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Banking (Special Provisions) Bill


Banking (Special Provisions) Bill

1

 

A

Bill

To

Make provision to enable the Treasury in certain circumstances to make an

order relating to the transfer of securities issued by, or of property, rights or

liabilities belonging to, an authorised deposit-taker; to make further provision

in relation to building societies; and for connected purposes. 

Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and

consent of the Lords Spiritual and Temporal, and Commons, in this present

Parliament assembled, and by the authority of the same, as follows:—

Introduction

1       

Meaning of “authorised UK deposit-taker”

(1)   

In this Act “authorised UK deposit-taker” means a UK undertaking that under

Part 4 of FSMA 2000 has permission to accept deposits.

(2)   

That expression does not, however, include such an undertaking with

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permission to accept deposits only for the purposes of, or in the course of, an

activity other than accepting deposits.

2       

Cases where Treasury’s powers are exercisable

(1)   

The power of the Treasury to make an order under—

(a)   

section 3 (transfer of securities issued by an authorised UK deposit-

10

taker), or

(b)   

section 6 (transfer of property, rights and liabilities of an authorised UK

deposit-taker),

   

is exercisable in relation to an authorised UK deposit-taker if (and only if) it

appears to the Treasury to be desirable to make the order for either or both of

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the following purposes.

   

This is subject to subsection (7).

(2)   

The purposes are—

 
HL Bill 3454/3
 
 

Banking (Special Provisions) Bill

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(a)   

maintaining the stability of the UK financial system in circumstances

where the Treasury consider that there would be a serious threat to its

stability if the order were not made;

(b)   

protecting the public interest in circumstances where financial

assistance has been provided by the Treasury to the deposit-taker for

5

the purpose of maintaining the stability of the UK financial system.

(3)   

The reference in subsection (2)(b) to the provision of financial assistance by the

Treasury to the deposit-taker includes—

(a)   

any case where the Bank of England has provided financial assistance

to the deposit-taker and—

10

(i)   

the Treasury have assumed a liability in respect of the

assistance,

(ii)   

the liability is of a kind of which the Treasury are expected to

give relevant notice, and

(iii)   

the Treasury have given relevant notice of the liability;

15

(b)   

any case where the Chancellor of the Exchequer has announced that the

Treasury (whether acting alone or with the Bank of England) would, if

necessary, put in place relevant guarantee arrangements in relation to

the deposit-taker (as well as any case where any such arrangements

have been put in place, whether or not following such an

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announcement).

(4)   

For the purposes of subsection (3) the Treasury give “relevant notice” of a

liability if—

(a)   

they lay a Minute before the House of Commons containing

information about the liability, or

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(b)   

they give written notice containing such information to the person who

chairs the House of Commons Committee of Public Accounts and the

person who chairs the House of Commons Treasury Committee.

(5)   

It is immaterial whether the notice or announcement mentioned in subsection

(3) is given or made before or after the passing of this Act.

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(6)   

In this Act “relevant guarantee arrangements”, in relation to any authorised

UK deposit-taker, means any guarantee arrangements for protecting some or

all of the depositors or other creditors of the deposit-taker.

(7)   

Where an order has been made under section 3 or 6 in relation to any

authorised UK deposit-taker, subsection (1) does not apply in relation to any

35

subsequent exercise of the power to make an order under either of those

sections in relation to that deposit-taker.

(8)   

The power of the Treasury to make an order under section 3 or 6 in relation to

an authorised UK deposit-taker may not be exercised after the end of the

period of one year beginning with the day on which this Act is passed.

40

(9)   

Subsection (8) does not affect the continuation in force or effect of any order

made or other thing done by virtue of either of those sections before the end of

that period.

(10)   

In this section “the UK financial system” means the financial system in the

United Kingdom.

