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208 provisions
121 Interpretation of Chapter 1
(1) In this Chapter—
“covered bond” means a regulated covered bond within the meaning of regulation 1(2) of the Regulated Covered Bonds Regulations 2008; and;
“relevant institution” means an institution, other than a mortgage credit institution, which is authorised by the PRA or FCA and is not part of a group subject to supervision on a consolidated basis in accordance with the capital requirements regulation and CRR rules.
(2) “Mortgage credit institution” means an institution—
(a) which does not have permission under Part 4A of FSMA to carry on the regulated activity of accepting deposits (within the meaning given by section 22 of that Act, read with Schedule 2 and any order under section 22); and
(b) whose lending—
(i) relates to an agreement under which the obligation of the borrower to repay is secured, or is to be secured, by a legal mortgage on land; and
(ii) is financed by covered bonds .
(3) In this Chapter, references to the “minimum requirement for own funds and eligible liabilities” include any transitional minimum requirement which the Bank determines that an institution is required to hold in accordance with article 123(1C).
122 Duties of the Bank in relation to minimum requirement
(1) The Bank must exercise the powers conferred by section 3A of the Banking Act 2009 (removal of impediments to the exercise of stabilisation powers etc)—
(a) to ensure that a relevant institution is required at all times to maintain a minimum requirement for own funds and eligible liabilities ...; and
(b) with the object of ensuring that at all times the institution meets the minimum requirement specified in a direction given for that purpose.
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) This article applies for the purpose of the determination by the Bank of the minimum requirement for own funds and eligible liabilities.
(1A) The Bank may determine a transitional period for a relevant institution, during which time a transitional minimum requirement applies.
(1B) The Bank may amend or revoke a determination under paragraph (1A), or determine a further transitional period in relation to a relevant institution, at any time including where a previous transitional period has expired.
(1C) Where the Bank determines a transitional period under paragraph (1A) or paragraph (1B), it must determine the transitional minimum requirement that applies during that period.
(1D) The Bank may amend or revoke any determination under paragraph (1C) at any time.
(2) The amount of the relevant institution's total liabilities must include total liabilities under any derivative contracts held by the institution.
(3) An assessment of total liabilities under a derivative contract must take account of the rights of the parties to the contract to set off or net under a title transfer collateral arrangement, set-off arrangement or netting arrangement (within the meaning given by section 48(1)(b), (c) and (d) of the Banking Act 2009).
(4) An eligible liability must be excluded from the amount of the relevant institution's own funds and eligible liabilities if—
(a) the instrument that creates the liability is not issued or fully paid up;
(b) the liability is owed to, or secured or guaranteed by, the institution itself;
(c) the purchase of the instrument that creates the liability was funded directly or indirectly by the institution itself;
(d) the liability has a remaining maturity of less than one year;
(e) the liability arises from a derivative contract held by the institution;
(f) the liability arises from a deposit in respect of which the depositor's rights, in any proceedings relating to the insolvency of the institution, would be preferred to the rights of other creditors; or
(g) the instrument that creates the liability is governed by the law of a third country and the Bank is not satisfied that a decision by the Bank to convert or write down the liability would be effective under that law.
(5) For the purpose of paragraph (4)(d), where the instrument that creates the liability confers on a party to the instrument a right to the repayment of a sum before maturity, the maturity date is the first date on which that party would become entitled to repayment if the right were exercised.
(6) The determination must be based on an assessment of the following criteria—
(a) the need to ensure that the relevant institution can be resolved by the application of the resolution tools including, where appropriate, by making special bail-in provision within the meaning of section 48B of the Banking Act 2009, in a way that meets the special resolution objectives;
(b) the need to ensure, in appropriate cases , taking into account whether recapitalisation payments under section 214E of FSMA (recapitalisation payments) may be available, that the relevant institution has sufficient eligible liabilities to ensure that, if mandatory reduction provision within the meaning of section 6B of the Banking Act 2009 or special bail-in provision were made—
(i) losses could be absorbed; and
(ii) the capital ratio and, as applicable, the leverage ratio, of the relevant institution could be restored,
to a level necessary to enable it to continue to comply with the conditions for authorisation under Part 4A of FSMA and to continue to carry out the activities for which it is authorised;
(c) the need to ensure that, if the resolution plan anticipates that certain classes of eligible liabilities might be excluded from bail-in under section 48B(10) of the Banking Act 2009 or that certain classes of eligible liabilities might be transferred to a recipient in full under a partial transfer—
(i) the relevant institution has sufficient other eligible liabilities or own funds to ensure that losses could be absorbed; and
(ii) the capital ratio and, as applicable, the leverage ratio, of the relevant institution could be restored,
to the level necessary to enable it to continue to comply with the conditions for authorisation under Part 4A of FSMA and to continue to carry out the activities for which it is authorised;
(d) the size, the business model, the funding model and the risk profile of the relevant institution; ...
