamentary Commission on Banking Standards Contents


Appendix: Amendments


RECOMMENDATION 18

A

Clause 1, page 1, line 11, after 'that' insert 'reduces the risk of ring-fenced bodies assuming disproportionate exposure, enhances their capacity to cope with other exposure and otherwise'.

B

Clause 1, page 1, line 18, after 'services,' insert 'in particular by securing the orderly handling of circumstances in which ring-fenced bodies have encountered or may encounter financial difficulties,'.

C

Clause 2, page 2, line 42, after 'that' insert 'reduces the risk of ring-fenced bodies assuming disproportionate exposure, enhances their capacity to cope with other exposure and otherwise'.

D

Clause 2, page 3, line 6, after 'services,' insert 'in particular by securing the orderly handling of circumstances in which ring-fenced bodies have encountered or may encounter financial difficulties,'.

RECOMMENDATION 21

E

Clause 4, page 3, line 33, leave out from 'order' to end of line 35 and insert—

'(a)  would significantly enhance the stability of the UK financial system or provide other significant benefit to the economy of the United Kingdom, and

(b)  would not pose a risk to the continuity of the provision in the United Kingdom of core services.'.

F

Clause 4, page 5, line 13, leave out from 'circumstances' to end of line 15 and insert—

'(a)   would significantly enhance the stability of the UK financial system or provide other significant benefit to the economy of the United Kingdom, and

(b)  would not pose a risk to the continuity of the provision in the United Kingdom of core services.'.



RECOMMENDATION 22

G

Clause 4, page 8, line 34 at end insert—

'(7A)  The Treasury must make regulations prescribing requirements with which ring-fencing rules made for the group ring-fencing purposes must comply.'.

H

Clause 4, page 12, line 31, at end insert—

'( ) section 142H(7A);'.

RECOMMENDATIONS 25 and 26

I

Clause 4, page 13, line 7, at end insert—

'142NA  Enhanced scrutiny procedure for certain affirmative procedure orders

(1)  This section applies if—

(a)  an order under section 142B(5), other than the first, makes provision for a regulated activity to be or cease to be a core activity or varies the circumstances in which a regulated activity is a core activity,

(b)  an order under section 142D(2) varies the circumstances in which the regulated activity of dealing in investments as principal is an excluded activity,

(c)  an order under section 142D(4), other than the first, provides for an activity to be or cease to be an excluded activity or varies the circumstances in which an activity is an excluded activity, or

(d)  an order under section 142E varies the scope of what ring-fenced bodies are prohibited from doing by virtue of that section (including by varying exemptions or conditions),

      and the order is not made in reliance on section 142N(4).

(2)  The Treasury must, before laying a draft of the order before either House of Parliament for approval, consult such persons as the Treasury consider appropriate in relation to the proposed draft.

(3)  If, after the consultation required by subsection (2), the Treasury consider that it is appropriate to proceed with the making of an order, the Treasury must lay before each House of Parliament a draft of the order together with an explanatory document—

  (a)  explaining the provisions in the draft order, and

(b)  giving details of the consultation under subsection (2), any representations received as a result of the consultation and any changes made to the proposed draft as a result of the representations.

(4)  If a joint committee of both Houses of Parliament is charged with reporting on the draft order—

(a)  the chairman of the Treasury Committee of the House of Commons is to be the chairman of the joint committee, and

(b)  the Treasury must have regard to any recommendations of the joint committee made during the 60-day period.

(5)  If, after the expiry of the 60-day period, the Treasury wish to make an order including material changes from the draft order, they must lay before Parliament—

(a)  a revised draft order, and

(b)  a statement giving details of the revisions.

(6)  After the expiry of the 60-day period (and, if subsection (5) applies, after complying with that subsection) the Treasury may make the order in the terms of the draft, or revised draft, if it is approved by a resolution of each House of Parliament (as required by section 142N(2)(a)).

(7)  In this section "the 60-day period" means the period of 60 days beginning with the day on which the draft order is laid before Parliament under subsection (3).

(8)  In calculating the 60-day period no account is to be taken of any time during which Parliament is dissolved or prorogued or during which either House is adjourned for more than 4 days.

(9)  The references in this section to the Treasury Committee of the House of Commons—

(a)  if the name of that Committee is changed, is to be treated as a reference to that Committee by its new name, and

(b)  if the functions of that Committee (or substantially corresponding functions) become functions of a different Committee of the House of Commons, is to be treated as a reference to the Committee by which the functions are exercisable;

and any question arising under paragraph (a) or (b) is to be determined by the Speaker of the House of Commons.".'.