45

(11)   

Section 13 of the National Audit Act 1983 (c. 44) (interpretation of references to

Committee of Public Accounts) applies for the purposes of this section, but as

if—

 
 

Banking (Special Provisions) Bill

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(a)   

the references in that section to that Act were to this Act, and

(b)   

the references in that section to the House of Commons Committee of

Public Accounts included the House of Commons Treasury

Committee.

Transfer of securities

5

3       

Transfer of securities

(1)   

The Treasury may, in relation to all or any securities of a specified description

that have been issued by an authorised UK deposit-taker, by order make

provision for or in connection with, or in consequence of, the transfer of the

securities to any of the following—

10

(a)   

the Bank of England;

(b)   

a nominee of the Treasury;

(c)   

a company wholly owned by the Bank of England or the Treasury;

(d)   

any body corporate not within paragraph (c).

(2)   

Schedule 1 specifies particular kinds of provisions that may be included in an

15

order under this section.

(3)   

Where an order providing for the transfer of any securities has been made

under this section, the power to make an order under this section may be

subsequently exercised so as to make provision in connection with, or in

consequence of, the transfer (including provision of a kind specified in

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Schedule 1) even though the order does not itself provide for the transfer of any

securities.

(4)   

Where an order under this section or section 6 (“the initial order”) has been

made in relation to an authorised UK deposit-taker, the power to make an

order under this section may be subsequently exercised in relation to that

25

deposit-taker whether or not any transfer of securities provided for by the

order is to the person to whom any transfer was made by or under the initial

order.

(5)   

For the purposes of this section any provision made by an order under this

section in relation to any transaction or event taking place while securities

30

transferred by such an order are held by a person within subsection (1)(a), (b)

or (c) is to be regarded as provision made in consequence of the transfer.

4       

Extinguishment of subscription rights

(1)   

This section applies where the Treasury make, or have made, an order under

section 3 providing for the transfer of securities issued by an authorised UK

35

deposit-taker.

(2)   

The Treasury may by order make provision for and in connection with, or in

consequence of, the extinguishment of rights of any specified description to

subscribe for, or otherwise acquire, securities of—

(a)   

the deposit-taker, or

40

(b)   

any of its subsidiary undertakings.

(3)   

Subsection (2) applies whether the rights have been granted by the deposit-

taker or otherwise.

 
 

Banking (Special Provisions) Bill

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(4)   

Where an order providing for the extinguishment of any rights has been made

under this section, the power to make an order under this section may be

subsequently exercised so as to make provision in connection with, or in

consequence of, the extinguishment of those rights even though the order does

not itself provide for any rights to be extinguished.

5

5       

Compensation etc. for securities transferred etc.

(1)   

The Treasury must by order—

(a)   

in relation to an order under section 3 that transfers securities only to

the public sector, make a scheme for determining the amount of any

compensation payable by the Treasury to persons who held the

10

securities immediately before they were so transferred;

(b)   

in relation to an order under section 3 that transfers securities only to a

private sector body, make provision for determining the amount of any

consideration payable by the body to persons who held the securities

immediately before they were so transferred;

15

(c)   

in relation to an order under section 3 that transfers securities both to

the public sector and a private sector body, make provision for

determining—

(i)   

the amount of any compensation payable by the Treasury, and

(ii)   

the amount of any consideration payable by the private sector

20

body concerned,

   

to persons who held the securities immediately before they were so

transferred.

(2)   

The Treasury must by order make provision for determining the amount of

any compensation payable to persons whose rights are extinguished by virtue

25

of an order under section 4 (a “section 4 order”) and—

(a)   

in any case where the section 4 order is made in consequence of an

order under section 3 that transfers securities only to the public sector,

the order must provide for any compensation to be payable by the

Treasury;

30

(b)   

in any case where the section 4 order is made in consequence of an

order under section 3 that transfers securities only to a private sector

body, the order must provide for any compensation to be payable by

the private sector body concerned;

(c)   

in any case where the section 4 order is made in consequence of an

35

order under section 3 that transfers securities both to the public sector

and a private sector body, the order must make provision for

determining the amount of any compensation payable by the Treasury

or the private sector body concerned (or both).

