(1) This section applies for the purpose of the exercise of the fourth stabilisation option (bail-in) in relation to a building society.
(2) Subsection (2A) of section 12A (bail-in option) is to be read as if the provision referred to included provision under this section.
(3) Subsection (1) of section 12AA (bail-in: sequence of write-down and conversion of capital instruments and liabilities) is to be read as if the powers referred to included the powers conferred by this section, sections 84B and 84C and the provisions modified by section 84D.
(4) A resolution instrument with respect to a building society may make—
(a) provision of the kind mentioned in subsection (5);
(b) other provision for the purposes of, or in connection with, provision of the kind mentioned in subsection (5) made by that or another instrument.
(5) A resolution instrument may—
(a) convert the building society into a company, or
(b) transfer all the property, rights and liabilities of the building society to a company.
(6) In the following provisions of this section, “the successor company”, in relation to a building society, means the company into which the building society is converted, or to which the property, rights and liabilities of the building society are transferred, as a result of provision made under subsection (5).
(7) The provision that may be made under subsection (4)(b) includes—
(a) provision cancelling shares in the building society;
(b) provision cancelling membership rights in the building society;
(c) provision converting shares in the building society into deposits with the successor company;
(d) provision conferring rights and imposing liabilities in place of cancelled shares and membership rights;
(e) provision requiring the FCA to cancel the building society’s registration under the Building Societies Act 1986 at a time specified in or determined in accordance with the instrument;
(f) provision that any person approved for the purposes of Part 5 of the Financial Services and Markets Act 2000 (performance of regulated activities) in relation to the building society immediately before the resolution instrument is made continues to be approved for those purposes in relation to the successor company (but without affecting the powers of the FCA or PRA to vary or withdraw an approval);
(g) provision which could be included in a property transfer instrument by virtue of—
(i) section 34(7) and (8) (property held on trust), or
(ii) section 36(1) to (5) (continuity).
(8) The provision that may be made under subsection (4)(b) also includes—
(a) in a case where the resolution instrument makes provision under subsection (5)(a), provision for the successor company on its incorporation to be wholly owned by a company specified in the instrument;
(b) in a case where the resolution instrument makes provision under subsection (5)(b) transferring the property, rights and liabilities of the building society to a company which is wholly owned by another company, provision relating to that other company;
(c) in either case, provision—
(i) for the transfer of liabilities from the successor company to the other company mentioned in paragraph (a) or (b) (“the parent undertaking”), and for the creation of corresponding liabilities of the successor company to the parent undertaking;
(ii) replacing a liability (of any form) of the building society or the successor company with a liability or security (of any form or class) of the parent undertaking.
(9) A company may not be specified under subsection (8)(a) unless it is (or is to be) wholly owned by—
(a) the Bank of England,
(b) a resolution administrator appointed under section 62B(1), or
(c) a person nominated by the Bank of England.
(10) Where a resolution instrument makes provision under subsection (5), section 37 (licences) applies as if the references to a property transfer instrument were references to the resolution instrument.
(11) A resolution instrument may provide for different provision made under this section by the instrument to take effect at different times.
(12) In this section—
“company” means a company as defined in section 1(1) of the Companies Act 2006 which is a public company limited by shares;
“deposit” has the meaning given by article 5(2) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544), but ignoring the exclusions in article 6.
84B Further provision: conversion of building society into company
(1) This section applies where
(a) a share transfer instrument makes provision under section 84ZA(2)(a), or
(b) a resolution instrument makes provision under section 84A(5)(a)
(2) The share transfer instrument or resolution instrument must—
(a) state the company’s proposed name;
(b) set out the terms of the memorandum of association of the company;
(c) set out the terms of the articles of association of the company (to the extent that these are not to be supplied by the default application of model articles: see section 20 of the Companies Act 2006);
(d) contain the statements and information required to be included in or to accompany an application for a certificate under section 761 of the Companies Act 2006 (public company: requirement as to minimum share capital).
(3) The conversion into the successor company takes effect on the registration of the company under the Companies Act 2006.
(4) The successor company is to be treated as the same person in law as the building society.
(5) The documents required by section 9 of the Companies Act 2006 (registration documents) to be delivered to the registrar (within the meaning of that Act) include a copy of the share transfer instrument or resolution instrument.
(6) In section 13 of the Companies Act 2006 (statement of compliance) and section 14 of that Act (registration), the reference to the requirements of that Act is to be read as a reference to the requirements of that Act as modified by this section.
(7) If the share transfer instrument or resolution instrument complies with subsection (2)(d), an application for a trading certificate is to be taken to have been made in accordance with section 762 of the Companies Act 2006 (procedure for obtaining trading certificate).
(8) In this section—
“company” means a company as defined in section 1(1) of the Companies Act 2006 which is a public company limited by shares;
“the successor company”, in relation to a building society, means the company into which the building society is converted as a result of provision made under section 84ZA(2)(a) or 84A(5)(a).
84C Further provision: transfer of business of building society to company
(1) A transfer under section 84A(5)(b) must be to a company which immediately before the transfer is wholly owned by—
(a) the Bank of England,
(b) a resolution administrator appointed under section 62B(1),
(c) a person nominated by the Bank of England, or
(d) a company which is itself wholly owned by a person within paragraphs (a) to (c).
(2) Where a resolution instrument has made provision under section 84A(5)(b), the building society is dissolved at such time as may be specified in or determined in accordance with the instrument.
(3) In this section, “company” means a company as defined in section 1(1) of the Companies Act 2006 which is a public company limited by shares.
84D Transfer to a bridge bank or Bail-in option: modifications of this Act and other legislation
(A1) Where a share transfer instrument makes provision under section 84ZA(2) with respect to a building society, the second stabilisation option is to be exercised by making (in that or a subsequent share transfer instrument) provision under section 12(2)(a)—
(a) with respect to the successor company, or
(b) where provision made under section 84ZA includes provision under subsection (3)(g) of that section, with respect to the successor company or its specified parent undertaking.
(1) Where a resolution instrument makes provision under section 84A(5) with respect to a building society, the exercise of the fourth stabilisation option involves the making (in that or a subsequent resolution instrument) of provision or proposals of any kind mentioned in section 12A(3) to (6)—
(a) with respect to the successor company, or
(b) where provision made under section 84A includes provision under subsection (8) of that section, with respect to the successor company or its specified parent undertaking.
(2) For the purpose of the making of provision as mentioned in subsection (A1)(a) or (b) or provision or proposals as mentioned in subsection (1)(a) or (b)—
(a) the Table in section 84 does not apply, and
(b) the provisions in the first column of the following Table apply where relevant —
(i) in relation to the successor company, or
(ii) in a case within subsection (A1)(b) or (1)(b), in relation to the successor company or its specified parent undertaking,
as they apply in relation to a bank, but subject to the modifications in the third column of the Table.
Table
Section | Topic | Modification
Section 12A | Bail-in option | Treat references in subsection (4) to securities issued by a specified bank as references to securities issued by the building society, or by the successor company or its specified parent undertaking. For subsection (8) substitute— (8) Subsection (8ZA) applies where— (a) the Bank of England has exercised the power in subsection (4) to transfer securities to a resolution administrator; or (b) by virtue of section 84A, 84B or 84C securities of a successor company or a specified parent undertaking are held by— (i) the resolution administrator, (ii) the Bank of England, (iii) a subscriber to the memorandum of association of a company into which the building society is converted in accordance with section 84B, or (iv) a person nominated for the purposes of section 84C(1)(c). (8ZA) The Bank of England must exercise its functions under this Part (see, in particular, section 48V) with a view to ensuring that any securities— (a) held by a person in the capacity of a resolution administrator, (b) held by the Bank of England, (c) held by a person as a result of being a subscriber to the memorandum of association of a company into which the building society is converted in accordance with section 84B, (d) held by a person as a result of being nominated by the Bank of England for the purposes of section 84C(1)(c), are so held only for so long as is, in the Bank of England’s opinion, appropriate having regard to the special resolution objectives. .
Section 12AA | Bail-in: sequence of write-down and conversion of capital instruments and liabilities | In relation to the result to be achieved, treat any reference to an instrument or liability of the bank as a reference to an instrument or liability of the building society immediately before the making of the first resolution instrument under section 84A in respect of it.
Section 15 | Share transfer instruments | Treat references in subsection (1) to securities issued by a specified bank as references to securities issued by the building society, or by the successor company or its specified parent undertaking.
Section 17 | Effect of transfer
Section 18 | Continuity
Section 19 | Conversion and delisting
Section 20 | Directors and senior managers | Treat references to a director or senior manager of a specified bank as references to a director or senior manager of the building society or of the successor company or its specified parent undertaking. In subsection (1A) treat the reference to a specified bank as a reference to the building society or its successor company.
Section 21 | Ancillary instruments: production, registration etc
Section 21 | Incidental provision
Section 24 | Procedure: instruments | On the first occasion on which the power to make a share transfer instrument is exercised in relation to a building society, treat the references in this section to a bank as a reference to a building society.
Section 26 | Supplemental Instruments | Treat the reference in subsection (3) to securities issued by the bank as a reference to securities issued by the building society or by the successor company or its specified parent undertaking.
Section 26ZA | Onward share transfer instruments | Treat references to securities issued by the bank as references to securities issued by the building society or by the successor company or its specified parent undertaking.
Section 30 | Resolution company: share transfers
Section 31 | Resolution company: reverse share transfer
Section 41A, and any other provision so far as relating to property transfer instruments under section 41A(2) | Transfer of property subsequent to resolution instrument
Section 44D and any other provision so far as relating to property transfer instruments under section 44D | Transfer of property subsequent to share transfer instrument | Section 44D also applies where the Bank of England has made a share transfer instrument in accordance with section 12(2) which provides for the conversion of the building society under section 84ZA(2).
Section 48B | Special bail-in provision | The provision that may be made in accordance with section 48B(1)(b) (see also rule 3(a) and (b) of section 48B(5)) includes provision replacing a liability (of any form) of the building society or its successor company with a liability of the successor company’s specified parent undertaking.
Section 48C | Meaning of “protected deposit”
Section 48D | General interpretation of section 48B
Section 48E | Report on special bail-in provision
Section 48F | Power to amend definition of “excluded liabilities”
Section 48G | Priority between creditors | Treat the reference in subsection (1) to the treatment of liabilities on an insolvency as a reference to the treatment of liabilities on the insolvency of a building society.
Section 48H | Business reorganisation plans | Treat the reference in subsection (2)(a) to the bank as a reference to the building society.
Section 48L | Powers in relation to securities | Treat references to securities issued by the bank as references to securities issued by the building society or by the successor company or its specified parent undertaking.
Section 48N | Directors and senior managers | Treat references to a director or senior manager of a specified bank as references to a director or senior manager of the building society or of the successor company or its specified parent undertaking.
Section 48O | Directions in or under resolution instrument | Treat references to a director of the bank as references to a director of the building society or of the successor company or its specified parent undertaking.
Section 48P | Orders for safeguarding certain financial arrangements
Section 48Q | Continuity
Section 48R | Execution and registration of instruments etc.
Section 48S | Resolution instruments: general matters
Section 48T | Resolution instruments: procedure | On the first occasion on which the power to make a resolution instrument is exercised in relation to a building society, treat the first reference in subsection (1) to a bank as a reference to the building society.
Section 48U | Supplemental resolution instruments | Treat the reference in subsection (1) to a bank as a reference to the building society.
Section 48V | Onward transfer | Treat references to securities issued by the bank as references to securities issued by the building society or by the successor company or its specified parent undertaking.
Section 48W | Reverse transfer | Treat references to securities issued by the bank as references to securities issued by the building society or by the successor company or its specified parent undertaking.