(e) the extent to which the failure of the relevant institution would have adverse effects on financial stability, including, due to its interconnectedness with other institutions or entities or with the rest of the financial system, through contagion to other institutions or entities; and
(f) relevant assessment criteria specified in the Bank of England’s Statement of Policy on its approach to setting a minimum requirement for own funds and eligible liabilities issued pursuant to section 3B(9) of the Banking Act 2009, as that Statement of Policy may be amended from time to time.
(7) The Bank must make that assessment in consultation with the appropriate regulator.
(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) The Bank must review the minimum requirement for own funds and eligible liabilities when, in accordance with Chapter 4 of Part 5, it reviews the resolution plan (within the meaning given in Chapter 1 or 3 of that Part) adopted for the relevant institution.
(2) Article 123 applies for the purpose of the review, but paragraph (6) of that article has effect for that purpose as if the reference to the determination (of the minimum requirement for own funds and eligible liabilities) were a reference to the re-determination of the requirement on review.
(1) This Chapter applies where the PRA or FCA is the consolidating supervisor in relation to a relevant group.
(2) In this Chapter—
...
“group entity” includes an undertaking which is—
a parent undertaking of the UK parent undertaking; and
a mixed activity holding company which has at least one subsidiary which—
is an institution; and
is not a subsidiary of a financial holding company which is also a subsidiary of the mixed activity holding company;
“group institution” means—
the UK parent undertaking, if it is a relevant institution;
a group subsidiary which is a relevant institution;
a group entity, other than an institution, which is—
required under article 139 ... to maintain a minimum requirement for own funds and eligible liabilities; ...
...
where the group resolution plan does not provide for the separate resolution of a subsidiary set up in a third country, that subsidiary if it would be a relevant institution if it were set up in the UK;
“minimum consolidated requirement” means the requirement for a minimum level of own funds and eligible liabilities of the group institutions , including any transitional minimum consolidated requirement of the group institutions in accordance with article 126(2C) ...;
“minimum requirement”, in relation to a group institution, means a minimum requirement for own funds and eligible liabilities , including any transitional minimum requirement in accordance with article 135(2C) ...; and
“netting arrangement”—
in relation to an institution authorised by the PRA or FCA, means a title transfer collateral arrangement, set-off arrangement or netting arrangement (within the meaning given by section 48(1)(b), (c) and (d) of the Banking Act 2009);
...
(3) “Relevant institution”, in the definition of “group institution”, means an institution which—
(a) if authorised by the PRA or FCA, is not a mortgage credit institution within the meaning given in Chapter 1; and
(b) if set up in a country other than the United Kingdom, does not meet criteria which are equivalent in that country to the criteria set out in article 121(2).
126 Determination of minimum consolidated requirement
(1) This article applies for the purpose of determining the minimum consolidated requirement for each resolution group.
(2) ... The Bank must determine the minimum consolidated requirement, and is solely responsible for the determination.
(2A) The Bank may determine a transitional period for a resolution group, during which time a transitional minimum consolidated requirement applies.
(2B) The Bank may amend or revoke a determination under paragraph (2A), or determine a further transitional period in relation to a resolution group, at any time including where a previous transitional period has expired.
(2C) Where the Bank determines a transitional period under paragraph (2A) or paragraph (2B), it must determine the transitional minimum consolidated requirement that applies during that period.
(2D) The Bank may amend or revoke any determination under paragraph (2C) at any time.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) The amount of each group institution's total liabilities must include total liabilities under any derivative contracts held by the institution.
