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

CHAPTER 2 U.K. Determination of minimum consolidated requirement where the PRA or FCA is the consolidating supervisor

Application and interpretation of Chapter 2 U.K.

125.—(1) This Chapter applies where the PRA or FCA is the consolidating supervisor in relation to a relevant group.

(2) In this Chapter—

“four month period” means four months beginning with the date on which the Bank gives notice of its provisional determination of the minimum consolidated requirement under article 126(3);

“group entity” includes an undertaking which is—

(a)

a parent undertaking of the EEA parent undertaking; and

(b)

a mixed activity holding company which has at least one subsidiary which—

(i)

is an institution; and

(ii)

is not a subsidiary of a financial holding company which is also a subsidiary of the mixed activity holding company;

“group institution” means—

(a)

the EEA parent undertaking, if it is a relevant institution;

(b)

a group subsidiary which is a relevant institution;

(c)

a group entity, other than an institution, which is—

(i)

required under article 139 or 146 to maintain a minimum requirement for own funds and eligible liabilities; or

(ii)

required by a resolution authority other than the Bank to maintain a minimum requirement for own funds and eligible liabilities;

(d)

where the group resolution plan does not provide for the separate resolution M1 of a subsidiary set up in a third country, that subsidiary if it would be a relevant institution if it were set up in an EEA State;

“minimum consolidated requirement” means the requirement for a minimum level of own funds and eligible liabilities of the group institutions expressed as a percentage of the total liabilities and own funds of those institutions;

“minimum requirement”, in relation to a group institution, means a minimum requirement for own funds and eligible liabilities expressed as a percentage of the institution's total liabilities and own funds; and

“netting arrangement”—

(a)

in relation to an institution authorised by the PRA or FCA, means a title transfer collateral arrangement, set-off arrangement or netting arrangement (within the meaning given by section 48(1)(b), (c) and (d) of the Banking Act 2009);

(b)

in relation to an institution set up in any other EEA State, has the meaning given by point (98) of Article 2.1 of the recovery and resolution directive.

(3) “Relevant institution”, in the definition of “group institution”, means an institution which—

(a) if authorised by the PRA or FCA, is not a mortgage credit institution within the meaning given in Chapter 1; and

(b) if set up in a country other than the United Kingdom, does not meet criteria which are equivalent in that country to the criteria set out in article 121(2).

Marginal Citations

M1 For the meaning of “resolution” see the recovery and resolution directive, Article 2.1, point (1).

Determination of minimum consolidated requirement U.K.

126.—(1) This article applies for the purpose of determining the minimum consolidated requirement.

(2) Where every group entity is set up in the United Kingdom, the Bank must determine the minimum consolidated requirement, and is solely responsible for the determination.

(3) Where a group entity is set up in another EEA State, the Bank must—

(a) make a provisional determination of the minimum consolidated requirement;

(b) give notice of the provisional determination to the resolution authority established in that EEA State; and

(c) endeavour within the college to determine the minimum consolidated requirement jointly with that resolution authority.

(4) The amount of each group institution's total liabilities must include total liabilities under any derivative contracts held by the institution.

(5) An assessment of total liabilities under a derivative contract must take account of the rights of the parties to the contract to set off or net under a netting arrangement.

(6) [F1 An eligible liability must be excluded] from the amount of the group institution's [F2 own funds and eligible liabilities] if—

(a) the instrument that creates the liability is not issued or fully paid up;

(b) the liability is owed to, or secured or guaranteed by, the institution itself;

(c) the purchase of the instrument that creates the liability was funded directly or indirectly by the institution itself;

(d) the liability has a remaining maturity of less than one year;

(e) the liability arises from a derivative contract held by the institution;

(f) the liability arises from a deposit in respect of which the depositor's rights, in any proceedings relating to the insolvency of the institution, would be preferred to the rights of other creditors; or

(g) the instrument that creates the liability is governed by the law of a third country and the Bank is not satisfied that a decision by the Bank to convert or write down the liability would be effective under that law.

(7) For the purpose of paragraph (6)(d), where the instrument that creates the liability confers on a party to the instrument a right to the repayment of a sum before maturity, the maturity date is the first date on which that party would become entitled to repayment if the right were exercised.

(8) The determination—

(a) must be based on an assessment of the criteria set out in Article 45.6 of the recovery and resolution directive; and

(b) must take account of any provision made in the group resolution plan for the separate resolution of a subsidiary set up in a third country.

(9) Where the Bank makes an assessment under paragraph (8)(a) with respect to a group institution authorised by the PRA or FCA, it must make the assessment in consultation with the appropriate regulator.

Textual Amendments

F1 Words in art. 126(6) substituted (16.12.2016) by The Bank Recovery and Resolution Order 2016 (S.I. 2016/1239), arts. 1(2), 41(14)(a)

F2 Words in art. 126(6) substituted (16.12.2016) by The Bank Recovery and Resolution Order 2016 (S.I. 2016/1239), arts. 1(2), 41(14)(b)

Joint determination U.K.

127.—(1) Where the Bank endeavours to determine the minimum consolidated requirement jointly with one or more other resolution authorities under article 126(3)(c), it must endeavour to make the determination within the four month period.

(2) Where the Bank and another resolution authority (“authority A”) are unable within the four month period to make a joint determination of the minimum consolidated requirement, the Bank—

(a) must make the determination, either alone or jointly with any resolution authority with which it is able to make a joint determination; and

(b) in relation to a group institution for which authority A is the resolution authority, must ensure that the determination takes account of authority A's assessment of that institution against the criteria for determining the minimum requirement for a group institution.

(3) The Bank must give the EEA parent undertaking written notice of the determination made under this article, including a reasoned account of the determination.

References to EBA: determination of minimum consolidated requirement U.K.

128.—(1) Where, before the end of the four month period, another resolution authority has referred to EBA in accordance with Article 19 of the EBA Regulation any matter relating to the prospective determination of the minimum consolidated requirement, the Bank must—

(a) defer the determination for one month beginning with the date on which the four month period ends; and

(b) ensure that the requirement determined is not less than the requirement specified in any decision taken by EBA before the end of that month under Article 19.3 of the EBA Regulation.

(2) For the purposes of a reference to EBA of a matter to which this article refers the four month period is deemed to be the conciliation phase referred to in Article 19.2 of the EBA Regulation.

Review of minimum consolidated requirement U.K.

129.—(1) The Bank must review the minimum consolidated requirement when, in accordance with Chapter 4 of Part 5, it reviews the group resolution plan.

(2) Articles 126 to 128 apply for the purpose of the review, but have effect for that purpose as if each reference to determining (or the determination of) the minimum consolidated requirement were a reference to re-determining (or the re-determination of) the requirement on review.