Section 48X | Replacement of Bank’s provisional valuation | Treat the first reference in subsection (2)(a) to the bank as a reference to the building society.
Section 48Y | Consequences of a replacement valuation | Treat the first reference in subsection (1) to the bank as a reference to the building society.
Section 48Z | Termination rights etc. | This section applies to contracts and other agreements entered into by the building society or by the successor company or its specified parent undertaking.
Section 49 | Compensation orders | Treat references to transferors as including references to the shareholding members of the building society.
Section 52 | Transfer to resolution company
Section 52A | Compensation orders: bail-in option
Section 53 | Onward and reverse transfers etc.
Section 54 | Independent valuer: compensation scheme order or bail-in compensation order
Section 55 | Independent valuer: supplemental
Section 56 | Independent valuer: money
Section 57 | Valuation principles | Treat the reference in subsection (4) to a bank as a reference to the building society. Treat the reference in subsection (5) to a transferor as including a reference to a shareholding member of the building society.
Section 58 | Resolution fund
Section 59 | Third party compensation: discretionary provision | Treat the reference in subsection (1) to a transferor as including a reference to a shareholding member of the building society.
Section 60A | Further mandatory provision: bail-in provision
Section 60B | Principle of no less favourable treatment | Treat references to pre-resolution shareholders and creditors of a bank as references to persons who were shareholding members of, or creditors of, the building society, immediately before the coming into effect of the first resolution instrument to be made in respect of the building society. Treat references to the bank as references to the building society.
Section 61 | Sources of compensation
Section 62 | Procedure
Section 62A | Independent valuer: sections 6E and 48X
Sections 62B to 62E | Resolution administrator
Sections 63, 64 and 66 to 70 where they apply in relation to a share transfer instrument or a resolution instrument or in relation to a property transfer instrument under section 41A(2) | Continuity obligations | Treat references in sections 66(1A) and 68(1)(a) to securities issued by the bank as references to securities issued by the building society or by the successor company or its specified parent undertaking.
Section 70A | Suspension of obligations
Section 70B | Restriction of security interests
Section 70C | Suspension of termination rights
Section 70D | Suspension: general provisions
Section 71 | Pensions | This section applies in relation to a pension scheme of the building society or of the successor company.
Section 73 | Disputes
Section 74 | Tax | This section enables regulations to make provision in relation to the building society, the successor company or its specified parent undertaking.
Section 75 | Power to change law | Treat the reference in subsection (5)(b) to building societies as including a reference to successor companies and their specified parent undertakings.
Section 78 | Public funds: general
Section 78A | Pre-conditions for financial assistance: duty of Bank to give information
Section 79 | Public funds: resolution company | Treat the reference in subsection (1) to a bank as a reference to a building society or its successor company.
Section 80 | Resolution company: report | Treat the reference in subsection (1) to a bank as a reference to a building society or its successor company.
Section 80A | Transfer for bail-in purposes: report | Treat the reference in subsection (1) to a bank as a reference to the building society.
Section 81A | Accounting information to be included in reports under sections 80, 80A(2)(b) and 81
Sections 83ZA to 83Z2 | Information, investigation and enforcement
Section 89K | Insolvency proceedings | Treat the references in paragraphs (a) and (b) of subsection (1) to a relevant firm as references to the building society.
Section 89L | Restrictions on disclosure of confidential information
Section 89M | Giving of notices, documents etc. under Part 1
(3) Any statutory instrument made under a provision specified in the first column of the Table in subsection (2) applies—
(a) to the successor company, or
(b) in a case within subsection (A1)(b) or (1)(b), to the successor company or the specified parent undertaking,
as it applies in relation to a bank, but subject to modifications corresponding to those applying to the provision under which it is made and as if references to a provision modified by subsection (2) or (5) were references to that provision as so modified.
(4) Subsection (3) does not apply where the instrument—
(a) states that it does not apply, or
(b) makes express provision about building societies or their successor companies.
(5) Where a resolution instrument makes provision under section 84A in respect of a building society—
(a) section 81BA (groups: bail-in option) applies with the following modifications—
(i) references to a banking group company are to be read as references to a subsidiary of the building society, and
(ii) the power in subsection (1) of that section is to be exercised only where the Bank of England has exercised the stabilisation power in accordance with section 12A(2) in respect of the parent building society;
(b) section 81CA applies as if references to a banking group company were references to a subsidiary of the building society or of the successor company; and
(c) section 81D (interpretation: “banking group company”) does not apply.
(5A) Where—
(a) the third stabilisation option is exercised in connection with the fourth stabilisation option in respect of a building society, and
(b) before the third stabilisation option is exercised—
(i) the building society is converted into a company pursuant to section 84A(5)(a), or
(ii) all the property, rights and liabilities of the building society are transferred to a company pursuant to section 84A(5)(b),
the references to the bank in section 12ZA(1)(a) and any other provision so far as relating to property transfer instruments under section 12ZA include a reference to the successor company.
(6) Sections 97 to 102D of the Building Societies Act 1986 (transfer of business of building society to commercial company) do not apply where
(a) a share transfer instrument makes provision under section 84ZA, or
(b) a resolution instrument makes provision under section 84A.
(7) Section 103 of the Building Societies Act 1986 (cancellation of registration) does not apply where
(a) a share transfer instrument makes provision under section 84ZA(3)(e), or
(b) a resolution instrument makes provision under section 84A(7)(e).
(8) In this section—
“company” means a company as defined in section 1(1) of the Companies Act 2006 which is a public company limited by shares;
“specified parent undertaking” means a company by which in accordance with provision falling within paragraph (g) of section 84ZA(3) or paragraph (a) or (b) of section 84A(8) the successor company is (or is to be) wholly owned;
“the successor company”, in relation to a building society, means the company into which the building society is converted, or to which the property, rights and liabilities of the building society are transferred, as a result of provision made under section 84ZA(2) or 84A(5).
(1) For the purpose of exercising the fifth stabilisation option in respect of a building society the Treasury may make one or more orders for the purposes of—
(a) arranging for deferred shares of a building society to be publicly owned,
(b) cancelling private membership rights in the building society,
(c) allowing the building society to continue in business while in public ownership, and
(d) eventually either winding up or dissolving the building society.
(2) For the purpose specified in subsection (1)(a) an order may—
(a) arrange for the transfer of existing deferred shares;
(b) provide for new deferred shares.
(3) For the purpose of arranging for the transfer of existing deferred shares an order may—
(a) provide for deferred shares to be transferred;
(b) make other provision for the purposes of, or in connection with, the transfer of deferred shares (whether or not the transfer has been or is to be effected by the order, by another order under this section or otherwise);
(c) relate to all or any specified class or description of deferred shares issued by the building society.
(4) For the purpose of providing for new deferred shares an order may—
(a) issue or allow the Treasury to issue new deferred shares on behalf of the building society;
(b) specify or allow the Treasury to specify the terms and effect of new deferred shares;
(c) specify or allow the Treasury to specify the recipient of new deferred shares.
(5) For the purpose specified in subsection (1)(b) an order may—
(a) cancel or permit the cancellation of shares (whether or not deferred) in the building society;
(b) confer rights and impose liabilities, or allow them to be conferred and imposed, in place of cancelled shares;
(c) prevent the issue or acquisition of shares in or other rights in respect of the building society otherwise than in accordance with the order.
(6) For the purpose specified in subsection (1)(c) an order may make any provision which the Treasury think desirable to facilitate the business of the building society after the making of provision in accordance with subsections (3) to (5).
(7) An order in respect of a building society may—
(a) make provision expressly or impliedly disapplying or modifying the memorandum or rules of the building society;
(b) disapply or modify an enactment about, or in its application to, building societies.
(8) The following sections apply to orders under this section as to share transfer orders: sections 17, 18, 20, 21, ... , 23, 25, 48Z, 71, 73 and 83Z2.
86 Distribution of assets on dissolution or winding up
(1) The Treasury may by order make provision about the distribution of surplus assets of a building society which—
(a) is the subject of a property transfer instrument or order, and
(b) is later wound up or dissolved by consent.
(2) An order under section 85 may include provision about the distribution of surplus assets of the building society if it is later wound up or dissolved by consent.
(3) “Surplus” means remaining after the satisfaction of liabilities to creditors and shareholders.
(4) An order under or by virtue of this section—
(a) may include any provision of a kind that may be made by order under section 90B of the Building Societies Act 1986 (power to alter priorities on dissolution or winding up),
(b) may be made whether or not the power under that section has been exercised, and
(c) shall be treated for all procedural purposes in the same way as an order under that section.
(1) Expressions used in this group of sections and in the Building Societies Act 1986 have the same meaning in this group of sections as in that Act.
(2) An order under section 119(1) of that Act defining “deferred shares”—
(a) may make special provision for the meaning of that expression in the application of this group of sections, and
(b) shall otherwise apply to this group of sections as to that Act.
(1) The Treasury may by order make provision, in addition to the provisions of this group of sections, in consequence of the application of this Part to building societies.
(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—
(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.
(1) The Treasury may by order provide for the application of this Part to credit unions (within the meaning of section 31 of the Credit Unions Act 1979) subject to modifications set out in the order.
(2) An order may disapply, modify or apply (with or without modifications) any enactment which relates, or in so far as it relates, to credit unions.
(3) An order—
(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.
(4) Provision made under or by virtue of this Part may make special provision in relation to the application of this Part to credit unions.
(5) In the application of this section to Northern Ireland the reference to section 31 of the Credit Unions Act 1979 is to be treated as a reference to Article 2 of the Credit Unions (Northern Ireland) Order 1985.
(1) This Part applies to investment firms as it applies to banks, subject to the modifications in the following Table—
Provision | Modification
Section 1 | Ignore subsection (2)(b).
Section 3 | In subsection (1), in the definition of “normal insolvency proceedings” ignore the reference to the bank insolvency procedure.
Section 4 | Ignore subsections (2)(b), (6) and (7)(b).
Section 5 | Ignore subsection (1)(b).
Section 7 | Ignore subsection (7).
. . . | . . .
Section 8ZA | In subsection (5), ignore the reference to the bank insolvency procedure.
Section 12AA | References to normal insolvency proceedings do not include a reference to the bank insolvency procedure.
Section 14 | Ignore subsection (5).
Section 60 | In subsection (3)(c), ignore the reference to bank insolvency.
Section 60B | In subsection (4), ignore the reference to bank insolvency.
Section 63 | In subsection (1A), ignore the reference to bank insolvency.
Section 66 | In subsection (1ZA), ignore the reference to bank insolvency.
(2) In the case of investment firms which are FCA-regulated investment firms, in subsection (1) the reference to this Part is a reference to this Part as it applies to FCA-regulated banks by virtue of section 83A.
(3) In this section—
“FCA-regulated bank” has the meaning given by section 83A(2);
“FCA-regulated investment firm” means an investment firm which does not carry on any activity which is a PRA-regulated activity for the purposes of the Financial Services and Markets Act 2000.
89H Recognition of third-country resolution actions
(1) This section applies where the Bank of England is notified of third-country resolution action in respect of a third-country institution or third-country parent undertaking.
(2) The Bank must make an instrument which—
(a) recognises the action, or
(b) refuses to recognise the action, or
(c) recognises part of the action and refuses to recognise the remainder.
An instrument within paragraph (a), (b) or (c) is a “third-country instrument” (as is an instrument under section 89I(4)(b)).
(3) The Bank may only make a decision under subsection (2) with the approval of the Treasury.