(5) An assessment of total liabilities under a derivative contract must take account of the rights of the parties to the contract to set off or net under a netting arrangement.
(6) An eligible liability must be excluded from the amount of the group institution's own funds and eligible liabilities if—
(a) the instrument that creates the liability is not issued or fully paid up;
(b) the liability is owed to, or secured or guaranteed by, the institution itself;
(c) the purchase of the instrument that creates the liability was funded directly or indirectly by the institution itself;
(d) the liability has a remaining maturity of less than one year;
(e) the liability arises from a derivative contract held by the institution;
(f) the liability arises from a deposit in respect of which the depositor's rights, in any proceedings relating to the insolvency of the institution, would be preferred to the rights of other creditors; or
(g) the instrument that creates the liability is governed by the law of a third country and the Bank is not satisfied that a decision by the Bank to convert or write down the liability would be effective under that law.
(7) For the purpose of paragraph (6)(d), where the instrument that creates the liability confers on a party to the instrument a right to the repayment of a sum before maturity, the maturity date is the first date on which that party would become entitled to repayment if the right were exercised.
(8) The determination—
(a) must be based on an assessment of the following criteria—
(i) the need to ensure that each group institution can be resolved by the application of the resolution tools including, where appropriate, by making special bail-in provision within the meaning of section 48B of the Banking Act 2009, in a way that meets the special resolution objectives;
(ii) the need to ensure, in appropriate cases , taking into account whether recapitalisation payments under section 214E of FSMA may be available, that each group institution has sufficient eligible liabilities to ensure that, if mandatory reduction provision within the meaning of section 6B of the Banking Act 2009 or special bail-in provision were made—
(aa) losses could be absorbed; and
(ab) the capital ratio and, if applicable, the leverage ratio, of the group institution could be restored,
to a level necessary to enable it to continue to comply with the conditions for authorisation under Part 4A of FSMA and to continue to carry out the activities for which it is authorised;
(iii) the need to ensure that, if the resolution plan anticipates that certain classes of eligible liabilities might be excluded from bail-in under section 48B(10) of the Banking Act 2009 or that certain classes of eligible liabilities might be transferred to a recipient in full under a partial transfer—
(aa) each group institution has sufficient other eligible liabilities or own funds to ensure that losses could be absorbed; and
(ab) the capital ratio and, if applicable, the leverage ratio, of the group institution could be restored,
to the level necessary to enable it to continue to comply with the conditions for authorisation under Part 4A of FSMA and to continue to carry out the activities for which it is authorised;
(iv) the size, the business model, the funding model and the risk profile of each group institution; ...
(v) the extent to which the failure of each group institution would have an adverse effect on financial stability, including, due to its interconnectedness with other institutions or entities or with the rest of the financial system, through contagion to other institutions or entities; and
(vi) relevant assessment criteria specified in the Bank of England’s Statement of Policy on its approach to setting a minimum requirement for own funds and eligible liabilities issued under section 3B(9) of the Banking Act 2009, as that Statement of Policy may be amended from time to time. and
(b) must take account of any provision made in the group resolution plan for the separate resolution of a subsidiary set up in a third country.
(9) Where the Bank makes an assessment under paragraph (8)(a) with respect to a group institution authorised by the PRA or FCA, it must make the assessment in consultation with the appropriate regulator.
(1) The Bank must review the minimum consolidated requirement for each resolution group when, in accordance with Chapter 4 of Part 5, it reviews the group resolution plan.
(2) Article 126 applies for the purpose of the review, but have effect for that purpose as if each reference to determining (or the determination of) the minimum consolidated requirement were a reference to re-determining (or the re-determination of) the requirement on review.
(1) This Chapter applies where the PRA or FCA is the consolidating supervisor in relation to a relevant group.
(2) In this Chapter—
... “group entity” and “minimum requirement” have the same meaning for the relevant group as they have for a relevant group in Chapter 2;
“group institution” means an institution, other than a mortgage credit institution within the meaning given in Chapter 1, that—
is authorised by the PRA or FCA and
forms part of a relevant group;
“minimum consolidated requirement” means the minimum consolidated requirement (within the meaning given in Chapter 2) which is determined for the relevant group;
“netting arrangement” has the same meaning as in Chapter 2;
...
