The Bank Recovery and Resolution (No. 2) Order 2014

PART 14 Procedural obligations where an undertaking is failing or likely to fail

Interpretation of Part

181.  In this Part—

“the regulator”—

(a)

in relation to an undertaking which is a PRA-authorised person, means the PRA; and

(b)

in relation to any other undertaking, means the FCA.

“undertaking” means—

(c)

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;

(d)

in relation to a relevant group, a group entity set up in the United Kingdom; or

(e)

a mixed activity holding company set up in the United Kingdom.

Matters to be notified by the regulator to the Bank

182.  The regulator must notify the Bank if—

(a) an undertaking notifies the regulator that the undertaking is failing or likely to fail (within the meaning given in Article 32.4 of the recovery and resolution directive); or

(b) the regulator requires an undertaking to take crisis prevention measures(1) or a measure referred to in Article 104.1 of the capital requirements directive.

Notification that an undertaking is failing or likely to fail

183.—(1) Where the regulator is satisfied that an undertaking is failing or likely to fail, it must give notice of that fact to the Bank.

(2) Where the Bank is satisfied, having regard to timing and other relevant circumstances, that it is not reasonably likely that (ignoring the stabilisation powers) action will be taken by or in respect of the undertaking that will prevent the failure of the undertaking, the Bank must give notice of that fact to the regulator.

(3) The Bank must also give notice of that fact—

(a) where the undertaking is a group entity and the regulator is not the consolidating supervisor for the relevant group concerned, to the consolidating supervisor and the group-level resolution authority;

(b) to the resolution authority and competent authority established in any other EEA State in which the undertaking has a significant branch or operates a place of business;

(c) to the scheme manager of the Financial Services Compensation Scheme (established under Part 15 of FSMA);

(d) to the Treasury in their capacity of—

(i) the person in charge of financing arrangements made in accordance with Article 100 of the recovery and resolution directive for the purpose of ensuring the effectiveness of resolution action by the Bank; and

(ii) competent ministry;

(e) to the Financial Policy Committee; and

(f) to the European Systemic Risk Board established by Regulation (EU) No. 1092/2010 of the European Parliament and of the Council of 24th November 2010 on European Union macro-prudential oversight of the financial system and establishing a European Systemic Risk Board(2).

(4) Where the undertaking is part of a group subject to supervision on a consolidated basis in accordance with Article 111 of the capital requirements directive, the Bank is not required to give notice under paragraph (3) to any person referred to in that paragraph who is also a member of the college.

(5) This article does not require any information to be disclosed if its disclosure would be contrary to section 348 of FSMA.

Duty to send copy of share transfer instrument etc to members and creditors of institution

184.—(1) This article applies where, in respect of an undertaking—

(a) the Bank has applied one or more of the resolution tools; or

(b) the Treasury have made a share transfer order for the purpose of taking the undertaking into temporary public ownership.

(2) Except where securities issued by the undertaking have been admitted to trading on a regulated market (within the meaning given in section 103(1) of FSMA), the Bank must send a copy of any property transfer instrument, resolution instrument, share transfer instrument, share transfer order or third-country instrument made in respect of the undertaking to the members and creditors of the undertaking who are known to the Bank.

(3) In this article—

“member” includes—

(a)

a shareholder of a company;

(b)

a member of a limited liability partnership; and

(c)

a shareholding or borrowing member of a building society established under the Building Societies Act 1986(3) (“shareholding member” and “borrowing member” have the meaning given in paragraph 5(2) of Schedule 2 to that Act);

“property transfer instrument” means a property transfer instrument (within the meaning given by section 33(4)) made under section 11 (private sector purchaser), section 41A(5) (transfer of property subsequent to resolution instrument), section 42(6) (supplemental instruments), section 42A(7) (private sector purchaser: reverse property transfer), section 43(8) (onward transfer), section 44(9) (resolution company: reverse property transfer) or section 44A(10) (bail-in: reverse property transfer);

“resolution instrument” means a resolution instrument made under section 12A (bail-in option), section 48U (supplemental resolution instruments), section 48V (onward transfer) or section 48W (reverse transfer)(11);

“share transfer instrument” means a share transfer instrument (within the meaning given by section 15) made under section 11, section 26(12) (supplemental instruments), section 26A(13) (private sector purchaser: reverse share transfer), section 30(14) (resolution company: share transfers) or section 31(15) (resolution company: reverse share transfer);

“share transfer order” means a share transfer order (within the meaning given by section 16) made by the Treasury under section 13(16) (temporary public ownership), section 27(17) (supplemental orders), section 28(18) (onward transfer) or section 29(19) (reverse share transfer); and

“third-country instrument” has the meaning given in section 89I(4)(20).

(4) In paragraph (3) each reference to a section is a reference to a section of the Banking Act 2009.

(1)

For the meaning of “crisis prevention measures” see the recovery and resolution directive, Article 2.1, point (101).

(2)

OJ No. L 331, 15.12.2010, p. 1.

(3)

1986 c. 53.

(4)

Section 33 was amended by S.I. 2014/3329.

(5)

Section 41A was inserted of the Financial Services (Banking Reform) Act 2013, Schedule 2, paragraphs 1 and 5(1); and was amended by S.I. 2014/3329.

(6)

Section 42 was amended by S.I. 2014/3329.

(7)

Section 42A was inserted by the Financial Services Act 2012, section 97(1) and (5).

(8)

Section 43 was amended by the Financial Services Act 2012, Schedule 17, paragraph 22, and by S.I. 2014/3329.

(9)

Section 44 was amended by the Financial Services Act 2012, section 97 and Schedule 17, paragraph 23, by the Financial Services (Banking Reform) Act 2013, Schedule 2, paragraph 16, and by S.I. 2014/3329.

(10)

Section 44A was inserted of the Financial Services (Banking Reform) Act 2013, Schedule 2, paragraphs 1 and 5(3); and was amended by S.I. 2014/3329.

(11)

Sections 12A, 48U, 48V and 48W were inserted of the Financial Services (Banking Reform) Act 2013, Schedule 2, paragraphs 1, 2 and 4; and were amended by S.I. 2014/3329.

(12)

Section 26 was amended by the Financial Services Act 2012, Schedule 17(1), paragraph 14, and by S.I. 2014/3329.

(13)

Section 26A was inserted by the Financial Services Act 2012, section 97(1) and (2).

(14)

Section 30 was amended by the Financial Services Act 2012, Schedule 17(1), paragraph 18, and by S.I. 2014/3329.

(15)

Section 31 was amended by the Financial Services Act 2012, section 97(4)(a) and (b), section 97(4)(c) and Schedule 17(1), paragraph 12, and by S.I. 2014/3329.

(16)

Section 13 was amended by the Financial Services (Banking Reform) Act 2013, Schedule 2, paragraph 13, and by S.I. 2014/3329.

(17)

Section 27 was amended by the Financial Services Act 2012, Schedule 17(1), paragraph 15.

(18)

Section 28 was amended by the Financial Services Act 2012, Schedule 17(1), paragraph 16.

(19)

Section 29 was amended by the Financial Services Act 2012, section 97(3) and Schedule 17(1), paragraph 17.

(20)

Section 89I was inserted by S.I. 2014/3329.