(3)   

An order under this section may also make provision for extending provisions

40

of the order, in any specified circumstances, to persons otherwise affected by

any provision made in an order under section 3 or 4.

(4)   

In determining the amount of any compensation payable by the Treasury by

virtue of any provision in an order under this section, it must be assumed—

(a)   

that all financial assistance provided by the Bank of England or the

45

Treasury to the deposit-taker in question has been withdrawn (whether

by the making of a demand for repayment or otherwise), and

(b)   

that no financial assistance would in future be provided by the Bank of

England or the Treasury to the deposit-taker in question (apart from

 
 

Banking (Special Provisions) Bill

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ordinary market assistance offered by the Bank of England subject to its

usual terms).

(5)   

For the purposes of subsection (4)—

(a)   

the references to the provision of financial assistance by the Treasury to

the deposit-taker include any case where the Chancellor of the

5

Exchequer announces that the Treasury (whether acting alone or with

the Bank of England) would, if necessary, put in place relevant

guarantee arrangements in relation to the deposit-taker (as well as any

case where any such arrangements are put in place, whether or not

following such an announcement);

10

(b)   

“ordinary market assistance” means assistance provided as part of the

Bank’s standing facilities in the sterling money markets or as part of the

Bank’s open market operations in those markets.

(6)   

It is immaterial whether the announcement mentioned in subsection (5)(a) is

made before or after the passing of this Act.

15

(7)   

In this section—

(a)   

any reference to any transfer of securities to the public sector is a

reference to the transfer of any securities to any person within

paragraphs (a) to (c) of subsection (1) of section 3;

(b)   

any reference to any transfer of securities to a private sector body is a

20

reference to the transfer of any securities to any body corporate within

paragraph (d) of that subsection.

(8)   

An order under subsection (1) or (2) must be made within the period of 3

months beginning with—

(a)   

the day on which the order under section 3 is made (in the case of an

25

order under subsection (1)), or

(b)   

the day on which the order under section 4 is made (in the case of an

order under subsection (2)).

(9)   

But nothing in subsection (8) prevents the making at any time after the end of

that period of a second or subsequent order under this section in relation to the

30

order under section 3 or 4.

Transfer of property etc.

6       

Transfer of property, rights and liabilities

(1)   

The Treasury may by order make provision for or in connection with, or in

consequence of, the transfer of property, rights and liabilities of an authorised

35

UK deposit-taker to either (or each) of the following—

(a)   

a company wholly owned by the Bank of England or the Treasury;

(b)   

a body corporate not within paragraph (a).

(2)   

An order under this section may define the property, rights and liabilities to be

transferred in one or more of the following ways—

40

(a)   

by specifying or describing the property, rights and liabilities in

question;

(b)   

by referring to all the property, rights and liabilities comprised in the

whole or a specified part of the deposit-taker’s business;

(c)   

by identifying the manner in which the property, rights and liabilities

45

to be transferred are to be determined.

 
 

Banking (Special Provisions) Bill

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(3)   

Schedule 2 specifies particular kinds of provisions that may be included in an

order under this section.

(4)   

Where an order providing for the transfer of any property, rights or liabilities

has been made under this section, the power to make an order under this

section may be subsequently exercised so as to make provision in connection

5

with, or in consequence of, the transfer (including provision of a kind specified

in Schedule 2) even though the order does not itself provide for the transfer of

any property, rights or liabilities.

(5)   

Where an order under this section or section 3 (“the initial order”) has been

made in relation to an authorised UK deposit-taker, the power to make an

10

order under this section may be subsequently exercised in relation to that

deposit-taker whether or not any transfer of property, rights or liabilities

provided for by the order is to the person to whom any transfer was made by

or under the initial order.

(6)   

A second or subsequent order made under this section in relation to an

15

authorised UK deposit-taker may make provision for any of the property,

rights or liabilities transferred by or under a previous order under this section

to be transferred back to the deposit-taker.