...
134 Duties of the Bank in relation to minimum requirement
(1) The Bank must exercise the powers conferred by section 3A of the Banking Act 2009—
(a) to ensure that a group institution is required at all times to maintain a minimum requirement; and
(b) with the object of ensuring that at all times the institution meets the minimum requirement specified in a direction given for that purpose.
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) This article applies for the purpose of determining the minimum requirement for a group institution.
(2) The amount of the institution's total liabilities must include total liabilities under any derivative contracts held by the institution.
(2A) The Bank may determine a transitional period for an institution, during which time a transitional minimum requirement applies.
(2B) The Bank may amend or revoke a determination under paragraph (2A), or determine a further transitional period in relation to an institution, at any time including where a previous transitional period has expired.
(2C) Where the Bank determines a transitional period under paragraph (2A) or paragraph (2B), it must determine the transitional minimum requirement that applies during that period.
(2D) The Bank may amend or revoke any determination under paragraph (2C) at any time.
(3) An assessment of total liabilities under a derivative contract must take account of the rights of the parties to the contract to set off or net under a netting arrangement.
(4) An eligible liability must be excluded from the amount of the institution's own funds and eligible liabilities if—
(a) the instrument that creates the liability is not issued or fully paid up;
(b) the liability is owed to, or secured or guaranteed by, the institution itself;
(c) the purchase of the instrument that creates the liability was funded directly or indirectly by the institution itself;
(d) the liability has a remaining maturity of less than one year;
(e) the liability arises from a derivative contract held by the institution;
(f) the liability arises from a deposit in respect of which the depositor's rights, in any proceedings relating to the insolvency of the institution, would be preferred to the rights of other creditors; or
(g) the instrument that creates the liability is governed by the law of a third country and the Bank is not satisfied that a decision by the Bank to convert or write down the liability would be effective under that law.
(5) For the purpose of paragraph (4)(d), where the instrument that creates the liability confers on a party to the instrument a right to the repayment of a sum before maturity, the maturity date is the first date on which that party would become entitled to repayment if the right were exercised.
(6) The determination—
(a) must be based on an assessment of the criteria set out in article 126(8)(a); and
(b) must take account of the minimum consolidated requirement.
(7) ... The Bank must make the assessment under paragraph (6)(a) in consultation with—
(a) the PRA, if the institution is a PRA-authorised person;
(b) the FCA, if the institution is any other UK authorised person.
(1) The Bank must review the minimum requirements for group institutions when, in accordance with Chapter 4 of Part 5, it reviews the group resolution plan.
(2) Articles 134 and 135 apply for the purpose of the review, but have effect for that purpose as if each reference to determining (or the determination of) a minimum requirement were a reference to re-determining (or the re-determination of) the requirement on review.
139 Minimum requirement for other group entities set up in the United Kingdom
(1) The Bank may decide, after consulting the regulator, that a group entity, other than a group institution, set up in the United Kingdom should be required to maintain a minimum requirement for own funds and eligible liabilities ....
(2) Where the Bank makes a such decision, articles 134 , 135 and 138 apply for the purpose of determining and reviewing the requirement and ensuring that the requirement is maintained and met, but have effect for that purpose as if each reference to an institution ... included a reference to the group entity for which the requirement is being (or has been) determined.
(3) In this article “the regulator”—
(a) where there is a PRA-authorised person and any other UK authorised person in the relevant group, means the PRA and the FCA;
(b) where there is a PRA-authorised person and no other UK authorised person in the relevant group, means the PRA;
(c) where there is no PRA-authorised person in the relevant group, means the FCA.
(1) This article applies in relation to a relevant group.
(2) The Bank may waive the application of Chapter 4 ... in relation to a UK parent institution where it—
(a) complies with the minimum consolidated requirement determined in accordance with Chapter 2 ...; and
(b) benefits from the exercise of the discretion laid down in Article 7.3 of the capital requirements regulation.