(4) Recognition of the action (or a part of it) may be refused only if the Bank and the Treasury are satisfied that one or more of the following conditions are satisfied—
(a) recognition would have an adverse effect on financial stability in the United Kingdom ...;
(b) the taking of action in relation to a branch located in the United Kingdom of a third-country institution is necessary to achieve one or more of the special resolution objectives;
(c) under the third-country resolution action creditors (including in particular depositors) located or payable in the United Kingdom would not, by reason of being located or payable in the United Kingdom, receive the same treatment as creditors (including depositors) who are located or payable in the ... country concerned and have similar legal rights;
(d) recognition of, and taking action in support of, the third-country resolution action (or the part) would have material fiscal implications for the United Kingdom;
(e) recognition would be unlawful under section 6 of the Human Rights Act 1998 (public authority not to act contrary to Human Rights Convention) ....
(5) The recognition of third-country resolution action (or any part of it) is without prejudice to any normal insolvency proceedings.
(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7) In this section—
...
“group” has the meaning given by section 474 of the Companies Act 2006,
...
“third-country group company” means an undertaking—
which is (or, but for third-country resolution action or the exercise of a stabilisation power, would be) in the same group as a third-country institution or a third-country parent undertaking, and
in respect of which any conditions specified in an order made by the Treasury under section 81D are met (applying that order as if references to the bank were references to the third-country institution or third-country parent undertaking),
“third-country institution” means an institution established in a country or territory other than the United Kingdom that would, if it were established within the United Kingdom, be regarded as a bank, building society, credit union or investment firm;
“third-country parent undertaking” means a parent undertaking, parent financial holding company or a parent mixed financial holding company established in a country or territory outside the United Kingdom;
“third-country resolution action” means action under the law of a country or territory outside the United Kingdom to manage the failure or likely failure of a third-country institution or third-country parent undertaking —
the anticipated results of which are, in relation to a third-country institution or third-country parent undertaking ..., broadly comparable to results which could have been anticipated from the exercise of a stabilisation option in relation to an entity in the United Kingdom corresponding to the institution or undertaking, and
the objectives of which are broadly comparable, in relation to the country or territory concerned, to the objectives in section 4 as they apply in relation to the United Kingdom;
...
89I Effect of recognition of third-country resolution action by Bank of England
(1) This section applies where an instrument under section 89H recognises any third-country resolution action (or a part of it).
(2) The third-country resolution action (or part) produces the same legal effects in any part of the United Kingdom as it would have produced had it been made (with due authority) under the law of that part of the United Kingdom.
(3) For the purposes of supporting, or giving full effect to, the third-county resolution action (or the part), the Bank of England may exercise, in relation to a third-country institution, a third-country parent undertaking or another third-country group company, one or more of the stabilisation options, or one or more of the stabilisation powers, available to the Bank in relation to a similar entity in the United Kingdom.
(4) But, for the purposes of exercising a power by virtue of subsection (3), provision which could otherwise be made under this Part in a mandatory reduction instrument, share transfer instrument, property transfer instrument or resolution instrument may instead be made in—
(a) the instrument made under section 89H recognising the third-country resolution action (or part), or
(b) a further instrument made by the Bank of England under this section.
An instrument under paragraph (b) is a “third-country instrument” (as is an instrument under section 89H(2)(a), (b) or (c)).
(5) This Part (other than this section) applies in relation to the exercise of any power by virtue of subsection (3), subject to subsections (6) to (9A) and any other necessary modifications.
(6) Section 4 (special resolution objectives) has effect as if after subsection (9) there were inserted—
(9A) Objective 8 is to support third-country resolution action with a view to promoting objectives which, in relation to the country or territory concerned, correspond to Objectives 1 to 7 in relation to the United Kingdom.
.
(7) Sections 7 to 8ZA do not apply.
(8) Section 60B (principle of no less favourable treatment) applies in relation to compensation arrangements in the case of third-country instruments in relation to any third-country resolution action (or a part of it) as if—
(a) references to the initial instrument were to the first third-country instrument under section 89H recognising that action (or part), and
(b) in subsection (3) the reference to the coming into effect of the initial instrument were a reference to the taking of the third-country resolution action recognised (or recognised in part) by that instrument.
(9) Section 81B, 81ZBA and 81BA have effect in relation to the exercise of a stabilisation power in respect of a third-country group company as if for subsections (2) and (3) (in each case) there were substituted—
(2) Condition 1 is that third-country resolution action has been taken in respect of a third-country institution, a third-country parent undertaking or another third-country group company, in the same group.
(3) Condition 2 is that the Bank of England is satisfied that the exercise of the power in respect of the third-country group company is necessary, having regard to the public interest in the stability of the financial systems of the United Kingdom and the country or territory concerned.
(3A) In subsections (2) and (3) “third-country resolution action”, “third-country institution”, “third-country parent undertaking”, and “third-country group company” have the meaning given by section 89H(7).
.
(9A) Sections 81ZZBA, 81ZZBB, 81ZBB, 81ZBC, 81BB and 81BC do not apply.
(10) Section 89H(7) applies for the purposes of this section.
(1) Section 23 (incidental provision) applies to a third-country instrument as it applies to a share transfer instrument.
(2) Section 24 (procedure: instruments) applies to a third-country instrument as it applies to a share transfer instrument, except that references in that section to the bank are to be read as references to the third-country institution, third-country parent undertaking or other third-country group company, to which the third-country instrument relates.
(3) Section 76 (international obligation notice: general) applies in relation to the making of a third-country instrument under section 89H or 89I as it applies in relation to the exercise of a stabilisation power, except that—
(a) for the purposes of section 76(3), section 4 is to be read subject to the modification in section 89I(6), and
(b) in subsection (4), the reference to a bank is to be read as a reference to a third-country institution, a third-country parent undertaking or another third-country group company, in respect of which a third-country instrument is made.
(4) Section 77 (international obligation notice: bridge bank) applies where the Bank of England has, by virtue of section 89I, transferred all or part of the business of a third-country institution, a third-country parent undertaking or another third-country group company, to a bridge bank as it applies where the Bank of England has transferred all or part of the business of a bank or banking group company to a bridge bank.
(5) Section 89I(7) applies for the purposes of this section.
89JA Resolution of UK branches of third-country institutions
(1) The provisions of Chapters 1, 3 and 4 of this Part apply in relation to UK branches subject to the modifications specified in subsections (4) to (10) and in the Table in subsection (11).
(2) In this Chapter—
(a) “UK branch” means a branch located in the United Kingdom of a third-country institution authorised for the purpose of the Financial Services and Markets Act 2000 by the PRA or the FCA,
(b) references to the business of a UK branch are to—
(i) any rights and liabilities of the third-country institution arising as a result of the operations of the UK branch, and
(ii) any other property in the United Kingdom of the third-country institution,
(c) “third-country institution” has the same meaning as in section 89H, and a third-country institution is “FCA-regulated” if it does not carry on any activity which is a PRA-regulated activity for the purposes of the Financial Services and Markets Act 2000,
(d) references to a third-country institution are to the third-country institution in respect of whose UK branch the Bank of England—
(i) is considering making a property transfer instrument, or
(ii) has made a property transfer instrument,
(e) “immediate group” has the meaning given by section 421ZA of the Financial Services and Markets Act 2000 .
(3) For the purposes of subsection (2)(b) liabilities arising as a result of the operations of the UK branch include liabilities in respect of deposits—
(a) which are held at the UK branch, or
(b) in respect of which withdrawals may be made at the UK branch,
and “deposit” has the meaning given by article 5(2) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 , but ignoring the exclusions in article 6.
(4) For section 6E (pre-resolution valuation) , substitute—
6E (1) Before the Bank of England makes a property transfer instrument in respect of a UK branch, it must ensure that the business of the UK branch is valued.
(2) Unless subsection (3) applies, the Bank of England must arrange for the appointment of an independent valuer in accordance with section 62A to carry out a valuation for the purposes of subsection (1).
(3) Where the Bank of England considers that the urgency of the case makes it appropriate to make a property transfer instrument before a valuation can be carried out by a person appointed in accordance with subsection (2), the Bank may carry out a provisional valuation of the business of the UK branch for the purposes of subsection (1).
(4) The purpose of a valuation carried out pursuant to subsection (1) is to—
(a) inform the decision as to—
(i) which stabilisation option should be employed,
(ii) what property, rights or liabilities (if any) are to be transferred by a property transfer instrument,
(iii) the value of any consideration to be paid to the third-country institution for any property, rights or liabilities so transferred, and
(iv) (where special bail-in provision is being made in the property transfer instrument) the extent to which any eligible liabilities should be modified or converted, and
(b) ensure that the full extent of any losses on the business of the UK branch is appreciated at the time the Bank of England makes a property transfer instrument.
(5) In carrying out a valuation required under subsection (1), the person carrying out the valuation must—
(a) make prudent assumptions as to possible rates of default and the severity of losses suffered by the third-country institution;
(b) disregard potential financial assistance which may be provided by the relevant third-country authority..., the Bank of England or the Treasury after the Bank has made a property transfer instrument (except for ordinary market assistance offered by the Bank on its usual terms),
(c) take account of the fact that—
(i) the Bank of England and the Treasury may recover expenses incurred in connection with the making of a property transfer instrument under section 58(2)(b),
(ii) the Bank of England and the Treasury may charge interest or fees in respect of any loans or guarantees provided to the third-country institution after the Bank has made a property transfer instrument in respect of its UK branch.
(5A) In subsection (5)(b) “relevant third-country authority” means an authority in a country or territory outside the United Kingdom that has functions corresponding to the stabilisation powers of the Bank of England, the FCA or the PRA.
(6) The valuation carried out under this section must follow the methodology specified in—
(a) any Commission Regulation containing regulatory technical standards adopted by the European Commission under article 36.16 of the recovery and resolution directive, so far as they are assimilated law, or
(b) technical standards made under subsection 12(a).
(7) A valuation under subsection (1) must be accompanied by—
(a) a balance sheet of the business of the UK branch as at the date of the valuation,
(b) a report on the financial position of the UK branch,
(c) an analysis and an estimate of the accounting value of the property and rights of the third-country institution which form part of the business of the UK branch,
(d) a list of the outstanding liabilities of the third-country institution which form part of the business of the UK branch (including any off-balance sheet liabilities), with the creditors subdivided into classes according to the priority their claims would receive in insolvency proceedings, and
(e) an estimate of the amount that each class of creditors and shareholders might be expected to receive if the third-country institution went into insolvency proceedings.
(8) For the purposes of subsection (7) “insolvency proceedings” means such insolvency proceedings (whether or not under the law of a country or territory outside the United Kingdom) as the person carrying out the valuation, after consultation with the Bank of England and the Treasury, considers relevant.
(9) Where appropriate, the information in subsection (7)(c) may be supplemented by an analysis and estimate of the value of the business of the UK branch on a market value basis in order to inform the decision referred to in paragraph (a)(ii) or (iii) of subsection (4).
(10) Where a provisional valuation is carried out under subsection (3)—
(a) the Bank of England need only comply with subsection (7) as far as it is reasonable to do so in the circumstances, and
(b) the requirement in subsection (8) to consult the Bank of England does not apply.
(11) A provisional valuation carried out under subsection (1) must make provision in respect of additional losses by the third-country institution in accordance with—
(a) any Commission Regulation containing regulatory technical standards adopted by the European Commission under article 36.16 of the recovery and resolution directive, so far are as they are assimilated law, or
(b) technical standards made under subsection (12)(b).
(12) The Bank of England may make technical standards relating to—
(a) the methodology for assessing the value of the assets and liabilities of a branch for the purposes of a valuation under this section;
(b) the methodology for calculating and including a buffer for additional losses in the provisional valuation.
(5) For section 7 (general conditions), substitute—
7 (1) The Bank of England may make a property transfer instrument in respect of a UK branch only if the Treasury has approved the making of the instrument, and one of the following applies—
(a) the PRA (or in the case of a third-country institution which is FCA-regulated, the FCA) is satisfied that Condition 1 is met, and the Bank of England is satisfied that Conditions 2, 4 and 5 are met, or
(b) the Bank of England is satisfied that Conditions 3 and 4 are met, or
(c) the Bank of England is satisfied that Condition 4 is met and Condition 5 is met by virtue of subsection 6(a).
