Banking Act 2009
| Jurisdiction | UK Non-devolved |
| Citation | 2009 c. 1 |
Banking Act 2009
2009 Chapter 1
An Act to make provision about banking.
[12th February 2009]
Be it enacted by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—
Part 1
Special Resolution Regime
Introduction
1 Overview
(1) The purpose of the special resolution regime for banks is to address the situation where all or part of the business of a bank has encountered, or is likely to encounter, financial difficulties.
(2) The special resolution regime consists of—
(a) the three stabilisation options,
(b) the bank insolvency procedure (provided by Part 2), and
(c) the bank administration procedure (provided by Part 3).
(3) The three "stabilisation options" are—
(a) transfer to a private sector purchaser (section 11),
(b) transfer to a bridge bank (section 12), and
(c) transfer to temporary public ownership (section 13).
(4) Each of the three stabilisation options is achieved through the exercise of one or more of the "stabilisation powers", which are—
(a) the share transfer powers (sections 15, 16, 26 to 31 and 85), and
(b) the property transfer powers (sections 33 and 42 to 46).
(5) Each of the following has a role in the operation of the special resolution regime—
(a) the Bank of England,
(b) the Treasury, and
(c) the Financial Services Authority.
(6) The Table describes the provisions of this Part.
Sections |
Topic |
Sections 1 to 3 |
Introduction |
Sections 4 to 6 |
Objectives and code |
Sections 7 to 10 |
Exercise of powers: general |
Sections 11 to 13 |
The stabilisation options |
Sections 14 to 32 |
Transfer of securities |
Sections 33 to 48 |
Transfer of property |
Sections 49 to 62 |
Compensation |
Sections 63 to 75 |
Incidental functions |
Sections 76 to 81 |
Treasury |
Sections 82 and 83 |
Holding companies |
Sections 84 to 89 |
Building societies, &c. |
2 Interpretation: ‘bank’
(1) In this Part "bank" means a UK institution which has permission under Part 4 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) Where a stabilisation power is exercised in respect of a bank, it does not cease to be a bank for the purposes of this Part if it later loses the permission referred to in subsection (1).
(5) 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.
(6) Section 84 applies this Part to building societies with modifications.
(7) Section 89 allows the application of this Part to credit unions.
3 Interpretation: other expressions
In this Part—
"the FSA" means the Financial Services Authority, and
"financial assistance" has the meaning given by section 257.
Objectives and code
4 Special resolution objectives
(1) This section sets out the special resolution objectives.
(2) The relevant authorities shall have regard to the special resolution objectives in using, or considering the use of—
(a) the stabilisation powers,
(b) the bank insolvency procedure, or
(c) the bank administration procedure.
(3) For the purpose of this section the relevant authorities are—
(a) the Treasury,
(b) the FSA, and
(c) the Bank of England.
(4) Objective 1 is to protect and enhance the stability of the financial systems of the United Kingdom.
(5) Objective 2 is to protect and enhance public confidence in the stability of the banking systems of the United Kingdom.
(6) Objective 3 is to protect depositors.
(7) Objective 4 is to protect public funds.
(8) Objective 5 is to avoid interfering with property rights in contravention of a Convention right (within the meaning of the Human Rights Act 1998).
(9) In subsection (4), the reference to the stability of the financial systems of the United Kingdom includes, in particular, a reference to the continuity of banking services.
(10) The order in which the objectives are listed in this section is not significant; they are to be balanced as appropriate in each case.
5 Code of practice
(1) The Treasury shall issue a code of practice about the use of—
(a) the stabilisation powers,
(b) the bank insolvency procedure, and
(c) the bank administration procedure.
(2) The code may, in particular, provide guidance on—
(a) how the special resolution objectives are to be understood and achieved,
(b) the choice between different options,
(c) the information to be provided in the course of a consultation under this Part,
(d) the giving of advice by one relevant authority to another about whether, when and how the stabilisation powers are to be used,
(e) how to determine whether Condition 2 in section 7 is met,
(f) how to determine whether the test for the use of stabilisation powers in section 8 is satisfied,
(g) sections 63 and 66, and
(h) compensation.
(3) Sections 12 and 13 require the inclusion in the code of certain matters about bridge banks and temporary public ownership.
(4) The relevant authorities shall have regard to the code.
(5) For the purpose of this section the relevant authorities are—
(a) the Treasury,
(b) the FSA, and
(c) the Bank of England.
6 Code of practice: procedure
(1) Before issuing the code of practice the Treasury must consult—
(a) the FSA,
(b) the Bank of England, and
(c) the scheme manager of the Financial Services Compensation Scheme (established under Part 15 of the Financial Services and Markets Act 2000).
(2) As soon as is reasonably practicable after issuing the code of practice the Treasury shall lay a copy before Parliament.
(3) The Treasury may revise and re-issue the code of practice.
(4) Subsections (1) and (2) apply to re-issue as to the first issue.
Exercise of powers: general
7 General conditions
(1) A stabilisation power may be exercised in respect of a bank only if the FSA is satisfied that the following conditions are met.
(2) Condition 1 is that the bank is failing, or is likely to fail, to satisfy the threshold conditions (within the meaning of section 41(1) of the Financial Services and Markets Act 2000 (permission to carry on regulated activities)).
(3) Condition 2 is that having regard to timing and other relevant circumstances it is not reasonably likely that (ignoring the stabilisation powers) action will be taken by or in respect of the bank that will enable the bank to satisfy the threshold conditions.
(4) The FSA shall treat Conditions 1 and 2 as met if satisfied that they would be met but for financial assistance provided by—
(a) the Treasury, or
(b) the Bank of England (disregarding ordinary market assistance offered by the Bank on its usual terms).
(5) Before determining whether or not Condition 2 is met the FSA must consult—
(a) the Bank of England, and
(b) the Treasury.
(6) The special resolution objectives are not relevant to Conditions 1 and 2.
(7) The conditions for applying for and making a bank insolvency order are...
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