(3) The Bank may waive the application of Chapter 4 ... in relation to a group institution which is a group subsidiary where—
(a) both the institution and its parent undertaking are UK authorised persons;
(b) the supervision of the institution by the PRA or FCA (“the regulator”) is part of the supervision on a consolidated basis of the parent undertaking in accordance with the capital requirements regulation and CRR rules;
(c) the highest level UK institution in the relevant group, if that is not the UK parent institution, complies on a sub-consolidated basis with the minimum consolidated requirement determined in accordance with Chapter 2 ...;
(d) there is no legal or other material impediment, whether actual or foreseeable, to the prompt transfer of own funds or repayment of liabilities by the parent undertaking to the institution;
(e) either—
(i) the parent undertaking has satisfied the regulator that no significant risks arise from the institution's operations; or
(ii) the parent undertaking has satisfied the regulator that the institution is prudently managed, and has declared, with the consent of the regulator, that it guarantees the institution's commitments;
(f) the institution is covered by the risk evaluation, measurement and control procedures of the parent undertaking;
(g) the parent undertaking holds more than 50 per cent. of the voting rights attached to shares in the capital of the institution or has the right to appoint or remove the majority of the members of the institution's management body (within the meaning given by point (7) of Article 3.1 of the capital requirements directive); and
(h) the institution benefits from the exercise of the discretion laid down in Article 7.1 of the capital requirements regulation.
(4) In this article—
“parent undertaking”, in relation to a UK institution, means an undertaking which is a parent undertaking of the institution and has no other subsidiary which is also a parent undertaking of the institution; and
“UK institution” means an institution which is authorised by the PRA or FCA and is not a mortgage credit institution within the meaning given in Chapter 1.
148 Meeting minimum requirement through contractual bail-in instruments etc
(1) This article applies where—
(a) a minimum requirement is determined in accordance with Chapter 1 for an institution authorised by the PRA or FCA;
(b) a minimum requirement is determined in accordance with Chapter 4 ... for an undertaking set up in the United Kingdom; or
(c) a minimum consolidated requirement is determined in accordance with Chapter 2 ... for a relevant group.
(2) The Bank may determine that a minimum requirement or minimum consolidated requirement to which this article applies must be met partially through contractual bail-in instruments or composed wholly or partially of own funds or a specified kind of liability.
(3) In this article “contractual bail-in instrument” means an instrument which —
(a) contains a contract term that where the Bank decides to apply the stabilisation option referred to in paragraph (c) of section 1(3) of the Banking Act 2009 (the bail-in option) in respect of the institution, undertaking or relevant group concerned, the instrument is to be written down or converted to the extent required before other eligible liabilities are written down or converted; and
(b) is subject to a binding subordination agreement, undertaking or provision under which, in the event that normal insolvency proceedings are commenced, the instrument ranks below other eligible liabilities and cannot be repaid until other eligible liabilities outstanding on the date of commencement of the insolvency proceedings have been repaid.
(4) “Normal insolvency proceedings” has the meaning given in section 3(1) of the Banking Act 2009.
(1) This Part applies in relation to a relevant group.
(2) In this Part—
“alternative measure” means—
a measure for early intervention within the meaning given in Chapter 1 of Part 8;
a power of the FCA or PRA by or under legislation upon which the United Kingdom relied immediately before IP completion day to meet its obligations with respect to Article 104.1 of the capital requirements directive (supervisory powers); or
a transfer of funds or capital from a parent undertaking;
...
“Case 2”—
in relation to a bank, means Case 2 set out in subsection (3) of section 6A of the Banking Act 2009 (cases where mandatory write-down, conversion, etc applies);
in relation to a banking group company, means Case 2 set out in subsection (4) of section 81AA of that Act (cases where mandatory write-down, conversion, etc applies: banking group companies);
“Case 3”, in relation to a bank, means Case 3 set out in section 6A(4) of that Act;
“Case 4”, in relation to a bank, means Case 4 set out in section 6A(5) of that Act;
“Case 5”—
in relation to a bank, means Case 5 set out in section 6A(6) of that Act;
in relation to a banking group company, means Case 3 set out in section 81AA(8) of that Act;
...
“recognised capital instruments” means Common Equity Tier 1 instruments, Additional Tier 1 instruments or Tier 2 instruments which have been recognised for the purpose of meeting the own funds requirements (within the meaning given in section 3(1) of the Banking Act 2009 ) of institutions on an individual and a consolidated basis; and
“UK group entity” means a group entity which is a bank or banking group company and has issued recognised capital instruments.