(2) Condition 1 is that the third-country institution is failing or likely to fail.
(3) Condition 2 is that, having regard to timing and other relevant circumstances, it is not reasonably likely that action will be taken by or in respect of the third-country institution that will result in Condition 1 ceasing to be met.
(4) Condition 3 is that—
(a) the third-country institution is unable or unwilling, or is likely in the near future to be unable or unwilling, to pay its debts or other liabilities owed to UK creditors or otherwise arising from the business of the UK branch as they fall due, and
(b) no third-country resolution action has been taken, no normal insolvency proceedings have been initiated, and no such action or proceedings are likely in the near future to be taken or initiated, in relation to the institution.
(5) Condition 4 is that making a property transfer instrument is necessary having regard to the public interest in the advancement of one or more of the special resolution objectives.
(6) Condition 5 is that—
(a) third-country resolution action has been taken, or the Bank of England has been notified that such action will be taken, in relation to the third-country institution and the Bank has refused or proposes to refuse to recognise such action for one or more of the reasons specified in section 89H(4), or
(b) third-country resolution action has not been, and is not likely to be, taken in relation to the third-country institution.
(7) For the purposes of Condition 1, a third-country institution is failing or likely to fail if it is failing, or is likely to fail, to satisfy the threshold conditions in circumstances where that failure would justify the variation or cancellation by the PRA (or in the case of an FCA-regulated third-country institution, the FCA) under section 55J of the Financial Services and Markets Act 2000 of the institution's permission under Part 4A of that Act to carry on one or more regulated activities in the United Kingdom.
(8) “The threshold conditions” means the threshold conditions, as defined by subsection (1) of section 55B of the Financial Services and Markets Act 2000, for which the PRA (or in the case of an FCA-regulated third-country institution, the FCA) is treated as responsible under subsection (2) of that section.
(9) For the purposes of Condition 3—
“UK creditor”, in relation to a third-country institution, means a creditor of the institution who—
in the case of an individual, is ordinarily resident in the United Kingdom; and
in the case of a body corporate or unincorporated association, has its head office in the United Kingdom.
(10) For the purposes of Conditions 3 and 5, “third-country resolution action” has the meaning given in section 89H(7).
(11) Before determining that Condition 1 is met, the PRA (or in the case of an FCA-regulated third-country institution, the FCA) must consult the Bank of England.
(12) Before determining whether or not Condition 2 or 4 is met the Bank of England must, subject to subsection (13), consult—
(a) the PRA,
(b) the FCA, and
(c) the Treasury.
(13) In the case of an FCA-regulated third-country institution, the Bank of England need only consult the PRA before determining whether or not Condition 2 or 4 is met if the third-country institution has as a member of its immediate group a PRA-authorised person.
.
(6) For section 7A (effect on other group members, financial stability in EU etc) substitute—
7A Where the Bank of England is considering making a property transfer instrument in respect of a UK branch of a third-country institution which is a member of a group, the Bank must have regard to—
(a) the need to minimise the effect of making the property transfer instrument on other undertakings in the same group,
(b) the need to minimise any adverse effects on the financial stability of the United Kingdom, and
(c) the potential effect of making the property transfer instrument on the financial stability of the country or territory in which the head office of the third-country institution is established, and any other country or territory (other than the United Kingdom) in which any member of the group is operating.
.
(7) For section 44B (property transfer instruments: special bail-in provision), substitute—
44B (1) A property transfer instrument within subsection (2) may make special bail-in provision (see section 48B) with respect to the liabilities of the third-country institution or the resolution company which are being transferred by that instrument (“transferred liabilities”).
(2) The instruments referred to in subsection (1) are—
(a) a property transfer instrument under section 11(2), 12(2) or 12ZA(3),
(b) a supplemental property transfer instrument under section 42 in relation to which the original instrument is—
(i) a property transfer instrument under section 11(2), 12(2) or 12ZA(3), or
(ii) an onward property transfer instrument under section 43(2), or
(c) an onward property transfer instrument under section 43(2).
(3) In the case of—
(a) a property transfer instrument under section 12(2) or 12ZA(3),
(b) a supplemental property transfer instrument under section 42 in relation to which the original instrument is—
(i) a property transfer instrument under section 12(2) or 12ZA(3), or
(ii) an onward property transfer instrument under section 43(2), or
(c) an onward property transfer instrument under section 43(2),
the power under subsection (1) to make the provision described in section 48B(1)(a) (see also rule 2(a) and (b) of section 48B(5)) includes power to make the provision referred to in subsection (4).
(4) The provision referred to in subsection (3) is provision replacing a transferred liability (of any form)—
(a) of the third-country institution mentioned in subsection (1), in the case of instruments within subsection (3)(a) and (b)(i),
(b) of the resolution company mentioned in section 43(1), in the case of instruments within subsection (3)(b)(ii) and (c),
with a relevant security (of any form or class).
(5) The following are relevant securities for the purpose of subsection (4)—
(a) where the instrument within subsection (3)(a), or the original instrument, is made under section 12, a security of the bridge bank mentioned in section 12(1),
(b) where the instrument within subsection (3)(a), or the original instrument, is made under section 12ZA, a security of the asset management vehicle mentioned in section 12ZA(1).
(6) In subsection (5), references to the original instrument are—
(a) in relation to an instrument within subsection (3)(b), the original instrument referred to in that paragraph,
(b) in relation to an instrument within subsection (3)(c), the original instrument as defined in section 43(1).
(7) Where securities of the bridge bank or asset management vehicle (“B”) are, as a result of subsection (3), held by a person other than the Bank of England, that does not prevent B from being regarded for the purposes of this Part (see particularly section 12(1A) and 12ZA(2)) as being wholly owned by the Bank of England, as long as the Bank of England is entitled to exercise, or control the exercise of, voting rights in respect of all the ordinary shares issued by B.
.
(8) For section 48B (special bail-in provision), substitute—
48B (1) “Special bail-in provision”, for the purposes of section 44B(1), means any of the following (or any combination of the following)—
(a) provision modifying, or changing the form of, a relevant liability;
(b) provision that a contract under which the relevant institution has a relevant liability is to have effect as if a specified right had been exercised under it.
(2) “Special bail-in provision”, for the purposes of section 44B, also includes any associated provision (see subsection (3)) that the Bank of England may think it appropriate to make in consequence of any provision under subsection (1) that—
(a) is made in the same property transfer instrument, or
(b) has been made in another property transfer instrument in respect of the UK branch, or (where the institution in relation to which special bail-in provision is made is a resolution company) in respect of the resolution company.
(3) “Associated provision” means provision modifying a contract under which a company which is a banking group company in relation to the third-country institution has a liability (whether or not the institution in relation to which special bail-in provision is made is the third-country institution).
(4) A power to make special bail-in provision—
(a) may be exercised only for the purpose of, or in connection with, reducing or deferring a relevant liability of the relevant institution;
(b) may not be exercised so as to affect any excluded liability.
(5) The following rules apply to the interpretation of subsection (1). 1 The reference to modifying a relevant liability includes a reference to modifying the terms (or the effect of the terms) of a contract under which the relevant institution has a liability. 2 The reference to changing the form of a relevant liability, includes, for example—
(a) converting an instrument under which the relevant institution owes a relevant liability from one form or class to another,
(b) replacing such an instrument with another instrument of a different form or class, or
(c) converting those liabilities into securities issued by a bridge bank or a UK parent undertaking.
(6) For the purposes of rule 2 in subsection (5)—
“parent undertaking” has the meaning given by Article 4.1(15)(a) of the capital requirements regulation, and
“UK parent undertaking” means a parent undertaking that is incorporated in, or formed under the law of, any part of the United Kingdom.
(7) Examples of special bail-in provision include—
(a) provision that transactions or events of any specified kind have or do not have (directly or indirectly) specified consequences or are to be treated in a specified manner for specified purposes;
(b) provision discharging persons from further performance of obligations under a contract and dealing with the consequences of persons being so discharged.
(8) The form and class of the instrument (“the resulting instrument”) into which an instrument is converted, or with which it is replaced, do not matter for the purposes of paragraphs (a) and (b) of rule 2 in subsection (5); for instance, the resulting instrument may (if it is a security) fall within Class 1 or any other Class in section 14.
(9) Liabilities of the relevant institution are “excluded liabilities” if they are—
(a) liabilities listed in subsection (10), or
(b) liabilities which the Bank of England has excluded under subsection (12) from the application of special bail-in provision.
(10) The following liabilities of the relevant institution are the excluded liabilities referred to in subsection (9)(a)—
(a) liabilities representing protected deposits;
(b) any liability, so far as it is secured;
(c) liabilities that the relevant institution has by virtue of holding client assets;
(d) liabilities with an original maturity of less than 7 days owed by the relevant institution to a credit institution or investment firm;
(e) liabilities with a remaining maturity of less than 7 days arising from participation in designated settlement systems and owed to such systems or to operators of, or participants in, such systems;
(ea) liabilities with a remaining maturity of less than 7 days owed by the relevant institution to a recognised central counterparty ... or a third country central counterparty;
(f) liabilities owed to an employee or former employee in relation to salary or other remuneration, except—
(i) variable remuneration that is not regulated by a collective bargaining agreement, and
(ii) variable remuneration of material risk takers within the meaning of rule 3 of Part 152 (remuneration) of the PRA rulebook (other than persons deemed by virtue of rule 3.2 not to be material risk takers and notified to the PRA in accordance with rule 3.2);
(g) liabilities owed to a pension scheme, except for liabilities owed in connection with variable remuneration of the kind mentioned in paragraph (f)(i) or (ii);
(h) liabilities owed to creditors arising from the provision to the relevant institution of goods or services (other than financial services) that are critical to the daily functioning of the operations of the third-country institution or of its UK branch (or in the case of an instrument made in relation to a resolution company, of the resolution company);
(i) liabilities owed by the relevant institution to the scheme manager of the FSCS in relation to levies imposed by the scheme manager under section 213(3)(b) or (4) of the Financial Services and Markets Act 2000;
(j) liabilities owed by the relevant institution to another institution or a banking group company which (in either case)—
(i) is part of the same resolution group as the relevant institution, and
(ii) is not itself a resolution entity,
where the liabilities do not rank below ordinary non-preferential debts under the hierarchy of claims in normal insolvency proceedings.
(11) The following special rules apply in cases involving banking group companies (whether or not the institution in relation to which special bail-in provision is made is the third-country institution)—
(a) a liability is not within subsection (10)(d) if the credit institution or investment firm to which the liability is owed is a banking group company in relation to the third-country institution (see section 81D);
(b) in subsection (10)(h) the reference to creditors does not include companies which are banking group companies in relation to the third-country institution.
(12) The Bank of England may, in a property transfer instrument, exclude any bail-in liability or class of bail-in liabilities from the application of any special bail-in provision in relation to a relevant institution under section 44B if, and only if, the Bank of England—
(a) thinks the exclusion is justified on one or more of the grounds set out in subsection (14), ...
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(13) The power conferred by subsection (12) may be exercised to exclude only part of a bail-in liability, or part of each of the bail-in liabilities of a particular class; and where it is so exercised that part is treated as a bail-in liability excluded under that subsection and the remainder is treated as a bail-in liability which has not been so excluded.
