The Financial Services and Markets Act 2000 (Excluded Activities and Prohibitions) Order 2014

Financial institution exposures: ancillary exposures U.K.

19.—(1) Subject to any rules made by the FCA or the PRA under the Act, a ring-fenced body may incur a financial institution exposure where the exposure concerned—

(a) arises in any of the circumstances set out in paragraphs (2) to (5), or

(b) is permitted under paragraph (6).

(2) The exposure arises in consequence of the provision—

(a) by the ring-fenced body of payment services to its customers in the United Kingdom or any other country;

(b) by the ring-fenced body to the relevant financial institution of—

(i) operational services, including in particular information technology, human resources or payment services, F1 ...

(ii) services as a trustee or agent in connection with a syndicated loan to an undertaking which is not a relevant financial institution; F2 ...

[F3 (iii) services as a trustee or agent in connection with a syndicated invoice discounting or factoring arrangement pursuant to which payment is advanced to any entity which is not a relevant financial institution, or

(iv) consultative services, including in particular the provision of business or financial advice; or]

(c) to the ring-fenced body of services from a relevant financial institution which are ancillary to or facilitate—

(i) the divestment or acquisition by the ring-fenced body of one or more of its subsidiaries or other assets,

(ii) the continuing operation of a business, entity or assets which have been acquired by the ring-fenced body,

(iii) an issue of securities by the ring-fenced body, by a subsidiary undertaking of the ring-fenced body or by a sponsored structured finance vehicle,

(iv) the participation by the ring-fenced body in a syndicated loan to an undertaking which is not a relevant financial institution.

[F4 (v) the participation by the ring-fenced body in any syndicated invoice discounting or factoring arrangement pursuant to which payment is advanced to any entity which is not a relevant financial institution.]

(3) The exposure arises where—

(a) the ring-fenced body is acting as distributor for a relevant financial institution in connection with the distribution of trade finance or other financial products or investments issued by or services provided by the relevant financial institution, or in respect of which that relevant financial institution is acting as distributor,

(b) the relevant financial institution is acting as a distributor for the ring-fenced body in connection with the provision by the ring-fenced body of trade finance or other financial products or investments issued by or services provided by the ring-fenced body to or for the benefit of an entity which is not a relevant financial institution.

(4) The exposure arises in consequence of guarantees, warranties, indemnities or covenants given to the ring-fenced body by a relevant financial institution as part of a permitted acquisition or disposal—

(a) by the ring-fenced body, or

(b) by a subsidiary undertaking of the ring-fenced body,

and for the purposes of this paragraph “permitted” means that the acquisition or disposal is not prohibited under the Act, this Order, or any rules made by the FCA or the PRA under the Act.

(5) The exposure arises in consequence—

(a) of a breach of a duty owed by the relevant financial institution to the ring-fenced body, or

(b) of the appointment of the ring-fenced body as executor of the estate of any person or of services provided by the ring-fenced body in that capacity.

(6) A ring-fenced body may incur a financial institution exposure to a global systemically important insurer where the exposure concerned results from the purchase of insurance by the ring-fenced body for the benefit of the business, directors, officers, employees or other staff of the ring-fenced body or of any subsidiary undertaking of the ring-fenced body.

[F5 (7) A ring-fenced body may incur a financial institution exposure that arises where the ring-fenced body is acting as trustee for or on behalf of any individual or charity.]

Textual Amendments

F1 Word in art. 19(2)(b)(i) omitted (1.12.2016) by The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment) Order 2016 (S.I. 2016/1032), arts. 1(2), 3(9)(a)

F2 Word in art. 19(2)(b)(ii) omitted (1.12.2016) by The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment) Order 2016 (S.I. 2016/1032), arts. 1(2), 3(9)(b)

F3 Art. 19(2)(b)(iii)(iv) inserted (1.12.2016) by The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment) Order 2016 (S.I. 2016/1032), arts. 1(2), 3(9)(c)

F4 Art. 19(2)(c)(v) inserted (1.12.2016) by The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment) Order 2016 (S.I. 2016/1032), arts. 1(2), 3(9)(d)

F5 Art. 19(7) inserted (1.12.2016) by The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment) Order 2016 (S.I. 2016/1032), arts. 1(2), 3(9)(e)

Commencement Information

I1 Art. 19 in force at 1.1.2019, see art. 1(3)