(3) In this article, for the interpretation of expressions defined in paragraph (2)—
“Additional Tier 1 instruments”, “Common Equity Tier 1 instruments” and “Tier 2 instruments” have the meaning given in section 3(1) of the Banking Act 2009 (interpretation: other expressions);
“bank” has the meaning given by section 2 of the Banking Act 2009 (interpretation: “bank”), but includes—
a building society within the meaning given in section 119 of the Building Societies Act 1986; and
an investment firm within the meaning given in section 258A of the Banking Act (“investment firm”);
“banking group company” has the meaning given by section 81D of that Act ; and
“group entity” includes an undertaking which is—
...
a mixed activity holding company.
150 Determinations under section 6A and 81AA of the Banking Act 2009: preliminary steps for UK group entities
(1) Before the Bank makes a determination that Case 2, 4 or 5 is satisfied in relation to a UK group entity, the Bank must give notice that it is considering whether to make that determination (“a Case 2, 4 or 5 notice”) without delay to the appropriate regulator.
(2) Before the Bank makes a determination ... that Case 3 is satisfied in relation to a UK group entity, the Bank must give notice that it is considering whether to make that determination (“a Case 3 notice”) without delay to the appropriate regulator.
(3) Where the Bank gives a Case 2, 4 or 5 notice or a Case 3 notice, it must—
(a) send with the notice an explanation of its reasons for considering whether to make the determination concerned; and
(b) after consulting the authorities to which the notice has been given assess whether—
(i) any alternative measure is available;
(ii) any alternative measure which is available could feasibly be taken; and
(iii) there is any reasonable prospect that any alternative measure which is available and could feasibly be taken would, within a reasonable time, avoid the need for the determination.
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) Where, in the Bank's assessment, there is a reasonable prospect that an alternative measure which is available and could feasibly be taken would, within a reasonable time, avoid the need for the determination referred to in a Case 2, 4 or 5 notice or a Case 3 notice—
(a) the Bank must notify the regulator of that fact; and
(b) except where the measure is a transfer of funds from a parent undertaking, the regulator must take the alternative measure in exercise of its powers under FSMA.
(2) In this article “the regulator”—
(a) where there is a PRA-authorised person and any other UK authorised person in the relevant group, means the PRA and the FCA;
(b) where there is a PRA-authorised person and no other UK authorised person in the relevant group, means the PRA;
(c) where there is no PRA-authorised person in the relevant group, means the FCA.
152 Determination that Case 2, 3, 4 or 5 is satisfied
(1) This article applies where, in the Bank's assessment, there is no reasonable prospect that any alternative measure which is available and could feasibly be taken would, within a reasonable time, avoid the need for the determination referred to in a Case 2, 4 or 5 notice or a Case 3 notice.
(2) ... The Bank must decide whether to make the determination referred to in the notice.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In this Part—
“Common Equity Tier 1 instruments” has the meaning given in section 3(1) of the Banking Act 2009 ; and
“relevant capital instruments” has the meaning given in section 3(1) of the Banking Act 2009;
“UK entity” means—
an institution which is authorised by the PRA or FCA and is not part of a group subject to supervision on a consolidated basis in accordance with the capital requirements regulation and CRR rules; or
in relation to a relevant group, a group entity set up in the United Kingdom.
155 Requirement to increase or remove limit on share capital
(1) This article applies where—
(a) the memorandum of association of a UK entity which is a company includes a statement of the amount of the entity's authorised share capital; and
(b) the resolution plan being drawn up for the entity or the group resolution plan being drawn up for the relevant group of which the entity is the UK parent undertaking or a group subsidiary includes provision for the application in respect of the entity of the stabilisation option referred to in paragraph (c) of section 1(3) of the Banking Act 2009 (the bail-in option).
(2) The Bank must determine whether it is appropriate to require the entity to alter the memorandum for the purpose of increasing the amount of authorised share capital or removing the statement of that amount.
(3) For this purpose the Bank must have regard to the provision which the plan concerned is to make in relation to resolution tools and resolution powers and to the matters referred to in paragraphs (4) and (5).