(14) The grounds are—
(a) that it is not reasonably possible to give effect to special bail-in provision in relation to the liability or class within a reasonable time;
(b) that the exclusion is necessary and proportionate to achieve the continuity of critical functions and core business lines in a manner that maintains the ability of the third-country institution or its UK branch (or in the case of an instrument made in relation to a resolution company, of the resolution company) to continue key operations, services and transactions;
(c) that the exclusion is necessary and proportionate to avoid giving rise to widespread contagion, in particular as regards protected deposits held by natural persons or micro, small and medium-sized enterprises, which would severely disrupt the functioning of financial markets, including financial market infrastructures, in a manner that could cause a serious disturbance to the economy of the United Kingdom;
(d) that the making of special bail-in provision in relation to the liability would cause a reduction in value such that the losses borne by other creditors would be higher than if the liability were excluded.
(15) When deciding whether to exclude liabilities under subsection (12) or (13), the Bank of England must give due consideration to—
(a) the principle that all the relevant liabilities of the relevant institution ought to be treated in accordance with the priority they would enjoy if the relevant institution went into insolvency proceedings, and
(b) the principle that any creditors who would have equal priority in insolvency proceedings ought to bear losses on an equal footing with each other,
and for the purposes of this subsection “insolvency proceedings” means such insolvency proceedings (whether or not under the law of a country or territory outside the United Kingdom) as the Bank of England, after consultation with the Treasury, considers relevant.
(17) For the purposes of subsection (14)—
“core business lines” means business lines and associated services which represent material sources of revenue, profit or franchise value for the third-country institution or its UK branch (or in the case of an instrument made in relation to a resolution company, of the resolution company);
“protected deposit” has the meaning given by section 48C, and
“micro, small and medium-sized enterprises” means micro, small and medium-sized enterprises as defined with regard to the annual turnover criterion referred to in Article 2(1) of the Annex to Commission Recommendation 2003/361/EC.
(17A) For the purposes of the definition of “core business lines” Article 7 of Commission Delegated Regulation (EU) 2016/778 (criteria relating to the determination of core business lines) applies.
(17B) The Treasury may by regulations made by statutory instrument specify criteria for the determination of the business lines and associated services referred to in the definition of “core business lines”.
(17C) The power conferred by subsection (16) includes—
(a) power to amend or revoke Article 7 of Commission Delegated Regulation (EU) 2016/778; and
(b) power to amend or repeal subsection (17A).
(17D) A statutory instrument containing regulations under subsection (17B) is subject to annulment in pursuance of a resolution of either House of Parliament.
(18) For the purposes of this section—
(a) “relevant liability” means a liability of a third-country institution or resolution company which is transferred in the property transfer instrument which makes special bail-in provision,
(b) “relevant institution” means the third-country institution or resolution company whose liabilities are so transferred.
.
(9) For section 48X (replacement of Bank's provisional valuation), substitute—
48X (1) Where the Bank of England has carried out a provisional valuation under section 6E(3) before making a property transfer instrument in relation to a UK branch, the Bank must arrange for the appointment of an independent valuer in accordance with section 62A to carry out a full valuation in accordance with this section as soon as reasonably practicable.
(2) The purpose of the valuation carried out under subsection (1) is to—
(a) ensure the full extent of any losses on the property and rights of the third-country institution which formed part of the business of the UK branch is recognised in the accounting records of the third-country institution, and
(b) inform a decision by the Bank as to whether—
(i) additional consideration should be paid by a bridge bank or asset management vehicle for any property, rights or liabilities transferred by the property transfer instrument, or
(ii) the Bank should exercise the power under section 48Y(1) to increase a liability which has been reduced by the property transfer instrument.
(3) A valuation carried out under subsection (1) must comply with subsections (5) and (6) of section 6E, and be accompanied by the information required in subsection (7) of that section.
.
(10) For section 48Y (consequences of a replacement valuation)—
48Y (1) Where the independent valuation carried out under section 48X(1) produces a higher valuation of the net asset value of the business of the UK branch transferred by the property transfer instrument than the provisional valuation carried out under section 6E(3), the Bank of England may—
(a) modify any liability of the third-country institution which has been reduced or deferred by the property transfer instrument so as to increase or reinstate that liability; or
(b) instruct a resolution company to pay additional consideration to the third-country institution for any property, rights or liabilities transferred to the resolution company by a property transfer instrument.
(2) The power in subsection (1)(a)—
(a) may not be exercised so as to increase the value of the liability beyond the value it would have had if the property transfer instrument which reduced or deferred it had not been made, and
(b) must be exercised by a supplemental property transfer instrument (whether or not that instrument contains any other provision authorised by this Part).
(11) The Table mentioned in subsection (1) is as follows—
Table of Modifications
Provision | Modification
Sections 6A (cases where mandatory write-down, conversion, etc applies) to 6D (mandatory reduction instruments: supplementary matters) | Ignore sections 6A to 6D.
Section 8 (specific condition: private sector purchaser, bridge bank or asset management vehicle) | Ignore section 8.
Section 8ZA (specific conditions: asset management vehicle) | In subsection (1) treat the reference to a bank as a reference to a UK branch. In subsection (2), treat the first reference to the bank as a reference to the UK branch, and the second reference to the bank as a reference to the third-country institution. In subsection (3)(b) treat the first reference to the bank as a reference to the third-country institution. If the third-country institution is FCA-regulated, ignore subsection (4) (a) unless the third-country institution has as a member of its immediate group a PRA-authorised person. In subsection (6), ignore the reference to section 8.
Section 9 (specific conditions: temporary public ownership) | Ignore section 9.
Section 11 (private sector purchaser) | In subsection (1), treat the reference to the bank as a reference to the UK branch. Ignore subsection (2)(a).
Section 11A (private sector purchaser: marketing) | In subsections (1), (2)(c) and (5), treat the reference to the bank as a reference to the third-country institution. In subsection (1), ignore paragraph (a). In subsections (2)(d) and (3)(a), ignore the reference to securities.
Section 12 (bridge bank) | In subsection (1), treat the reference to the bank as a reference to the UK branch. In subsection (1A)(c), treat the reference to the bank or its business as a reference to the business of the UK branch. Ignore subsection (2)(a).
Section 12ZA (asset management vehicle) | In subsection (1)(a), treat the reference to the bank as a reference to the UK branch. In subsection (1)(b)— (a) ignore the reference to shares, (b) treat the reference to property, rights or liabilities of the bank as a reference to property, rights or liabilities of the third-country institution which form part of the business of the UK branch. In subsection (2)(c) treat the first reference to banks as including a reference to third-country institutions.
Sections 12A (bail-in option), 12AA (bail-in: sequence of write down and conversion of capital instruments and liabilities) and 13 (temporary public ownership) | Ignore sections 12A, 12AA and 13.
Sections 15 (share transfer instrument) to 29 (reverse share transfer orders) | Ignore sections 15 to 29.
Sections 30 (resolution company: share transfers) and 31 (resolution company: reverse transfer) | Ignore sections 30 and 31.
Section 33 (property transfer instrument) | In subsections (1) and (2), treat references to property, rights or liabilities of a specified bank as references to property, rights or liabilities of the third-country institution which form part of the business of a specified UK branch, or to property, rights or liabilities of a resolution company. Ignore subsection (3).
Section 36A (directors and senior managers) | In subsections (1) and (2), ignore each reference to a director. In subsections (1) and (4) treat each reference to a specified bank as a reference to a specified UK branch. In subsection (2) treat the reference to a specified bank as a reference to the third-country institution. In subsection (5), treat the first reference to a bank as a reference to a UK branch or a third-country institution, and ignore the words “(whether or not it is a bank)”.
Section 39A (banks which are clearing houses) | Ignore section 39A.
Section 41 (procedure) | In subsection (1)— (a) treat the first reference to a bank as a reference to a UK branch, (b) in paragraph (a), treat the reference to the bank as a reference to the third-country institution, (c) if the third-country institution is FCA-regulated, ignore paragraph (c). In subsection (2) treat the references to the bank as references to the third-country institution. In subsection (4), treat the first reference to a bank as a reference to a UK branch or a third-country institution, and ignore the words “even if it is not a bank”.
Section 41A (transfer of property subsequent to resolution instrument) | Ignore section 41A.
Section 42 (supplemental instruments) | In subsections (1) and (6), ignore the reference to section 41A(2). In subsection (4), ignore the reference to section 8. If the third-country institution is FCA-regulated, ignore subsection (5)(a) unless the third-country institution has as a member of its immediate group a PRA-authorised person.
Section 42A (private sector purchaser: reverse property transfer) | In subsection (1), treat the reference to property, rights or liabilities of a bank as a reference to property, rights or liabilities of a third-country institution which form part of the business of a UK branch. In subsection (5), ignore the reference to section 8. If the third-country institution is FCA-regulated, ignore subsection (6)(a) unless the third-country institution has as a member of its immediate group a PRA-authorised person.
Section 43 (onward transfer) | In subsection (6), ignore the reference to section 8. If the third-country institution is FCA-regulated, ignore subsection (7)(a) unless the third-country institution has as a member of its immediate group a PRA-authorised person.
Section 44 (resolution company: reverse property transfer) | In subsection (5), ignore the reference to section 8. If the third-country institution is FCA-regulated, ignore subsection (6)(a) unless the third-country institution has as a member of its immediate group a PRA-authorised person.
Section 44A (bail-in: reverse property transfer) | Ignore section 44A.
Section 44BA (property transfer instruments and bail-in: supplementary matters) | Ignore section 44BA.
Section 44C (report on special bail-in provision) | In subsection (4), treat each reference to “on a liquidation” as a reference to “in insolvency proceedings”. In subsection (4)(a), treat the reference to “the liabilities of the bank” as a reference to “the relevant liabilities of the third-country institution” (and for this purpose, “relevant liability” has the meaning given in section 48B(17)). In subsection (4), after paragraph (b), insert “ and for the purposes of this subsection “insolvency proceedings” means such insolvency proceedings (whether or not under the law of a country or territory outside the United Kingdom) as the Bank of England, after consultation with the Treasury, considers relevant. ”
Sections 44D (bridge bank: supplemental property transfer powers) to 46 (temporary public ownership: reverse property transfer) | Ignore sections 44D to 46.
Section 47 (restriction of partial transfers) | In subsection (1), treat the reference to a bank as a reference to a third-country institution. In subsection (1A), treat the first reference to a bank as a reference to a third-country institution, and ignore the words “(even if it is not a bank)”.
Section 48A (creation of liabilities) | In subsection (1) ignore the reference to sections 44A(3)(b), 44D(3)(b), 44E(3)(b), 45(3)(b) and 46(3)(b).
Section 48C (meaning of “protected deposit”) | In subsection (4), treat the reference to section 48B(8)(a) as a reference to section 48B(10)(a).
Section 48D (general interpretation of section 48B) | In the definition of client assets, treat the reference to the bank as a reference to the third-country institution.
Section 48E (report on special bail-in provision) | Ignore section 48E.
Section 48F (power to amend definition of “excluded liabilities”) | In subsection (1) treat the reference to section 48B(8) as including a reference to section 48B(10).
Section 48H (business reorganisation plan) | Ignore section 48H.
Sections 48L (powers in relation to securities) to 48O (directions in or under resolution instruments) | Ignore sections 48L to 48O.
Section 48Q (continuity) | Treat references to a resolution instrument as references to a property transfer instrument within section 44B(2) that makes special bail-in provision under section 48B(1).
Section 48R (execution and registration of instruments, etc.) | Treat references to a resolution instrument as references to a property transfer instrument within section 44B(2) that makes special bail-in provision under section 48B(1).
Section 48S (resolution instruments: general matters) | Treat references to a resolution instrument as references to a property transfer instrument within section 44B(2) that makes special bail-in provision under section 48B(1).
Sections 48T (procedure) to 48WA (bail-in option: recovery of expenses) | Ignore sections 48T to 48WA.
Section 48Z (termination rights etc) | In subsection (1), in paragraph (a) of the definition of “crisis management measure”, treat the reference to the bank as including a reference to a UK branch. In subsection (6)(a), treat the first reference to the third-country institution as including a reference to the UK branch.
