Sch. 2 para. 6(8) in force at 1.3.2014 for specified purposes by S.I. 2014/377, art. 2(1)(b), Sch. Pt. 2

Sch. 2 para. 6(8) in force at 31.12.2014 in so far as not already in force by S.I. 2014/3160, art. 2(1)(b)

Sch. 2 para. 6(1)-(7)(9)(10) in force at 31.12.2014 by S.I. 2014/3160, art. 2(1)(b)

http://www.legislation.gov.uk/ukpga/2013/33/schedule/2/paragraph/6/2019-12-09Financial Services (Banking Reform) Act 2013An Act to make further provision about banking and other financial services, including provision about the Financial Services Compensation Scheme; to make provision for the amounts owed in respect of certain deposits to be treated as a preferential debt on insolvency; to make further provision about payment systems and securities settlement systems; to make provision about the accounts of the Bank of England and its wholly owned subsidiaries; to make provision in relation to persons providing claims management services; and for connected purposes.texttext/xmlenStatute Law Database2024-09-06Expert Participation2019-12-09SCHEDULESSCHEDULE 2Bail-in stabilisation optionPART 1Amendments of Banking Act 2009Compensation61

In section 49 (orders)—

a

in subsection (1), for “three” substitute “ four ” and for “and property transfer instruments” substitute “ , property transfer instruments and orders and resolution instruments ”;

b

after subsection (2) insert—

2A

A “bail-in compensation order” is an order establishing a scheme for determining, in accordance with section 52A, whether any transferors or others should be paid compensation.

2

In section 52 (transfer to bridge bank), in subsection (3)(b), for “specified classes of creditor,” substitute “ persons of a specified description, ”.

3

After section 52 insert—

52ABail-in option1

Subsection (2) applies if the Bank of England makes—

a

a resolution instrument under section 12A(2), or

b

a property transfer instrument under section 41A(2).

2

The Treasury must make a bail-in compensation order (see section 49(2A)).

3

A bail-in compensation order may include provision for—

a

an independent valuer (in which case sections 54 to 56 are to apply);

b

valuation principles (in which case section 57(2) to (5) is to apply).

4

In section 53 (onward and reverse transfers), in subsection (1)—

a

before paragraph (za) insert—

zza

the Bank of England makes a supplemental share transfer instrument under section 26,

;

b

after paragraph (za) insert—

zb

the Treasury makes a supplemental share transfer order under section 27,

;

c

after paragraph (d) insert—

dza

the Bank of England makes a supplemental property transfer instrument under section 42,

;

d

after paragraph (f) insert—

fa

the Bank of England makes a reverse property transfer instrument under section 44A(2),

;

e

omit the “or” after paragraph (g);

f

after paragraph (h) insert—

i

the Bank of England makes a supplemental resolution instrument under section 48U,

j

the Bank of England makes an onward transfer resolution instrument under section 48V(2), or

k

the Bank of England makes a reverse transfer resolution instrument under section 48W(2) or (3).

;

g

in the heading, after “transfers” insert etc.

5

In section 54 (independent valuer)—

a

in subsection (1), after “compensation scheme order” insert “ or bail-in compensation order ”;

b

in subsection (4)(b), after “order” insert “ or bail-in compensation order ”.

6

In section 56 (independent valuer: money), in subsection (2)(b) for “or third party compensation order” substitute “ , third party compensation order or bail-in compensation order ”.

7

In section 57 (valuation principles), in subsection (1), after “order” insert “ or bail-in compensation order ”.

8

After section 60 insert—

60AFurther mandatory provision: bail-in provision1

The Treasury may make regulations about compensation arrangements in the case of—

a

resolution instruments under section 12A(2) and supplemental resolution instruments under section 48U(2), and

b

instruments (made under any provision) that include special bail-in provision.

2

Regulations may—

a

require a resolution fund order, a compensation scheme order, a third party compensation order or a bail-in compensation order to include provision of a specified kind or to specified effect;

b

make provision that is to be treated as forming part of any such order (whether (i) generally, (ii) only if applied, (iii) unless disapplied, or (iv) subject to express modification).

