The Building Societies (Bail-in) Order 2014
| Jurisdiction | UK Non-devolved |
| Citation | SI 2014/3344 |
2014No. 3344
FINANCIAL SERVICES AND MARKETS
BUILDING SOCIETIES
The Building Societies (Bail-in) Order 2014
18thDecember2014
19thDecember2014
10thJanuary2015
The Treasury are designated( 1) for the purposes of section 2(2) of the European Communities Act 1972( 2) in relation to financial services.
The Treasury, in exercise of the powers conferred by section 2(2) of the European Communities Act 1972 and sections 17(2) to (4) and 142(3) of the Financial Services (Banking Reform) Act 2013( 3), make the following Order:
Citation and commencement
1. This Order may be cited as the Building Societies (Bail-in) Order 2014 and comes into force on 10th January 2015.
Amendments to Part 1 of the Banking Act 2009
2. (1) Part 1 of the Banking Act 2009( 4) is amended as follows.
(2) In section 84( 5) (application of Part 1 to building societies: general), for the existing text before the Table substitute-
"This Part applies to building societies (within the meaning of section 119 of the Building Societies Act 1986( 6)) as it applies to banks, subject to-
(a) the provisions of the Table, and
(b) sections 84A to 84D (which relate to the fourth stabilisation option).".
(3) After section 84 insert-
"Bail-in option: building societies
84A.
(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( 7) (bail-in option) is to be read as if the provision referred to included provision under this section.
(3) Subsection (1) of section 12AA( 8) (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( 9) (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)( 10) (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)( 11), 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( 12) 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.
Further provision: conversion of building society into company
84B.
(1) This section applies where a resolution instrument makes provision under section 84A(5)(a).
(2) The 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 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 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 84A(5)(a).
Further provision: transfer of business of building society to company
84C.
(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.
Bail-in option: modifications of this Act and other legislation
84D.
(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 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-
(i) in relation to the successor company, or
(ii) in a case within subsection (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... |
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