Section 57 (valuation principles) | In subsection (4) treat the reference to the bank as a reference to the third-country institution.
Section 60 (third party compensation) | In subsection (3)— (a) in paragraph (a) treat the second reference to a bank as including a reference to a third-country institution; (b) in paragraph (c) treat the reference to insolvency as including any proceedings under the law of the country or territory outside the United Kingdom in which the country or territory outside the United Kingdom institution is incorporated which are equivalent to the proceedings listed in paragraph (c).
Section 60B (principle of no less favourable treatment) | In subsection (1), treat the references to a bank as including references to a third-country institution. In subsection (2)(a) treat the reference to the bank as a reference to the UK branch. Ignore subsection (2)(b). In subsection (3), treat the references to a bank as references to a third-country institution. In subsection (4) treat the reference to insolvency as including any proceedings under the law of the country or territory outside the United Kingdom in which the third-country institution is incorporated which are equivalent to the proceedings listed in subsection (4).
Section 62A (independent valuer: sections 6E and 48X) | In subsection (1A) , treat the reference to the bank as including a reference to the third-country institution.
Sections 62B (resolution administrator) to 62E (resolution administrator: money) | Ignore sections 62B to 62E.
Section 63 (general continuity obligations: property transfers) | In subsection (1)(a)— (a) treat the second reference to a bank as a reference to a third-country institution; (b) treat the reference to “whose business” as a reference to the business of whose UK branch; (c) ignore the references to sections 41A(2) and 44D(2). In subsection (1)(d) treat the reference to the bank as a reference to the UK branch. In subsection (1A) treat the reference to insolvency as including any proceedings under the law of the country or territory outside the United Kingdom in which the third-country institution is incorporated which are equivalent to proceedings listed in subsection (1A). In subsection (4A)— (a) treat each reference to the bank as a reference to the third-country institution; (b) treat the reference to “whose business” as a reference to “the business of whose UK branch”.
Section 64 (special continuity obligations: property transfers) | Treat the references to contracts or other arrangements, in each place where they appear, as limited to contracts or other arrangements which were entered into by the third-country institution in relation to the business of its UK branch.
Section 65 (continuity obligations: onward property transfers) | In subsection (1), ignore paragraph (a)(ii). In subsection (3), ignore paragraph (b). In subsection (4), ignore paragraph (c), and in paragraph (d) treat the reference to “(a) to (c)” as a reference to “(a) or (b)”.
Sections 66 (share transfers) to 68 (continuity obligations: onward share transfers) | Ignore sections 66 to 68.
Section 70A (suspension of obligations) | For subsection (1), substitute— (1) The Bank of England may suspend obligations to make a payment, or delivery, under a contract where— (a) one of the parties to the contract is a third-country institution, (b) the contract was entered into by the third-country institution in relation to the business of its UK branch, and (c) the Bank is making a property transfer instrument in relation to the business of the UK branch. . In subsection (3)(c) treat the reference to the bank under resolution as a reference to the third-country institution. In subsection (5), ignore the references to share transfer instruments, resolution instruments and third-country instruments.
Section 70B (restriction of security interests) | In subsection (1)— (a) treat the first reference to the bank as a reference to the UK branch and the second as a reference to the third-country institution; (b) treat the reference to assets of the bank as a reference to any property or rights of the third-country institution which form part of the business of the UK branch. In subsection (3), treat the reference to any asset of the bank under resolution as a reference to any property or rights of the third-country institution which form part of the business of the UK branch. In subsection (4), ignore the references to share transfer instruments, resolution instruments and third-country instruments.
Section 70C (suspension of termination rights) | For subsection (2), substitute— (2) A contract is a “qualifying contract” for the purpose of this section if— (a) one of the parties to the contract is a third-country institution, and the contract was entered into by the third-country institution in relation to the business of its UK branch, (b) the Bank is making a property transfer instrument in relation to the business of the UK branch, and (c) all the obligations under the contract to make a payment, make delivery or provide collateral continue to be performed. . Ignore subsection (3). In subsection (5), ignore the references to share transfer instruments, resolution instruments and third-country instruments. In subsection (6), ignore the words after paragraph (b). In subsection (7)— (a) treat the reference to the bank under resolution as a reference to the third-country institution; (b) ignore paragraph (b). In subsection (9)— (a) treat the reference to the bank under resolution as a reference to the third-country institution; (b) ignore the words “or the subsidiary undertaking”.
Section 71 (pensions) | Ignore section 71.
Section 76 (international obligation notice: general) | In subsections (1) and (3) treat the reference to exercising the power to make a resolution administrator appointment instrument or a mandatory reduction instrument or a stabilisation power as a reference to making a property transfer instrument. In subsections (1) and (4) treat the reference to a bank as a reference to a UK branch. Ignore subsection (5).
Section 77 (international obligation notice: resolution company) | In subsection (1), treat the reference to a bank's business as a reference to the business of a UK branch.
Section 78 (public funds: general) | In subsections (1) and (4) treat the reference to exercising the power to make a mandatory reduction instrument or a stabilisation power as a reference to making a property transfer instrument. In subsections (1) and (5), treat the reference to a bank as a reference to a UK branch.
Section 78A (pre-conditions for financial assistance) | Ignore section 78A.
Section 79 (public funds: resolution company) | In subsection (1), treat the reference to a bank's business as a reference to the business of a UK branch.
Section 79A (private sector purchaser: report) | In subsection (1), treat the reference to a bank's business as a reference to the business of a UK branch. In subsection (2) ignore the reference to share transfer instruments.
Section 80 (resolution company: report) | In subsection (1), treat the reference to a bank's business as a reference to the business of a UK branch.
Sections 80A (transfer for bail-in purposes) and 81 (temporary public ownership) | Ignore sections 80A and 81.
Section 81A (accounting information to be included in reports under section 80) | In subsection (1), ignore the references to sections 80A(2)(b) and 81. Ignore the references to the bank.
Sections 81AA to 81CA (groups) | Ignore sections 81AA to 81CA.
Section 81D (interpretation: “banking group company”) | In subsection (1)(a)— (a) ignore the reference to a bank and EU institution, (b) treat the reference to section 81B(9) as a reference to section 89JA(2)(c).
Sections 82 (temporary public ownership) and 83 (supplemental) | Ignore sections 82 and 83.
Section 83ZA (information) | For subsection (1), substitute— (1) This section only applies to information and documents reasonably required in connection with the making by the Bank of England of a property transfer instrument in relation to the UK branch of a third-country institution. . In subsections (2) and (4) treat references to a bank or banking group company as references to a third-country institution. In subsections (7) and (10) treat references to a bank as references to a third-country institution.
Section 83ZB (reports by skilled persons) | In subsection (2) treat the references to a bank as a reference to a third-country institution.
Section 83ZC (appointment by persons to carry out general investigations) | In subsection (2)(a) treat the reference to the business of a bank as a reference to the business conducted by a UK branch. Ignore subsections (2)(c), (3) and (4).
Section 83ZE (investigations etc. in support of foreign resolution authorities) | Ignore section 83ZE.
Section 83ZL (entry of premises under warrant) | In subsection (3), treat each reference to a bank as a reference to a third-country institution.
Section 83ZR (regulatory sanctions) | In subsection (1)(d), where the third-country institution is an investment firm, treat the references to banks as references to investment firms.
(1) If —
(a) a stabilisation power has been exercised in respect of a relevant firm, or
(b) the conditions in section 7 are met in relation to a relevant firm,
insolvency proceedings may not be commenced in relation to that firm except by, or with the consent of, the Bank of England.
(2) For the purposes of subsection (1), the commencement of insolvency proceedings means—
(a) making an application for an administration order;
(b) presenting a petition for winding up;
(c) proposing a resolution for voluntary winding up;
(d) appointing an administrator.
(3) In this section—
(a) “relevant firm” means—
(i) a bank, building society, investment firm, financial holding company, mixed financial holding company or a mixed activity holding company, or
(ii) a financial institution which is a subsidiary undertaking of an entity within sub-paragraph (i);
(b) “building society” has the meaning given in the Building Societies Act 1986;
(c) “financial holding company” has the meaning given in Article 4.1(2) of the capital requirements regulation;
(d) “financial institution” has the meaning given in Article 4.1(26) of the capital requirements regulation;
(e) “mixed activity holding company” has the meaning given in Article 4.1(22) of the capital requirements regulation;
(f) “mixed financial holding company” has the meaning given in Article 4.1(21) of the capital requirements regulation.
89L Restrictions on disclosure of confidential information
(1) Sections 348, 349, 352 and 353 of the Financial Services and Markets Act 2000 (disclosure of information) apply for the purposes of this Part with the following modifications.
(2) Section 348 of that Act has effect as if—
(a) in subsection (2)(b), after “Act” there were inserted “or of the Bank of England under Part 1 of the Banking Act 2009 or the Bank Recovery and Resolution (No 2) Order 2014”,
(b) in subsection (3)(a), at the end there were inserted “or the Banking Act 2009”, and
(c) in subsection (5)—
(i) after paragraph (c) there were inserted—
(ca) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(cb) a resolution administrator appointed under Part 1 of the Banking Act 2009;
(cc) a person appointed to make a report under section 83ZB of that Act (reports by skilled persons);
,
(ii) in paragraph (e) for “to (c)” there were substituted “ to (cc) ”, and
(d) after subsection (6)(b) there were inserted—
(c) a competent person appointed by the Bank of England under Chapter 4 of Part 1 of the Banking Act 2009.
(3) Section 349 of that Act has effect as if, in subsection (2)(c), for “or the PRA” substitute “the PRA, the Bank of England or a resolution administrator appointed by virtue of section 62B of the Banking Act 2009”.
(4) Section 353 of that Act has effect as if in subsection (1)—
(a) in paragraph (a), after “under this Act” there were inserted “or the Banking Act 2009”, and
(b) in paragraph (b) after “to the” there were inserted “Bank of England, the”.
Regulations under section 414 of the Financial Services and Markets Act 2000 (service of notices), and subsection (4) of that section, apply in relation to any notice, direction or document of any kind required to be given under any provision of this Part (however that requirement is expressed) as if those provisions were provisions of that Act.
(1) This Part provides for a procedure to be known as bank insolvency.
(2) The main features of bank insolvency are that—
(a) a bank enters the process by court order,
(b) the order appoints a bank liquidator,
(c) the bank liquidator aims to arrange for the bank's eligible depositors to have their accounts transferred or to receive their compensation from the FSCS,
(d) the bank liquidator then winds up the bank, and
(e) for those purposes, the bank liquidator has powers and duties of liquidators, as applied and modified by the provisions of this Part.
(3) The Table describes the provisions of this Part.
Sections | Topic
Sections 90 to 93 | Introduction
Sections 94 to 98 | Bank insolvency order
Sections 99 to 105 | Process of bank liquidation
Sections 106 to 112 | Tenure of bank liquidator
Sections 113 to 116 | Termination of process, &c.
Sections 117 to 122 | Other processes
Sections 123 to 135 | Miscellaneous
(1) In this Part “bank” means a UK institution which has permission under Part 4A of the Financial Services and Markets Act 2000 to carry on the regulated activity of accepting deposits (within the meaning of section 22 of that Act, taken with Schedule 2 and any order under section 22).
(2) But “bank” does not include—
(a) a building society within the meaning of section 119 of the Building Societies Act 1986,
(b) a credit union within the meaning of section 31 of the Credit Unions Act 1979, or
(c) any other class of institution excluded by an order made by the Treasury.
(3) In subsection (1) “UK institution” means an institution which is incorporated in, or formed under the law of any part of, the United Kingdom.
(4) An order under subsection (2)(c)—
(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.