3

Regulations may provide for whether compensation is to be paid, and if so what amount is to be paid, to be determined by reference to any factors or combination of factors; in particular, the regulations may provide for entitlement—

a

to depend in part upon the amounts which are or may be payable under a resolution fund order;

b

to be contingent upon the occurrence or non-occurrence of specified events;

c

to be determined wholly or partly by an independent valuer (within the meaning of sections 54 to 56) appointed in accordance with a compensation scheme order or bail-in compensation order.

4

Regulations may make provision about payment including, in particular, provision for payments—

a

on account subject to terms and conditions;

b

by instalment.

5

Regulations—

a

are to 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.

60BPrinciple of no less favourable treatment1

In making regulations under section 60A the Treasury must, in particular, have regard to the desirability of ensuring that pre-resolution shareholders and creditors of a bank do not receive less favourable treatment than they would have received had the bank entered insolvency immediately before the coming into effect of the initial instrument.

2

References in this section to the initial instrument are—

a

in relation to compensation arrangements in the case of property transfer instruments under section 12(2), to the first instrument to be made under that provision with respect to the bank;

b

in relation to compensation arrangements in other cases, to the first resolution instrument to be made under section 12A with respect to the bank.

3

The “pre-resolution shareholders and creditors” of a bank are the persons who held securities issued by the bank, or were creditors of the bank, immediately before the coming into effect of the initial instrument.

4

References in this section to insolvency include a reference to (i) liquidation, (ii) bank insolvency, (iii) administration, (iv) bank administration, (v) receivership, (vi) composition with creditors, and (vii) a scheme of arrangement.

9

In section 61(1) (sources of compensation),—

a

omit the “and” at the end of paragraph (c);

b

after paragraph (c) insert—

ca

bail-in compensation orders,

;

c

after paragraph (d) insert, “, and

e

regulations under section 60A.

10

In section 62(1) (procedure), omit the “and” at the end of paragraph (b), and after that paragraph insert—

ba

bail-in compensation orders, and

.