RECOMMENDATIONS 29 to 31: SEPARATION IN CASE OF PARTICULAR GROUPS

J

Clause 4, page 9, line 21, at end insert—

'Power to order full separation

142JC  Power to order separation in case of particular groups

(1)  Where—

(a)  the members of a group include one or more ring-fenced bodies and one or more other bodies, and

(b)  it appears to the appropriate regulator that the conduct of any one or more of the members of the group is such that there is a significant risk that the appropriate regulator will not be able to advance the objective in section 2B(3)(c) (in the case of the PRA) or the continuity objective (in the case of the FCA) otherwise than by acting under this section,

the appropriate regulator may give a notice to each of the members of the group.

(2)  The notice must state that the appropriate regulator proposes to require the taking of relevant steps in relation to the group before the date specified in the notice.

(3)   In this section "relevant steps" means steps to secure one of the following results—

(a)  that there is no member of the group with a Part 4A permission to carry on a regulated activity of a description specified in the notice;

(b)  that no member of the group is a ring-fenced body;

(c)  that there is no member of the group with a Part 4A permission to carry on a regulated activity which is not a ring-fenced body.

    (4)  The notice must—

(a)  specify a period, of not less than 3 months, during which any member of the group may make representations to the appropriate regulator in relation to its proposal, and

(b)  name an independent reviewer who is to report on the conduct of the members of the group and the appropriateness of the proposal made by the appropriate regulator.

(5)  A person may not be named as the independent reviewer without the consent of the chairman of the Treasury Committee of the House of Commons; and the reference in this subsection to the Treasury Committee of the House of Commons—

(a)  if the name of that Committee is changed, is to be treated as a reference to that Committee by its new name, and

(b)  if the functions of that Committee (or substantially corresponding functions) become functions of a different Committee of the House of Commons, is to be treated as a reference to the Committee by which the functions are exercisable;

and any question arising under this paragraph (a) or (b) is to be determined by the Speaker of the House of Commons.

(6)  After receiving any representations made in relation to the proposal by members of the group and the report of the independent reviewer, the appropriate regulator must decide whether it intends to implement the proposal.

(7)  If the appropriate regulator decides that it does intend to implement the proposal, it must publish notice of the proposal, and of its decision to implement it, at least 60 days before it is implemented.

(8)  A person who is aggrieved by the decision of the appropriate regulator that it intends to implement the proposal may refer the matter to the Tribunal.

(9)  The proposal may not be implemented without the consent of the Treasury; and the Treasury must publish their decision on any application made by the appropriate regulator for consent, together with their reasons for the decision, at least 60 days before it is implemented.

(10)  Once the Treasury has consented to the implementation of the proposal and either—

(a)  any reference to the Tribunal under subsection (8) has been dismissed, or

(b)  the period for making such a reference to the Tribunal has expired without a reference having been made,

the appropriate regulator may implement the proposal by giving notice to the members of the group requiring the taking of the relevant steps specified in the proposal before the date so specified.

(11)  If the relevant steps have not been taken by the specified date, the appropriate regulator may—

(a)  in a case where the relevant steps are aimed at securing the result in paragraph (a) of subsection (3), take the action specified in subsection (12),

(b)  in a case where the relevant steps are aimed at securing the result in paragraph (b) of subsection (3), take the action specified in subsection (13), or

(c)  in a case where the relevant steps are aimed at securing the result in paragraph (c) of subsection (3), take the action specified in subsection (14).

    (12)  The action referred to in paragraph (a) of subsection (11) is—

(a)  to cancel the Part 4A permission of any member of the group to carry on the regulated activity specified in the notice, and

(b)  to refuse to give a Part 4A permission to any member of the group to carry on that activity.

(13)  The action referred to in paragraph (b) of subsection (11) is—

(a)  to cancel the Part 4A permission of any member of the group that is a ring-fenced body to the extent that it relates to a core activity, and

(b)  to refuse to give any member of the group a Part 4A permission to carry on a core activity.

(14)  The action referred to in paragraph (c) of subsection (11) is—

(a)  to cancel the Part 4A permission of any member of the group that is not a ring-fenced body, and

(b)  to refuse to give a Part 4A permission to any member of the group that is not a ring-fenced body.'.

K

Clause 20, page 21, line 23, at end insert—

'( )  No order may be made appointing a day for the coming into force of section 4 so far as it inserts section 142JC of FSMA 2000 unless the day is later than that on which the report of the first review under section 142J of that Act is published.'.

RECOMMENDATIONS 29, 30, 32 AND 33: REVIEWS AND GENERAL REQUIREMENT OF SEPARATION

L

Clause 4, page 9, line 21, at end insert—

'Full separation

  142JD  General requirement of separation

(1)  Where the members of any group include one or more ring-fenced bodies and one or more other bodies, the members of the group must, before the end of the period of 5 years beginning with the relevant commencement date, take steps to secure that there are no members of the group that are ring-fenced bodies.