(5) Section 130 makes provision for the application of this Part to building societies.
(6) Section 131 makes provision for the application of this Part to credit unions.
In this Part “the court” means—
(a) in England and Wales, the High Court,
(b) in Scotland, the Court of Session, and
(c) in Northern Ireland, the High Court.
(1) In this Part—
(a) “the PRA” means the Prudential Regulation Authority, and
(b) “the FCA” means the Financial Conduct Authority.
(2) In this Part a reference to “the FSCS” is a reference to—
(a) the Financial Services Compensation Scheme (established under Part 15 of the Financial Services and Markets Act 2000), or
(b) where appropriate, the scheme manager of that Scheme.
(3) In this Part “eligible depositors” means depositors who are eligible for compensation under the FSCS.
(4) 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 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 carried on by the bank.
(5) Expressions used in this Part and in the Insolvency Act 1986 have the same meaning as in that Act.
(6) Expressions used in this Part and in the Companies Act 2006 have the same meaning as in that Act.
(7) A reference in this Part to action includes a reference to inaction.
(8) The expression “fair” is used in this Part as a shorter modern equivalent of the expression “just and equitable” (and is not therefore intended to exclude the application of any judicial or other practice relating to the construction and application of that expression).
(1) A bank insolvency order is an order appointing a person as the bank liquidator of a bank.
(2) A person is eligible for appointment as a bank liquidator if qualified to act as an insolvency practitioner in relation to the bank.
(3) An appointment may be made only if the person has consented to act.
(4) A bank insolvency order takes effect in accordance with section 98; and—
(a) the process of a bank insolvency order having effect may be described as “bank insolvency” in relation to the bank, and
(b) while the order has effect the bank may be described as being “in bank insolvency”.
(1) An application for a bank insolvency order may be made to the court by—
(a) the Bank of England,
(b) the PRA, or
(c) the Secretary of State.
(2) An application must nominate a person to be appointed as the bank liquidator.
(3) The bank must be given notice of an application, in accordance with rules under section 411 of the Insolvency Act 1986 (as applied by section 125 below).
(1) In this section—
(a) Ground A is that a bank is unable, or likely to become unable, to pay its debts,
(b) Ground B is that the winding up of a bank would be in the public interest, and
(c) Ground C is that the winding up of a bank would be fair.
(2) The Bank of England may apply for a bank insolvency order only if—
(a) ... the PRA is satisfied that Condition 1 in section 7 is met, and
(b) the Bank of England is satisfied—
(ai) that Condition 2 in section 7 is met,
(i) that the bank has eligible depositors, and
(ii) that Ground A or C applies.
(3) The PRA may apply for a bank insolvency order only if—
(a) the Bank of England is satisfied that Condition 2 in section 7 is met, and
(b) the PRA is satisfied—
(i) that Condition 1 in section 7 is met,
(ii) that the bank has eligible depositors, and
(iii) that Ground A or C applies.
(4) The Secretary of State may apply for a bank insolvency order only if satisfied—
(a) that the bank has eligible depositors, and
(b) that Ground B applies.
(5) The sources of information on the basis of which the Secretary of State may be satisfied of the matters specified in subsection (4) include those listed in section 124A(1) of the Insolvency Act 1986 (petition for winding up on grounds of public interest).
(1) The court may make a bank insolvency order on the application of the Bank of England or the PRA if satisfied—
(a) that the bank has eligible depositors, and
(b) that Ground A or C of section 96 applies.
(2) The court may make a bank insolvency order on the application of the Secretary of State if satisfied—
(a) that the bank has eligible depositors, and
(b) that Grounds B and C of section 96 apply.
(3) On an application for a bank insolvency order the court may—
(a) grant the application in accordance with subsection (1) or (2),
(b) adjourn the application (generally or to a specified date), or
(c) dismiss the application.
(1) A bank insolvency order shall be treated as having taken effect in accordance with this section.
(2) In the case where—
(a) notice has been given to the PRA under section 120 of an application for an administration order or a petition for a winding up order, and
(b) the PRA or the Bank of England applies for a bank insolvency order in the period of 2 weeks specified in Condition 3 in that section,
the bank insolvency order is treated as having taken effect when the application or petition was made or presented.
(3) In any other case, the bank insolvency order is treated as having taken effect when the application for the order was made.
(4) Unless the court directs otherwise on proof of fraud or mistake, proceedings taken in the bank insolvency, during the period for which it is treated as having had effect, are treated as having been taken validly.
(1) A bank liquidator has two objectives.
(2) Objective 1 is to work with the FSCS so as to ensure that as soon as is reasonably practicable each eligible depositor—
(a) has the relevant account transferred to another financial institution, or
(b) receives payment from (or on behalf of) the FSCS.
(3) Objective 2 is to wind up the affairs of the bank so as to achieve the best result for the bank's creditors as a whole.
(4) Objective 1 takes precedence over Objective 2 (but the bank liquidator is obliged to begin working towards both objectives immediately upon appointment).
(1) Following a bank insolvency order a liquidation committee must be established, for the purpose of ensuring that the bank liquidator properly exercises the functions under this Part.
(2) The liquidation committee is to consist initially of—
(a) two individuals nominated by the Bank of England,
(b) one individual nominated by the PRA,
(c) one individual nominated by the FCA, and
(d) one individual nominated by the FSCS.
(3) The bank liquidator must report to the liquidation committee about any matter—
(a) on request, or
(b) which the bank liquidator thinks is likely to be of interest to the liquidation committee.
(4) In particular, the bank liquidator—
(a) must keep the liquidation committee informed of progress towards Objective 1 in section 99, and
(b) must notify the liquidation committee when in the bank liquidator's opinion Objective 1 in section 99 has been achieved entirely or so far as is reasonably practicable.
(5) As soon as is reasonably practicable after receiving notice under subsection (4)(b) the liquidation committee must either—
(a) resolve that Objective 1 in section 99 has been achieved entirely or so far as is reasonably practicable (a “full payment resolution”), or
(b) apply to the court under section 168(5) of the Insolvency Act 1986 (as applied by section 103 below).
(6) Where a liquidation committee passes a full payment resolution—
(a) the bank liquidator must summon a meeting of creditors,
(b) the meeting may elect 2 or 4 individuals as new members of the liquidation committee,
(c) those individuals replace the members nominated by the Bank of England, the PRA and the FCA,
(d) the FSCS may resign from the liquidation committee (in which case 3 or 5 new members may be elected under paragraph (b)), and
(e) if no individuals are elected under paragraph (b), or the resulting committee would have fewer than 3 members or an even number of members, the liquidation committee ceases to exist at the end of the meeting.
(7) Subject to provisions of this section, rules under section 411 of the Insolvency Act 1986 (as amended by section 125 below) may make provision about—
(a) the establishment of liquidation committees,
(b) the membership of liquidation committees,
(c) the functions of liquidation committees, and
(d) the proceedings of liquidation committees.
(1) A meeting of the liquidation committee may be summoned—
(a) by any of the members, or
(b) by the bank liquidator.
(2) While the liquidation committee consists of the initial members (or their nominated replacements) a meeting is quorate only if all the members are present.
(3) A person aggrieved by any action of the liquidation committee before it has passed a full payment resolution may apply to the court, which may make any order (including an order for the repayment of money).
(4) The court may (whether on an application under subsection (3), on the application of a bank liquidator or otherwise) make an order that the liquidation committee is to be treated as having passed a full payment resolution.
(5) If a liquidation committee fails to comply with section 100(5) the bank liquidator must apply to the court—
(a) for an order under subsection (4) above, or
(b) for directions under or by virtue of section 168(3) or 169(2) of the Insolvency Act 1986 as applied by section 103 below.
(6) A nominating body under section 100(2) may replace its nominee at any time.
(7) After the removal of the nominated members under section 100(6)(c) the PRA, the FCA and the Bank of England—
(a) may attend meetings of the liquidation committee,
(b) are entitled to copies of documents relating to the liquidation committee's business,
(c) may make representations to the liquidation committee, and
(d) may participate in legal proceedings relating to the bank insolvency.
(8) Where a liquidation committee ceases to exist by virtue of section 100(6)(e)—
(a) it may be re-formed by a creditors' meeting summoned by the bank liquidator for the purpose, and
(b) the bank liquidator must summon a meeting for the purpose if requested to do so by one-tenth in value of the bank's creditors.
(9) Where a liquidation committee ceases to exist by virtue of section 100(6)(e) and has not been re-formed under subsection (8) above or under section 141(2) or 142(2) of the Insolvency Act 1986 (as applied by section 103 below)—
(a) ignore a reference in this Part to the liquidation committee,
(b) for section 113(2) to (4) substitute requirements for the bank liquidator, before making a proposal—
(i) to produce a final report,
(ii) to send copies in accordance with section 113(2)(b),
(iii) to make it available in accordance with section 113(2)(c), and
(iv) to be satisfied as specified in section 113(4)(b),
(c) ignore Condition 2 in section 114, and
(d) for section 115(1) to (5) substitute a power for the bank liquidator to apply to the Secretary of State or Accountant of Court for release and requirements that before making an application the bank liquidator must—
(i) produce a final report,
(ii) send copies in accordance with section 115(2)(b),
(iii) make it available in accordance with section 115(2)(c), and
(iv) notify the court and the registrar of companies of the intention to vacate office and to apply for release.
(1) As soon as is reasonably practicable, a liquidation committee must recommend the bank liquidator to pursue—
(a) Objective 1(a) in section 99,
(b) Objective 1(b) in section 99, or
(c) Objective 1(a) for one specified class of case and Objective 1(b) for another.
(2) In making a recommendation the liquidation committee must consider—
(a) the desirability of achieving Objective 1 as quickly as possible, and
(b) Objective 2 in section 99.
(3) If the liquidation committee thinks that the bank liquidator is failing to comply with their recommendation, they must apply to the court for directions under section 168(5) of the Insolvency Act 1986 (as applied by section 103 below).
(4) Where the liquidation committee has not made a recommendation the bank liquidator may apply to the court under section 101(3); and the court may, in particular, make a direction in lieu of a recommendation if the liquidation committee fail to make one within a period set by the court.
(1) A bank liquidator may do anything necessary or expedient for the pursuit of the Objectives in section 99.
(2) The following provisions of this section provide for—
(a) general powers and duties of bank liquidators (by application of provisions about liquidators), and
(b) the general process and effects of bank insolvency (by application of provisions about winding up).
(3) The provisions set out in the Table apply in relation to bank insolvency as in relation to winding up, with—
(a) the modifications set out in subsection (4),
(b) any other modification specified in the Table, and
(c) any other necessary modification.
(4) The modifications are that—
(a) a reference to the liquidator is a reference to the bank liquidator,
(b) a reference to winding up is a reference to bank insolvency,
(c) a reference to winding up by the court is a reference to the imposition of bank insolvency by order of the court,
(d) a reference to being wound up under Part IV or V of the Insolvency Act 1986 is a reference to being made the subject of a bank insolvency order,
(e) a reference to the commencement of winding up is a reference to the commencement of bank insolvency,
(f) a reference to going into liquidation is a reference to entering bank insolvency,
(g) a reference to a winding-up order is a reference to a bank insolvency order, and
(h) except where otherwise specified in the Table, a reference to a company is a reference to the bank.
(5) Powers conferred by this Act, by the Insolvency Act 1986 (as applied) and the Companies Acts are in addition to, and not in restriction of, any existing powers of instituting proceedings against a contributory or debtor of a bank, or the estate of any contributory or debtor, for the recovery of any call or other sum.
(6) A reference in an enactment or other document to anything done under a provision applied by this Part includes a reference to the provision as applied.
(7) In the Table “Schedule 9 to the 2015 Act” means Schedule 9 to the Small Business, Enterprise and Employment Act 2015 (further amendments relating to the abolition of requirements to hold meetings: company insolvency).