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<note class="commentary I" eId="key-734cae7ecba6918491efdc273d0c3aa7">
<p>
<ref href="http://www.legislation.gov.uk/id/ukpga/2013/33/schedule/2/paragraph/6/8">Sch. 2 para. 6(8)</ref>
in force at 1.3.2014 for specified purposes by
<ref href="http://www.legislation.gov.uk/id/uksi/2014/377">S.I. 2014/377</ref>
,
<ref href="http://www.legislation.gov.uk/id/uksi/2014/377/article/2/1/b">art. 2(1)(b)</ref>
,
<ref href="http://www.legislation.gov.uk/id/uksi/2014/377/schedule/part/2">Sch. Pt. 2</ref>
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<note class="commentary I" eId="key-f3283902fcc650a1e6b75b4d626f0893">
<p>
<ref href="http://www.legislation.gov.uk/id/ukpga/2013/33/schedule/2/paragraph/6/8">Sch. 2 para. 6(8)</ref>
in force at 31.12.2014 in so far as not already in force by
<ref href="http://www.legislation.gov.uk/id/uksi/2014/3160">S.I. 2014/3160</ref>
,
<ref href="http://www.legislation.gov.uk/id/uksi/2014/3160/article/2/1/b">art. 2(1)(b)</ref>
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<ref href="http://www.legislation.gov.uk/id/ukpga/2013/33/schedule/2/paragraph/6/9">(9)</ref>
<ref href="http://www.legislation.gov.uk/id/ukpga/2013/33/schedule/2/paragraph/6/10">(10)</ref>
in force at 31.12.2014 by
<ref href="http://www.legislation.gov.uk/id/uksi/2014/3160">S.I. 2014/3160</ref>
,
<ref href="http://www.legislation.gov.uk/id/uksi/2014/3160/article/2/1/b">art. 2(1)(b)</ref>
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<portionBody>
<hcontainer name="schedules" eId="d4e138" period="#period3">
<heading>SCHEDULES</heading>
<hcontainer name="schedule" eId="schedule-2" period="#period2">
<num>SCHEDULE 2</num>
<heading>Bail-in stabilisation option</heading>
<part eId="schedule-2-part-1" period="#period2">
<num>
<strong>PART 1</strong>
</num>
<heading>Amendments of Banking Act 2009</heading>
<hcontainer name="crossheading" eId="schedule-2-part-1-crossheading-compensation" period="#period1">
<heading>
<em>Compensation</em>
</heading>
<paragraph eId="schedule-2-paragraph-6" period="#period1">
<num>6</num>
<subparagraph eId="schedule-2-paragraph-6-1" period="#period1">
<num>
<noteRef href="#key-d187fe6d7cebed5f2f68e835c7893618" marker="I3" class="commentary I"/>
1
</num>
<intro>
<p>In section 49 (orders)—</p>
</intro>
<paragraph eId="schedule-2-paragraph-6-1-a">
<num>a</num>
<content>
<p>
in subsection (1), for “three” substitute
<mod>
<quotedText>“ four ”</quotedText>
</mod>
and for “and property transfer instruments” substitute
<mod>
<quotedText>“ , property transfer instruments and orders and resolution instruments ”</quotedText>
</mod>
;
</p>
</content>
</paragraph>
<paragraph eId="schedule-2-paragraph-6-1-b">
<num>b</num>
<content>
<p>after subsection (2) insert—</p>
<p class="BlockAmendment">
<mod>
<quotedStructure class="primary unknown main default" startQuote="" endQuote="">
<subsection eId="d4e188">
<num>2A</num>
<content>
<p>A “bail-in compensation order” is an order establishing a scheme for determining, in accordance with section 52A, whether any transferors or others should be paid compensation.</p>
</content>
</subsection>
</quotedStructure>
</mod>
</p>
</content>
</paragraph>
</subparagraph>
<subparagraph eId="schedule-2-paragraph-6-2" period="#period1">
<num>
<noteRef href="#key-d187fe6d7cebed5f2f68e835c7893618" marker="I3" class="commentary I"/>
2
</num>
<content>
<p>
In section 52 (transfer to bridge bank), in subsection (3)(b), for “specified classes of creditor,” substitute
<mod>
<quotedText>“ persons of a specified description, ”</quotedText>
</mod>
.
</p>
</content>
</subparagraph>
<subparagraph eId="schedule-2-paragraph-6-3" period="#period1">
<num>
<noteRef href="#key-d187fe6d7cebed5f2f68e835c7893618" marker="I3" class="commentary I"/>
3
</num>
<content>
<p>After section 52 insert—</p>
<p class="BlockAmendment">
<mod>
<quotedStructure class="primary unknown main default" startQuote="" endQuote="">
<section eId="d4e215">
<num>52A</num>
<heading>Bail-in option</heading>
<subsection eId="d4e219">
<num>1</num>
<intro>
<p>Subsection (2) applies if the Bank of England makes—</p>
</intro>
<paragraph eId="d4e225">
<num>a</num>
<content>
<p>a resolution instrument under section 12A(2), or</p>