(2)  If in the case of any group steps to secure that there are no members of the group that are ring-fenced bodies are not taken within the period specified in subsection (1)—

(a)  at the end of that period the Part 4A permission of each member of the group that is a ring-fenced body shall be treated as having been cancelled to the extent that it relates to a core activity, and

(b)  after the end of that period the appropriate regulator must refuse to give any member of the group a Part 4A permission to carry on a core activity.

    (3)  At the end of the period specified in subsection (1)—

      (a)  section 142H(1)(b) and (4) to (7), and

(b)  section 142JC,

      cease to have effect.

(4)  In subsection (1) "the relevant commencement date" means the day appointed for the coming into force of section 4 of the Financial Services (Banking Reform) Act 2013 so far as it inserts this section.'.

M

Clause 20, page 21, line 23, at end insert—

'( )  No order may be made appointing a day for the coming into force of section 4 so far as it inserts section 142JD of FSMA 2000 unless—

(a)  the day is later than that on which there is published the report of a review under section 142J of that Act containing a recommendation that section 4 of that Act should be brought into force to that extent, and

(b)  a draft of the order has been laid before, and approved by a resolution of, each House of Parliament.'.

N

Clause 4, page 9, leave out lines 8 to 21 and insert—

'Reviews

142J  Reviews of ring-fencing

(1)  The Treasury must make arrangements for the carrying out of reviews of the effects of the operation of the provision made by or under this Part in relation to ring-fenced bodies, including ring-fencing rules made by the PRA and the FCA.

(2)  The first review must be completed before the end of the period of 4 years beginning with the date on which section 4 of the Financial Services (Banking Reform) Act 2013, so far as it inserts this section, comes into force.

(3)  Subsequent reviews must be completed before the end of the period of 5 years beginning with the date on which the previous review was completed.

(4)  Not less than 9 months, nor more than 12 months, before the date on which a review is due to be completed, the PRA and the FCA must publish a joint assessment of the impact of the operation of their ring-fence rules.

(5)  For the purposes of this section a review is completed when the report of it is published.

  142JA  Persons by whom reviews are to be conducted

(1)  The Treasury shall appoint not fewer than 5 persons to conduct a review of whom one is to chair it.

(2)  A person may not be appointed to chair a review unless the chairman of the Treasury Committee of the House of Commons has notified the Treasury that, in the chairman's opinion, the person is likely to act independently of the Treasury, the PRA and the FCA in carrying out the review.

(3)  The persons appointed to conduct a review must include at least one person with substantial experience in central banking or financial regulation at a senior level.

(4)  The reference in subsection (2) to the Treasury Committee of the House of Commons—

(a)  if the name of that Committee is changed, is to be treated as a reference to that Committee by its new name, and

(b)  if the functions of that Committee (or substantially corresponding functions) become functions of a different Committee of the House of Commons, is to be treated as a reference to the Committee by which the functions are exercisable;

and any question arising under paragraph (a) or (b) is to be determined by the Speaker of the House of Commons.

142JB  Reports of review

(1)  The persons appointed to conduct a review must give the Treasury a report of the review.

(2)  The report must include an assessment of the extent to which the provision made by or under this Part in relation to ring-fenced bodies, including ring-fencing rules made by the PRA and by the FCA, are facilitating the advancement by the PRA of the objective in section 2B(3)(c) and by the FCA of the continuity objective.

(3)  If the report is made before section 4 of the Financial Services (Banking Reform) Act 2013, so far as it inserts section 142JD, has come into force it must also include a recommendation as to whether or not section 4 of that Act should be brought into force to that extent.

(4)  The report must include—

(a)  recommendations to the Treasury as to the provision that should be included in orders and regulations under this Part, and

(b)  recommendations to the PRA and the FCA about the provision that should be included in ring-fencing rules.

(5)  The Treasury must lay a copy of the report before Parliament and publish it in such manner as it thinks fit.'.

RECOMMENDATION 37

O

Clause 6, page 14, line 7, at end insert—

'( )  the nature and extent of the dealings by ring-fenced bodies in derivative products (including options, futures, contracts for differences and similar products);'.

RECOMMENDATION 39

P

Clause 4, page 3, line 35, at end insert—

'(3A)  In making an order under subsection (2)(b) which—

(a)  provides an exemption for UK institutions holding deposits below a specified amount, or

(b)  varies the amount previously specified for the purposes of such an exemption,

the Treasury must aim to enhance competition among UK institutions which have a Part 4A permission relating to one or more core activities (in particular by having regard to the likely effect on the number of UK institutions applying for or obtaining such a permission for the first time).'.

Q

Clause 6, page 14, line 7, at end insert 'and

( )  developments affecting the appropriateness of the amount for the time being specified for the purposes of any exemption under section 142A(2)(b) for UK institutions holding deposits below that specified amount.'.