TABLE OF APPLIED PROVISIONS
Provision of Insolvency Act 1986 | Subject | Modification or comment
Section 127 | Avoidance of property dispositions | Ignore section 127(2).
Section 128 | Avoidance of attachment, &c.
Section 130 | Consequences of winding-up order | Ignore section 130(4).
Section 131 | Company's statement of affairs | (a) Treat references to the official receiver as references to the bank liquidator. (b) A creditor or contributory of the bank is entitled to receive a copy of a statement under section 131 on request to the bank liquidator.
Section 135 | Provisional appointment | (a) Treat the reference to the presentation of a winding-up petition as a reference to the making of an application for a bank insolvency order. (b) Subsection (2) applies in relation to England and Wales and Scotland (and subsection (3) does not apply). (c) Ignore the reference to the official receiver. (d) Only a person who is qualified to act as an insolvency practitioner in relation to the bank and who consents to act may be appointed. (e) A provisional bank liquidator may not pay dividends to creditors. (f) The appointment of a provisional bank liquidator lapses on the appointment of a bank liquidator.
Section 141 | Liquidation Committee (England and Wales) | Ignore the amendment made by paragraph 36 of Schedule 9 to the 2015 Act. The application of section 141 is subject to— sections 100, 101 and 109 of this Act, rules under section 411 (as applied by section 125 of this Act) which may, in particular, adapt section 141 to reflect (i) the fact that the bank liquidator is appointed by the court and (ii) the possibility of calling creditors' meetings under other provisions, and the omission of references to the official receiver.
Section 142 | Liquidation Committee (Scotland) | Ignore the amendments made by paragraph 37 of Schedule 9 to the 2015 Act. The application of section 142 is subject to— sections 100, 101 and 109 of this Act, rules under section 411 (as applied by section 125 of this Act) which may, in particular, adapt section 142 to reflect (i) the fact that the bank liquidator is appointed by the court and (ii) the possibility of calling creditors' meetings under other provisions, and the omission of references to the official receiver.
Section 143 | General functions of liquidator | (a) Section 143(1) is subject to Objective 1 in section 99 above. (b) Ignore section 143(2).
Section 144 | Custody of property
Section 145 | Vesting of property
Section 146 | Duty to summon final meeting | Section 146 is not applied–but section 115 below makes similar provision.
Section 147 | Power to stay or sist proceedings | An application may be made only by— the bank liquidator, the PRA, the Bank of England, the FSCS, or a creditor or contributory (but only if the liquidation committee has passed a full payment resolution).
Section 148 | List of contributories and application of assets | By virtue of the Insolvency Rules the functions under this section are largely delegated to the liquidator–rules by virtue of section 125 may achieve a similar delegation to the bank liquidator.
Section 149 | Debts due from contributories
Section 150 | Power to make calls
Section 152 | Order on contributory: evidence
Section 153 | Exclusion of creditors
Section 154 | Adjustment of rights of contributories
Section 155 | Inspection of books by creditors | In making or considering whether to make an order under section 155 the court shall have regard to Objective 1 in section 99 above.
Section 156 | Payment of expenses of winding up
Section 157 | Attendance at company meetings (Scotland)
Section 158 | Power to arrest absconding contributory
Section 159 | Powers to be cumulative | Section 159 is not applied–but subsection (5) above makes similar provision.
Section 160 | Delegation of powers to liquidator (England and Wales) | Ignore the amendment made by paragraph 39 of Schedule 9 to the 2015 Act.
Section 161 | Orders for calls on contributories (Scotland)
Section 162 | Appeals from orders (Scotland) | An appeal may be brought only if the liquidation committee has passed a full payment resolution.
Section 167 and Schedule 4 | General powers of liquidator | An application to the court may not be made under section 167(3) unless the liquidation committee has passed a full payment resolution (although a creditor or contributory may apply to the court with respect to any action (or inaction) of the liquidation committee, under section 101(3) above). In exercising or considering whether to exercise a power under Schedule 4 the bank liquidator shall have regard to Objective 1 in section 99. A reference to the liquidation committee is to the liquidation committee established by section 100. The power in paragraph 4 of Schedule 4 includes the power to submit matters to arbitration. Some additional general powers are conferred by section 104 below.
Section 168 | Supplementary powers of liquidator | (za) Ignore the amendment made by paragraph 41 of Schedule 9 to the 2015 Act. (a) A direction or request under section 168(2) has no effect unless the liquidation committee has passed a full payment resolution. (b) Section 168(5) also applies in the case of the imposition of bank insolvency by order of the Court of Session. (c) An application to the court may not be made under section 168(5) unless the liquidation committee has passed a full payment resolution (except as provided in section 100 or 102 above).
Section 169 | Supplementary powers (Scotland) | (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (b) Powers of the bank liquidator by virtue of section 169(2) are subject to Objective 1 in section 99 above.
Section 170 | Liquidator's duty to make returns | The liquidation committee is added to the list of persons able to apply under section 170(2).
Section 172 | Removal of liquidator | Section 172 is not applied to a bank liquidator–but section 108 makes similar provision.
Section 172(1), (2) and (5) are applied to a provisional bank liquidator.
Section 174 | Release of liquidator | Section 174 is not applied–but section 115 makes similar provision.
Section 175 | Preferential debts
Section 176 | Preferential charge on goods restrained
Section 176AZA | Non-preferential debts of financial institutions
Section 176ZA | Expenses of winding up
Section 176ZB | Application of proceeds of office-holder claims
Section 176A | Share of assets for unsecured creditors
Section 177 | Appointment of special manager
Section 178 | Power to disclaim onerous property
Section 179 | Disclaimer of leaseholds
Section 180 | Land subject to rentcharge
Section 181 | Disclaimer: powers of court
Section 182 | Leaseholds
Section 183 | Effect of execution or attachment (England and Wales)
Section 184 | Execution of writs (England and Wales)
Section 185 | Effect of diligence (Scotland) | In the application of section 24(1) and (2) of the Bankruptcy (Scotland) Act 2016 the reference to an order of the court awarding winding up is a reference to the making of the bank insolvency order.
Section 186 | Rescission of contracts by court
Section 187 | Transfer of assets to employees
Section 188 | Publicity
Section 189 | Interest on debts
Section 190 | Exemption from stamp duty
Section 191 | Company's books as evidence
Section 192 | Information about pending liquidations
Section 193 | Unclaimed dividends (Scotland)
Section 194 | Resolutions passed at adjourned meetings | Section 194 applies as it applied before its repeal by paragraph 46 of Schedule 9 to the 2015 Act.
Section 195 | Meetings to ascertain wishes of creditors or contributories | (a) Ignore the amendments made by paragraph 47 of Schedule 9 to the 2015 Act. (b) The power to have regard to the wishes of creditors and contributories is subject to Objective 1 in section 99.
Section 196 | Judicial notice of court documents
Section 197 | Commission for receiving evidence
Section 198 | Court order for examination of persons (Scotland)
Section 199 | Costs of application for leave to proceed (Scotland)
Section 200 | Affidavits
Section 206 | Fraud in anticipation of winding up
Section 207 | Transactions in fraud of creditors
Section 208 | Misconduct in course of winding up | Ignore the amendment made by paragraph 52 of Schedule 9 to the 2015 Act.
Section 209 | Falsification of company's books
Section 210 | Material omissions
Section 211 | False representations to creditors
Section 212 | Summary remedy against directors, &c.
Section 213 | Fraudulent trading
Section 214 | Wrongful trading | (a) Treat the reference in subsection (2)(b) to entering insolvent administration as a reference to entering bank administration under Part 3 of this Act at a time when the bank’s assets are insufficient for the payment of its debts and other liabilities and the expenses of the administration. (b) Ignore subsection (6A).
Section 215 | Sections 213 & 214: procedure
Section 216 | Restriction on re-use of company names
Section 217 | Personal liability for debts
Section 218 | Prosecution of officers and members of company | (a) Ignore subsections (4) and (6). (b) In subsection (3), treat the second reference to the official receiver as a reference to the Secretary of State. (c) In subsection (5) treat the reference to subsection (4) as a reference to subsection (3).
Section 219 | Obligations under section 218
Section 231 | Appointment of 2 or more persons
Section 232 | Validity of acts
Section 233 | Utilities
Section 234 | Getting in company's property
Section 235 | Co-operation with liquidator | Ignore references to the official receiver
Section 236 | Inquiry into company's dealings | Ignore references to the official receiver
Section 237 | Section 236: enforcement by court
Section 238 | Transactions at undervalue (England and Wales) | Anything done by the bank in connection with the exercise of a stabilisation power under Part 1 of this Act is not a transaction at an undervalue for the purposes of section 238.
Section 239 | Preferences (England and Wales) | Action taken by the bank in connection with the exercise of a stabilisation power under Part 1 of this Act does not amount to giving a preference for the purpose of section 239.
Section 240 | Sections 238 & 239: relevant time
Section 241 | Orders under sections 238 & 239 | Having notice of the relevant proceedings means having notice of— an application by the Bank of England, the PRA or the Secretary of State for a bank insolvency order, or notice under section 120 below.
Section 242 | Gratuitous alienations (Scotland) | Anything done by the bank in connection with the exercise of a stabilisation power under Part 1 of this Act is not a gratuitous alienation for the purpose of section 242 or any other rule of law.
Section 243 | Unfair preferences (Scotland) | Action taken by the bank in connection with the exercise of a stabilisation power under Part 1 of this Act does not amount to an unfair preference for the purpose of section 243 or any other rule of law.
Section 244 | Extortionate credit transactions
Section 245 | Avoidance of floating charges
Section 246 | Unenforceability of liens
Section 246ZD | Power to assign certain causes of action
Sections 386 & 387, and Schedule 6 (and Schedule 4 to the Pension Schemes Act 1993) | Preferential debts
Section 387A | Financial institutions and their non-preferential debts
Section 389 | Offence of acting without being qualified | Treat references to acting as an insolvency practitioner as references to acting as a bank liquidator.
Sections 390 to 391T | Authorisation and regulation of insolvency practitioners | (a) In section 390 treat references to acting as an insolvency practitioner as references to acting as a bank liquidator. (b) Read subsection (2) of that section (as so modified) as if after “authorised” there were inserted “to act as an insolvency practitioner”. (c) An order under section 391 has effect in relation to any provision applied for the purposes of bank insolvency. (d) In sections 390A, 390B(1) and (3), 391O(1)(b) and 391R(3)(b), in a reference to authorisation or permission to act as an insolvency practitioner in relation to (or only in relation to) companies the reference to companies has effect without the modification in subsection (4)(h) of this section. (e) In sections 391Q(2)(b) and 391S(3)(e) the reference to a company has effect without the modification in subsection (4)(h) of this section.
Sections 423–425 | Transactions defrauding creditors | Anything done by the bank in connection with the exercise of a stabilisation power under Part 1 of this Act is not a transaction at an undervalue for the purposes of section 423.
Sections 430 to 432and Schedule 10 | Offences
Section 433 | Statements: admissibility | For section 433(1)(a) and (b) substitute a reference to a statement prepared for the purposes of a provision of this Part.
(1) A bank liquidator has the following powers.
(2) Power to effect and maintain insurances in respect of the business and property of the bank.
(3) Power to do all such things (including the carrying out of works) as may be necessary for the realisation of the property of the bank.
(4) Power to make any payment which is necessary or incidental to the performance of the bank liquidator's functions.
A bank liquidator appointed by bank insolvency order remains in office until vacating office—
(a) by resigning under section 107,
(b) on removal under section 108 or 109,
(c) on disqualification under section 110,
(d) on the appointment of a replacement in accordance with section 112,
(e) in accordance with sections 113 to 115, or
(f) on death.