</content>
</paragraph>
<paragraph eId="d4e231">
<num>b</num>
<content>
<p>a property transfer instrument under section 41A(2).</p>
</content>
</paragraph>
</subsection>
<subsection eId="d4e237">
<num>2</num>
<content>
<p>The Treasury must make a bail-in compensation order (see section 49(2A)).</p>
</content>
</subsection>
<subsection eId="d4e243">
<num>3</num>
<intro>
<p>A bail-in compensation order may include provision for—</p>
</intro>
<paragraph eId="d4e249">
<num>a</num>
<content>
<p>an independent valuer (in which case sections 54 to 56 are to apply);</p>
</content>
</paragraph>
<paragraph eId="d4e255">
<num>b</num>
<content>
<p>valuation principles (in which case section 57(2) to (5) is to apply).</p>
</content>
</paragraph>
</subsection>
</section>
</quotedStructure>
</mod>
</p>
</content>
</subparagraph>
<subparagraph eId="schedule-2-paragraph-6-4" period="#period1">
<num>
<noteRef href="#key-d187fe6d7cebed5f2f68e835c7893618" marker="I3" class="commentary I"/>
4
</num>
<intro>
<p>In section 53 (onward and reverse transfers), in subsection (1)—</p>
</intro>
<paragraph eId="schedule-2-paragraph-6-4-a">
<num>a</num>
<content>
<p>before paragraph (za) insert—</p>
<p class="BlockAmendment">
<mod>
<quotedStructure class="unknown unknown unknown default" startQuote="" endQuote="">
<paragraph eId="d4e275">
<num>zza</num>
<content>
<p>the Bank of England makes a supplemental share transfer instrument under section 26,</p>
</content>
</paragraph>
</quotedStructure>
</mod>
<inline name="AppendText">;</inline>
</p>
</content>
</paragraph>
<paragraph eId="schedule-2-paragraph-6-4-b">
<num>b</num>
<content>
<p>after paragraph (za) insert—</p>
<p class="BlockAmendment">
<mod>
<quotedStructure class="unknown unknown unknown default" startQuote="" endQuote="">
<paragraph eId="d4e290">
<num>zb</num>
<content>
<p>the Treasury makes a supplemental share transfer order under section 27,</p>
</content>
</paragraph>
</quotedStructure>
</mod>
<inline name="AppendText">;</inline>
</p>
</content>
</paragraph>
<paragraph eId="schedule-2-paragraph-6-4-c">
<num>c</num>
<content>
<p>after paragraph (d) insert—</p>
<p class="BlockAmendment">
<mod>
<quotedStructure class="unknown unknown unknown default" startQuote="" endQuote="">
<paragraph eId="d4e305">
<num>dza</num>
<content>
<p>the Bank of England makes a supplemental property transfer instrument under section 42,</p>
</content>
</paragraph>
</quotedStructure>
</mod>
<inline name="AppendText">;</inline>
</p>
</content>
</paragraph>
<paragraph eId="schedule-2-paragraph-6-4-d">
<num>d</num>
<content>
<p>after paragraph (f) insert—</p>
<p class="BlockAmendment">
<mod>
<quotedStructure class="unknown unknown unknown default" startQuote="" endQuote="">
<paragraph eId="d4e320">
<num>fa</num>
<content>
<p>the Bank of England makes a reverse property transfer instrument under section 44A(2),</p>
</content>
</paragraph>
</quotedStructure>
</mod>
<inline name="AppendText">;</inline>
</p>
</content>
</paragraph>
<paragraph eId="schedule-2-paragraph-6-4-e">
<num>e</num>
<content>
<p>omit the “or” after paragraph (g);</p>
</content>
</paragraph>
<paragraph eId="schedule-2-paragraph-6-4-f">
<num>f</num>
<content>
<p>after paragraph (h) insert—</p>
<p class="BlockAmendment">
<mod>
<quotedStructure class="unknown unknown unknown default" startQuote="" endQuote="">
<paragraph eId="d4e341">
<num>i</num>
<content>
<p>the Bank of England makes a supplemental resolution instrument under section 48U,</p>
</content>
</paragraph>
<paragraph eId="d4e347">
<num>j</num>
<content>
<p>the Bank of England makes an onward transfer resolution instrument under section 48V(2), or</p>
</content>
</paragraph>
<paragraph eId="d4e353">
<num>k</num>
<content>
<p>the Bank of England makes a reverse transfer resolution instrument under section 48W(2) or (3).</p>
</content>
</paragraph>
</quotedStructure>
</mod>
<inline name="AppendText">;</inline>
</p>
</content>
</paragraph>
<paragraph eId="schedule-2-paragraph-6-4-g">
<num>g</num>
<content>
<p>
in the heading, after “
<strong>transfers</strong>
” insert
<mod>
<quotedText>
<strong>
<abbr title="Et cetera" xml:lang="la">etc</abbr>
</strong>
</quotedText>
</mod>
.
</p>
</content>
</paragraph>
</subparagraph>