(4) The amount of authorised share capital must be adequate to ensure that where the Bank exercises a relevant power, the entity is able to issue new shares or other instruments of ownership to facilitate the conversion of liabilities into shares or other instruments of ownership.
(5) The amount of the authorised share capital must not be less than the sum of the following amounts—
(a) the amount by which the Bank has assessed that Common Equity Tier 1 instruments must be reduced and relevant capital instruments must be written down or converted pursuant to section 6B, 12AA, 48Y or 81AA of the Banking Act 2009; and
(b) the aggregate amount assessed by the Bank pursuant to section 6E or 48X of that Act.
(6) The Bank must make the determination under paragraph (2) when it draws up the resolution plan ....
(7) In this article “relevant power” means the power conferred by sections 12A (bail-in option), 48B (special bail-in provision) and 81BA (bail-in option) of the Banking Act 2009 to convert the entity's eligible liabilities into Common Equity Tier 1 instruments of—
(a) the entity; or
(b) a parent undertaking of the entity.
156 Removal of impediments to the conversion of liabilities into shares
Where the articles or memorandum of association of a UK entity which is a company confer pre-emption rights on shareholders, require the consent of shareholders to an increase in capital or make any other provision which could prevent or otherwise impede the conversion of any liabilities of the company into shares or other instruments of ownership, the Bank must determine whether it is necessary to require the entity to alter the articles or memorandum with the object of removing the impediment created by the provision concerned.
156A Contractual recognition of bail-in: technical standards
(1) The Bank may make technical standards relating to requirements concerning the contractual recognition of bail-in.
(2) Technical standards under paragraph (1) may include provision specifying—
(a) liabilities that must be excluded from these requirements; or
(b) the content of the contractual term that is comprised in these requirements.
(3) In exercising its functions under this article the Bank must take into account the different business models of banks.
(1) This Part applies where the Bank has decided to apply the stabilisation option referred to in paragraph (c) of section 1(3) (the bail-in option) in relation to liabilities arising from a derivative contract.
(2) In this Part each reference to a section is a reference to a section of the Banking Act 2009.
(1) This article applies for the purposes of valuing a derivative contract and the liabilities arising from it under section 6E(1) (pre-resolution valuation), a provisional valuation by the Bank under section 6E(3) or a valuation under section 48X (replacement of Bank's provisional valuation).
(2) Where the parties to the contract have rights to set off or net under a title transfer collateral arrangement, set-off arrangement or netting arrangement (within the meaning given by section 48(1)(b), (c) and (d)), the Bank must ensure that the value of the contract and of the liabilities arising from it are determined—
(a) on a net basis in accordance with the terms of the contract; and
(b) in accordance with—
(i) appropriate methodologies for determining the value of classes of derivative contracts, including transactions that are subject to netting arrangements;
(ii) principles for establishing the time at which the value of a derivative position should be established; and
(iii) appropriate methodologies for comparing with each other the following amounts—
(aa) the loss in value that would result from closing out a derivative contract and making special bail-in provision (within the meaning given by section 48B) in respect of that contract; and
(bb) the reduction in the liabilities of the institution which is subject to the special bail-in provision as a result of making that provision in respect of the derivative contract.
(3) Subject to paragraph (4), the Bank may make technical standards specifying—
(a) appropriate methodologies for the purposes of paragraph (2)(b)(i);
(b) principles for the purposes of paragraph (2)(b)(ii); or
(c) appropriate methodologies for the purposes of paragraph (2)(b)(iii).
(4) When exercising its functions under paragraph (3) in relation to derivative contracts that are subject to a netting arrangement, the Bank must take into account the methodology for close-out set out in the netting arrangement.
(1) This Chapter applies where—
(a) an institution is authorised by the PRA or FCA and is not part of a group subject to supervision on a consolidated basis in accordance with the capital requirements regulation and CRR rules;
(b) the Bank has made a resolution instrument under section 12A of the Banking Act 2009 (bail-in option) in respect of the institution; and
(c) the management body of the institution or the resolution administrator submits a business reorganisation plan to the Bank for assessment in accordance with section 48H of the Banking Act 2009 (business reorganisation plan).
(2) In this Chapter—
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“resolution administrator” means the individual or body corporate appointed by the Bank under section 62B of the Banking Act 2009 as the resolution administrator of the institution.