The Financial Services and Markets Act 2000 (Contribution to Costs of Special Resolution Regime) Regulations 2010

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations prescribe the descriptions of expenses in respect of which the Treasury may require the Financial Services Compensation Scheme (“the scheme manager”) to make payments under section 214B(2) of the Financial Markets and Services Act 2000, and make further provision in connection with such payments. Regulation 1(2) revokes the Financial Services and Markets Act 2000 (Contribution to Costs of Special Resolution Regime) Regulations 2009 (S.I. 2009/807).

Regulation 3 describes the expenses to which the Treasury may require the scheme manager to make payments.

Regulation 4 provides that the Treasury may send the scheme manager an initial notification. This notification includes details of the banking institution and the stabilisation power, sets out the expenses incurred or expected to be incurred and whether or not a payment is required immediately from the scheme manager. The notification also sets out the interest rate to be applied to the accounts kept in respect of the resolution under Schedule 1.

Regulation 5 provides for the initial notification to be updated on the occurrence of certain events.

Regulation 6 provides for the scheme manager, on receipt of the initial notification, to make the determinations under section 214D(2) and to keep a record of its actual expenditure.

Regulation 7 provides that the Treasury shall keep the accounts set out in Part 1 of Schedule 1.

Regulation 8 provides that the Treasury shall determine the limit of the amount of special resolution regime payments the scheme manager can be required to make, using the methodology in Part 2 of Schedule 1.

Regulation 9 applies where either the Treasury require the scheme manager, or the scheme manager volunteers, to make an interim payment. It provides that the Treasury shall establish the maximum amount of interim payment that can be made and shall keep an account of any interim payment made in accordance with Part 3 of Schedule 1.

Regulation 10 provides for the final notification for payment where no interim payments have been made.

Regulation 11 provides for the calculation of the balancing payment due from the scheme manager (in accordance with Part 4 of Schedule 1) and final notification for payment where interim payments have been made.

Regulation 12 provides for the accounts kept in accordance with Schedule 1 and expenses included in those accounts to be independently verified.

Regulation 13 provides for Part 1 of Schedule 2 to apply to a valuer appointed by the Treasury under section 214D(3). It provides that the Treasury may specify principles for the valuer to apply and for the valuer to notify their determinations to the Treasury.

Regulation 14 provides for the scheme manager or the Treasury to require the valuer to reconsider their determinations and to make a reference to the Tribunal.

Regulation 15 provide for other disputes arising under the Regulations to be referred to the Tribunal.

Regulation 16 applies Schedule 3.

Regulation 17 provides that payments made by the scheme manager under the Regulations are to be treated as payment of compensation to eligible claimants.

Regulation 18 makes transitional provision for notifications made under the Financial Services and Markets Act 2000 (Contribution to Costs of Special Resolution Regime) Regulations 2009.

Schedule 1 provides for accounts to be kept to allow the Treasury to calculate the net cost of resolution, the scheme manager’s limit, the total cost of interim payments and any balancing payments.

Schedule 2 provides for the valuer to hold office and to be remunerated and to apply to the court for information to be disclosed.

Schedule 3 makes provision for proceedings before the Tribunal under these Regulations.

An Impact Assessment of the effect that allowing the cost of funding the exercise of SRR powers to be recovered from the FSCS will have on the costs of business and the voluntary sector has been prepared. It may be obtained from the Financial Regulation Strategy Team, HM Treasury, 1 Horse Guards Road, London, SW1A 2HQ. It is also available on HM Treasury’s website (www.hm-treasury.gov.uk).