<subparagraph eId="schedule-2-paragraph-6-5" period="#period1">
<num>
<noteRef href="#key-d187fe6d7cebed5f2f68e835c7893618" marker="I3" class="commentary I"/>
5
</num>
<intro>
<p>In section 54 (independent valuer)—</p>
</intro>
<paragraph eId="schedule-2-paragraph-6-5-a">
<num>a</num>
<content>
<p>
in subsection (1), after “compensation scheme order” insert
<mod>
<quotedText>“ or bail-in compensation order ”</quotedText>
</mod>
;
</p>
</content>
</paragraph>
<paragraph eId="schedule-2-paragraph-6-5-b">
<num>b</num>
<content>
<p>
in subsection (4)(b), after “order” insert
<mod>
<quotedText>“ or bail-in compensation order ”</quotedText>
</mod>
.
</p>
</content>
</paragraph>
</subparagraph>
<subparagraph eId="schedule-2-paragraph-6-6" period="#period1">
<num>
<noteRef href="#key-d187fe6d7cebed5f2f68e835c7893618" marker="I3" class="commentary I"/>
6
</num>
<content>
<p>
In section 56 (independent valuer: money), in subsection (2)(b) for “or third party compensation order” substitute
<mod>
<quotedText>“ , third party compensation order or bail-in compensation order ”</quotedText>
</mod>
.
</p>
</content>
</subparagraph>
<subparagraph eId="schedule-2-paragraph-6-7" period="#period1">
<num>
<noteRef href="#key-d187fe6d7cebed5f2f68e835c7893618" marker="I3" class="commentary I"/>
7
</num>
<content>
<p>
In section 57 (valuation principles), in subsection (1), after “order” insert
<mod>
<quotedText>“ or bail-in compensation order ”</quotedText>
</mod>
.
</p>
</content>
</subparagraph>
<subparagraph eId="schedule-2-paragraph-6-8" period="#period1">
<num>
<noteRef href="#key-734cae7ecba6918491efdc273d0c3aa7" marker="I1" class="commentary I"/>
<noteRef href="#key-f3283902fcc650a1e6b75b4d626f0893" marker="I2" class="commentary I"/>
8
</num>
<content>
<p>After section 60 insert—</p>
<p class="BlockAmendment">
<mod>
<quotedStructure class="primary unknown main default" startQuote="" endQuote="">
<section eId="d4e434">
<num>60A</num>
<heading>Further mandatory provision: bail-in provision</heading>
<subsection eId="d4e438">
<num>1</num>
<intro>
<p>The Treasury may make regulations about compensation arrangements in the case of—</p>
</intro>
<paragraph eId="d4e444">
<num>a</num>
<content>
<p>resolution instruments under section 12A(2) and supplemental resolution instruments under section 48U(2), and</p>
</content>
</paragraph>
<paragraph eId="d4e450">
<num>b</num>
<content>
<p>instruments (made under any provision) that include special bail-in provision.</p>
</content>
</paragraph>
</subsection>
<subsection eId="d4e456">
<num>2</num>
<intro>
<p>Regulations may—</p>
</intro>
<paragraph eId="d4e462">
<num>a</num>
<content>
<p>require a resolution fund order, a compensation scheme order, a third party compensation order or a bail-in compensation order to include provision of a specified kind or to specified effect;</p>
</content>
</paragraph>
<paragraph eId="d4e468">
<num>b</num>
<content>
<p>make provision that is to be treated as forming part of any such order (whether (i) generally, (ii) only if applied, (iii) unless disapplied, or (iv) subject to express modification).</p>
</content>
</paragraph>
</subsection>
<subsection eId="d4e474">
<num>3</num>
<intro>
<p>Regulations may provide for whether compensation is to be paid, and if so what amount is to be paid, to be determined by reference to any factors or combination of factors; in particular, the regulations may provide for entitlement—</p>
</intro>
<paragraph eId="d4e480">
<num>a</num>
<content>
<p>to depend in part upon the amounts which are or may be payable under a resolution fund order;</p>
</content>
</paragraph>
<paragraph eId="d4e486">
<num>b</num>
<content>
<p>to be contingent upon the occurrence or non-occurrence of specified events;</p>
</content>
</paragraph>
<paragraph eId="d4e492">
<num>c</num>
<content>
<p>to be determined wholly or partly by an independent valuer (within the meaning of sections 54 to 56) appointed in accordance with a compensation scheme order or bail-in compensation order.</p>
</content>
</paragraph>
</subsection>
<subsection eId="d4e498">
<num>4</num>
<intro>
<p>Regulations may make provision about payment including, in particular, provision for payments—</p>
</intro>
<paragraph eId="d4e504">
<num>a</num>
<content>
