PART 11 U.K.Removal of procedural impediments to application of bail-in tool
Interpretation of PartU.K.
154. In this Part—
“Common Equity Tier 1 instruments” has the meaning given in section 3(1) of the Banking Act 2009 M1; and
“UK entity” means—
an institution which is authorised by the PRA or FCA and is not part of a group subject to supervision on a consolidated basis in accordance with Article 111 of the capital requirements directive; or
in relation to a relevant group, a group entity set up in the United Kingdom.
Marginal Citations
M1This definition was inserted by S.I. 2014/3329.
Requirement to increase or remove limit on share capitalU.K.
155.—(1) This article applies where—
(a)the memorandum of association of a UK entity which is a company includes a statement of the amount of the entity's authorised share capital; and
(b)the resolution plan being drawn up for the entity or the group resolution plan being drawn up for the relevant group of which the entity is the EEA parent undertaking or a group subsidiary includes provision for the application in respect of the entity of the stabilisation option referred to in paragraph (c) of section 1(3) of the Banking Act 2009 (the bail-in option).
(2) The Bank must determine whether it is appropriate to require the entity to alter the memorandum for the purpose of increasing the amount of authorised share capital or removing the statement of that amount.
(3) For this purpose the Bank must have regard to the provision which the plan concerned is to make in relation to resolution action M2 and to the matters referred to in paragraphs (4) and (5).
(4) The amount of authorised share capital must be adequate to ensure that where the Bank exercises a relevant power, the entity is able to issue new shares or other instruments of ownership to facilitate the conversion of liabilities into shares or other instruments of ownership.
(5) The amount of the authorised share capital must not be less than the sum of the amounts specified in Article 47.3(b) and (c) of the recovery and resolution directive (treatment of shareholders in bail-in or write down or conversion of capital instruments).
(6) The Bank must make the determination under paragraph (2) when it draws up the resolution plan or when the group resolution plan is drawn up within the college.
(7) In this article “relevant power” means the power conferred by sections 12A (bail-in option), 48B (special bail-in provision) and 81BA (bail-in option) of the Banking Act 2009 M3 to convert the entity's eligible liabilities into Common Equity Tier 1 instruments of—
(a)the entity; or
(b)a parent undertaking of the entity.
Removal of impediments to the conversion of liabilities into sharesU.K.
156. Where the articles or memorandum of association of a UK entity which is a company confer pre-emption rights on shareholders, require the consent of shareholders to an increase in capital or make any other provision which could prevent or otherwise impede the conversion of any liabilities of the company into shares or other instruments of ownership, the Bank must determine whether it is necessary to require the entity to alter the articles or memorandum with the object of removing the impediment created by the provision concerned.