(7)   

The provisions of this section and Schedule 2 apply for the purposes of

subsection (6) with any necessary modifications.

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(8)   

For the purposes of this section any provision made by an order under this

section in relation to any transaction or event taking place while property,

rights or liabilities transferred by or under such an order are held by a

company within subsection (1)(a) is to be regarded as provision made in

consequence of the transfer.

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7       

Compensation etc. for property etc. transferred

(1)   

The Treasury must by order make provision—

(a)   

in relation to an order under section 6 providing for the transfer of

property, rights or liabilities to a company within subsection (1)(a) of

that section, for determining the amount of any compensation payable

30

by the Treasury to the authorised UK deposit-taker concerned;

(b)   

in relation to an order under section 6 providing for the transfer of

property, rights or liabilities to any other body, for determining the

amount of any consideration payable by the transferee to the

authorised UK deposit-taker concerned.

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(2)   

An order under this section may also make provision for extending provisions

of the order, in any specified circumstances, to persons otherwise affected by

any provision made in an order under section 6.

(3)   

In determining the amount of any compensation payable by the Treasury by

virtue of any provision in an order under this section, it must be assumed—

40

(a)   

that all financial assistance provided by the Bank of England or the

Treasury to the deposit-taker in question has been withdrawn (whether

by the making of a demand for repayment or otherwise), and

(b)   

that no financial assistance would in future be provided by the Bank of

England or the Treasury to the deposit-taker in question (apart from

45

ordinary market assistance offered by the Bank of England subject to its

usual terms).

 
 

Banking (Special Provisions) Bill

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(4)   

For the purposes of subsection (3)—

(a)   

the references to the provision of financial assistance by the Treasury to

the deposit-taker include any case where the Chancellor of the

Exchequer announces that the Treasury (whether acting alone or with

the Bank of England) would, if necessary, put in place relevant

5

guarantee arrangements in relation to the deposit-taker (as well as any

case where any such arrangements are put in place, whether or not

following such an announcement);

(b)   

“ordinary market assistance” means assistance provided as part of the

Bank’s standing facilities in the sterling money markets or as part of the

10

Bank’s open market operations in those markets.

(5)   

It is immaterial whether the announcement mentioned in subsection (4)(a) is

made before or after the passing of this Act.

(6)   

An order under subsection (1) must be made within the period of 3 months

beginning with the day on which the order under section 6 is made.

15

(7)   

But nothing in subsection (6) prevents the making at any time after the end of

that period of a second or subsequent order under this section in relation to the

order under section 6.

Further transfers

8       

Further transfers following transfer to public sector

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(1)   

Subsection (2) applies where any securities issued by an authorised UK

deposit-taker have been transferred to a person within section 3(1)(a) to (c) by

an order under section 3.

(2)   

In such a case the Treasury may by order make provision for and in connection

with, or in consequence of, the transfer to a specified person of any of the

25

following—

(a)   

any of the securities transferred as mentioned in subsection (1);

(b)   

any securities issued by the deposit-taker at any time after the transfer

mentioned in that subsection;

(c)   

any of the property, rights and liabilities of the deposit-taker;

30

(d)   

any of the property, rights and liabilities of any UK undertaking which

is a subsidiary undertaking of the deposit-taker;

(e)   

where the securities so transferred were transferred to a company

within section 3(1)(c)—

(i)   

any securities issued by the company;

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(ii)   

any property, rights and liabilities of the company.

(3)   

Subsection (4) applies where any property, rights or liabilities have been

transferred to a company within section 6(1)(a) (“the company”) by or under

an order under section 6.

(4)   

In such a case the Treasury may by order make provision for and in connection

40

with, or in consequence of, the transfer to a specified person of any of the

following—

(a)   

any property, rights and liabilities of the company;

(b)   

any property, rights and liabilities of any UK undertaking which is a

subsidiary undertaking of the company;

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