<p>on account subject to terms and conditions;</p>
</content>
</paragraph>
<paragraph eId="d4e510">
<num>b</num>
<content>
<p>by instalment.</p>
</content>
</paragraph>
</subsection>
<subsection eId="d4e516">
<num>5</num>
<intro>
<p>Regulations—</p>
</intro>
<paragraph eId="d4e522">
<num>a</num>
<content>
<p>are to be made by statutory instrument, and</p>
</content>
</paragraph>
<paragraph eId="d4e528">
<num>b</num>
<content>
<p>may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.</p>
</content>
</paragraph>
</subsection>
</section>
<section eId="d4e537">
<num>60B</num>
<heading>Principle of no less favourable treatment</heading>
<subsection eId="d4e541">
<num>1</num>
<content>
<p>In making regulations under section 60A the Treasury must, in particular, have regard to the desirability of ensuring that pre-resolution shareholders and creditors of a bank do not receive less favourable treatment than they would have received had the bank entered insolvency immediately before the coming into effect of the initial instrument.</p>
</content>
</subsection>
<subsection eId="d4e547">
<num>2</num>
<intro>
<p>References in this section to the initial instrument are—</p>
</intro>
<paragraph eId="d4e553">
<num>a</num>
<content>
<p>in relation to compensation arrangements in the case of property transfer instruments under section 12(2), to the first instrument to be made under that provision with respect to the bank;</p>
</content>
</paragraph>
<paragraph eId="d4e559">
<num>b</num>
<content>
<p>in relation to compensation arrangements in other cases, to the first resolution instrument to be made under section 12A with respect to the bank.</p>
</content>
</paragraph>
</subsection>
<subsection eId="d4e565">
<num>3</num>
<content>
<p>The “pre-resolution shareholders and creditors” of a bank are the persons who held securities issued by the bank, or were creditors of the bank, immediately before the coming into effect of the initial instrument.</p>
</content>
</subsection>
<subsection eId="d4e571">
<num>4</num>
<content>
<p>References in this section to insolvency include a reference to (i) liquidation, (ii) bank insolvency, (iii) administration, (iv) bank administration, (v) receivership, (vi) composition with creditors, and (vii) a scheme of arrangement.</p>
</content>
</subsection>
</section>
</quotedStructure>
</mod>
</p>
</content>
</subparagraph>
<subparagraph eId="schedule-2-paragraph-6-9" period="#period1">
<num>
<noteRef href="#key-d187fe6d7cebed5f2f68e835c7893618" marker="I3" class="commentary I"/>
9
</num>
<intro>
<p>In section 61(1) (sources of compensation),—</p>
</intro>
<paragraph eId="schedule-2-paragraph-6-9-a">
<num>a</num>
<content>
<p>omit the “and” at the end of paragraph (c);</p>
</content>
</paragraph>
<paragraph eId="schedule-2-paragraph-6-9-b">
<num>b</num>
<content>
<p>after paragraph (c) insert—</p>
<p class="BlockAmendment">
<mod>
<quotedStructure class="unknown unknown unknown default" startQuote="" endQuote="">
<paragraph eId="d4e597">
<num>ca</num>
<content>
<p>bail-in compensation orders,</p>
</content>
</paragraph>
</quotedStructure>
</mod>
<inline name="AppendText">;</inline>
</p>
</content>
</paragraph>
<paragraph eId="schedule-2-paragraph-6-9-c">
<num>c</num>
<content>
<p>after paragraph (d) insert, “, and</p>
<p class="BlockAmendment">
<mod>
<quotedStructure class="unknown unknown unknown default" startQuote="" endQuote="">
<paragraph eId="d4e612">
<num>e</num>
<content>
<p>regulations under section 60A.</p>
</content>
</paragraph>
</quotedStructure>
</mod>
</p>
</content>
</paragraph>
</subparagraph>
<subparagraph eId="schedule-2-paragraph-6-10" period="#period1">
<num>
<noteRef href="#key-d187fe6d7cebed5f2f68e835c7893618" marker="I3" class="commentary I"/>
10
</num>
<content>
<p>In section 62(1) (procedure), omit the “and” at the end of paragraph (b), and after that paragraph insert—</p>
<p class="BlockAmendment">
<mod>
<quotedStructure class="primary unknown main default" startQuote="" endQuote="">
<paragraph eId="d4e626">
<num>ba</num>
<content>
<p>bail-in compensation orders, and</p>
</content>
</paragraph>
</quotedStructure>
</mod>
<inline name="AppendText">.</inline>
</p>
</content>
</subparagraph>
</paragraph>
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