RECOMMENDATION 46

R

Clause 4, page 7, line 45, at end insert—

'( )   provision requiring that shares or voting power in a ring-fenced body are held only by another member of the ring-fenced body's group which is not carrying on an excluded activity or by other members of that group none of which is carrying on such an activity;'.

RECOMMENDATION 47

S

Schedule, page 24, line 9, at end insert—

'( )  After subsection (3) insert—

"(4)  Without prejudice to the generality of subsection (3), in the case of a ring-fencing transfer scheme the court must not make an order sanctioning the scheme if it considers that it might lead to the dissolution of a company or to the transfer of liabilities owed to any persons in a manner that may prejudice the interests of those persons.".'.


RECOMMENDATIONS 49 and 50

T (New Clause)

  Bank bail-in regime

To move the following Clause:—

'(1)  The Bank of England must, at least once in every year, prepare an assessment of any progress which has been made towards the introduction of a bank bail-in regime in the United Kingdom or, once a bank bail-in regime has been introduced, of its operation.

(2)  If a bank bail-in regime is not in force in the United Kingdom by the end of 2015, the Treasury must by regulations make provision for such a regime.

(3)   an assessment under subsection (1) must include—

(a)  an assessment of how much of the issued debt of banks would be covered by any proposed bank bail-in regime or is covered by the provisions of the bank bail-in regime in force,

(b)  (if a bank bail-in regime is in force) an account of the sorts of companies within groups which have creditors who are covered by the bank bail-in regime and of the sorts of persons who are creditors who are so covered,

(c)  a review of the descriptions of creditors who would be covered by any proposed bail-in regime or are covered by the provisions of the bank bail-in regime in force, and

(d)  an account of progress towards international co-operation in relation to bail-in regimes.

(4)  The Bank of England must send the assessment to the Treasury.

(5)  The Treasury must lay the assessment before Parliament.

(6)  The Bank of England must publish the assessment in such manner as they think fit.

(7)  In this section "bank bail-in regime" means provisions under which losses incurred by a bank are to be met by certain descriptions of creditors of the bank should the bank encounter financial difficulties which might otherwise lead to the taking of action which would be likely to have implications for public funds.

(8)  For the purposes of subsection (7) "action having implications for public funds" has the same meaning as in section 78(1) of the Banking Act 2009.

(9)  In this section "bank" means a UK institution which has permission under Part 4A of FSMA 2000 to carry on the regulated activity of accepting deposits, other than a building society (within the meaning of the Building Societies Act 1986) or any description of institution excluded by virtue of subsection (2)(b) of section 142A of that Act from being a ring-fenced body as defined in subsection (1) of that section.'.

U

Clause 16, page, 20, line 28, after 'ring-fencing)' insert 'or section (Bank bail-in regime)(2) (bank bail-in regime)'.


V

Title, line, 4, after 'insolvency;' insert 'to make provision in relation to a bank bail-in regime;'.

RECOMMENDATION 51

W

Clause 4, page 12, line 22, at end insert—

'( )  If an order under this section includes provision for the grant by a regulator of any exemption from the requirements imposed by such an order, the order must—

(a)  require a relevant body claiming the exemption to satisfy the regulator that the exemption should be granted,

(b)  require the regulator, in deciding whether to grant the exemption, to have regard to all reasonably foreseeable circumstances,

(c)  include provision for reviews of, or appeals from, any decision not to grant the exemption,

(d)  require the regulator to make to the Treasury a report setting out any decision to grant the exemption and the terms of the exemption granted, and

(e)  require the Treasury to lay a copy of such a report before Parliament and to publish it in such manner as they think fit.'.

RECOMMENDATION 57

X (New Clause)

  Annual assessment of developments in respect of risk-weighting

To move the following Clause:—

'(1)  The Bank of England must, at least once in every year, prepare an assessment of developments in respect of risk-weighting in relation to banks and building societies.

(2)  The Bank must send the assessment to the Treasury.

(3)  The Treasury must lay the assessment before Parliament.

(4)  The Bank of England must publish the assessment in such manner as they think fit.

(5)  In this section "risk weighting" means the process by which the assets of a bank or building society are accorded a risk weight.

(6)  In this section—

"bank" means a UK institution which has permission under Part 4A of FSMA 2000 to carry on the regulated activity of accepting deposits, other than any description of institution excluded by virtue of subsection (2)(b) of section 142A of that Act from being a ring-fenced body as defined in subsection (1) of that section (or a building society);

"building society" has the same meaning as in the Building Societies Act 1986;

"risk weight" means a percentage that is derived from the risk to the value of an asset.'.


Y

Title, line, 4, after 'insolvency;' insert 'to make provision for reports relating to developments in respect of risk-weighting;'.



 
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Prepared 11 March 2013