Inter-bank payment systems
Section 104: Inter-bank payment systems
586.Part 5 of the Banking Act 2009 makes provision for regulation by the Bank of payment systems specified by the Treasury as “recognised payment systems”. The Bank performs its functions under Part 5 in pursuance of its financial stability objective (specified in section 2A of the Bank of England Act 1998 as amended by section 2). Section 104 makes amendments to that Part.
587.Subsection (2) inserts a new section 186A which confers a power on the Treasury to amend an order made under section 184 (recognition order) that specifies a payment system as a “recognised system”. This power may be used, for example, to amend the description of the arrangements which constitute the recognised system. Before amending a recognition order the Treasury must consult the Bank and notify the operator of the relevant system and consider any representations made. In addition, in certain cases the Treasury must consult the FCA and the PRA.
588.Subsection (3) substitutes for section 191 (directions) a new section 191. Section 191 confers on the Bank the power to give directions to a recognised payment system. Such directions may, for example, be given for the purposes of securing the compliance with a requirement imposed under section 190 (system rules) or may be given for the purposes of addressing an immediate threat to financial stability. Where a direction is specified by the Bank as being given for the purposes of resolving or reducing a threat to the stability of the UK financial system, new section 191(3) provides that the operator of the system (and its officers and staff) has immunity from liability in damages in respect of action or inaction in accordance with the direction. The new arrangements reduce the administrative steps necessary for the purposes of conferring immunity from liability in damages, with the aim of enhancing the speed at which action may be taken to address threats to financial stability. Provision is also made enabling the Treasury to confer immunity from liability in damages on any person and regardless of the purpose for which the direction is to be given where the Treasury consider it appropriate (subsection (5)). For example, this power could enable the Treasury to grant immunity: (a) to an operator of a recognised payment system when the direction is given by the Bank for a purpose other than that of resolving or reducing a threat to the stability of the UK financial system; or (b) to a person who provides services to an operator of a recognised payment system where a direction is given for the purposes of resolving or reducing a threat to the stability of the UK financial system and action is required on the part of the operator which involves the cooperation of the service provider or action on the part of that person. The effect of this provision is essentially to continue the Treasury’s existing ability to confer immunity from liability in damages in a wider range of cases.
589.Subsection (4) makes amendments to section 186 (procedure to be followed by the Treasury before making a recognition order) such that the Treasury are required to consult the FCA before making a recognition order in respect of a payment system the operator of which is, or has applied to become, a recognised investment exchange under Part 18 of FSMA or has, or has applied for, a permission to conduct regulated activities under Part 4A of FSMA. The Treasury must also consult the PRA where the person concerned has applied for, or has, permission to carry on any PRA-regulated activities. Subsections (5), (6) and (10) make other similar consequential changes.
590.Subsection (7) inserts a new section 202A into the Banking Act which enables the Bank to apply to the court for an injunction in certain cases, for example, where there is a reasonable likelihood that there will be a compliance failure as defined in section 196 of the Act (compliance failure).
591.Subsection (8) inserts new sections 203A and 203B which impose certain requirements on the Bank in relation to the discharge of its functions in connection with recognised payment systems. In particular, new section 203A requires the Bank to maintain satisfactory arrangements for recording decisions made in the exercise of certain of its functions under Part 5 of the Banking Act; new section 203B requires the Bank to report to the Treasury at least once a year in relation to, among other things, the discharge of its functions under Part 5.
592.Subsection (9) inserts a new subsection (1A) into section 204 (information) which provides that the Bank can require the operator of a recognised payment system to provide information in connection with any other of the Bank’s functions undertaken in pursuance of its financial stability objective. The Bank can already require persons to provide information in connection with its functions under Part 5.
Section 105: International obligations
593.Section 105 amends the Banking Act 2009 by inserting a new section 206B. This new section enables the Treasury to direct the Bank in exercising its powers under Part 5 of that Act (inter-bank payment systems) not to take proposed action if it appears to the Treasury that action would be incompatible with Community obligations or any other international obligations of the United Kingdom. The Treasury may also direct the Bank to take action which it has power to take where that action is required for the purpose of implementing any such obligation. This power is similar to the power in section 410 of FSMA (international obligations).
